For my project I will be presenting both the NPV and IRR calculations for a graduating senior in the B.S. Economics program at Lehigh University. However, before I start my discussion about my methodologies and findings, I think it is important to discuss why this study is so important. To so many people, myself included, college is really taken for granted and idea that education is an investment in the future isn’t recognized until its time to get a job. If I had been presented with more of
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COMPUTING NPV and IRR PCP Pj vs STATUS QUO STRYKER Case decrease in purchases from contract manufacturers less incremental Stryker manufacturing costs Operating income from project less architect and engineering fees pre-tax income less taxes at 36% After-tax income add back Building depreciation add back Equipment depreciation add back It & other equipment depreciation Subtotal plus NCW Savings Subtotal Cash Flow Terminal Value, at book value Hurdle rate Discount factor at 15% PV of Cash Flows Sum
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250,000 | COST OF FORMULAR = N=0NCFn1+in CAPITAL – 8% (1,000,0001+0.08) + (450,0001+0.08) + (350,000(1+0.08)) + (300,000(1+0.08)) + (250,000(1+0.08)) = 138,642.39 >0 INTERNAL RULE OF RETURN FORMUA – 0= n=0NCFn1+IRRn IRR= 14.79% SIMPLE PAYBACK YEAR 0 1 2 3 4 | CASH FLOW-1,000,000 450,000 350,000 300,000
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appropriateness of an exit multiple of 8 based on the adjusted EBITDA. 6. What offer price per share do you propose for AMC if JPMP wishes to meet its targeted return of 20% to 25% on this type of investment? Use the FTE approach for estimating the IRR. You can use an exit multiple of the adjusted EBITDA of 8 as an estimate of the terminal value. The current stock price of AMC is about $16. a.
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David Y. Kim Section 004, Foundations of Financial Markets Professor Jeffrey Wurgler Homework 1 1. Bid = 102 ¼, Ask = 102 ½ a. Buy = 4,000(102.25) = $409,000 Sell = 4,000(102.50) = $410,000 Profit = $410,000 – $409,000 = $1,000 Value of Inventory at Ask price = –6,000(102.50) = –$615,000 b. New Bid = 110.25, New Ask = 110.5 Sell = 2,000(110.5) = $221,000 Buy = 8,000(110.25) = $882,000 Sold 6,000 shares yesterday for 6,000(102.50) = $615,000 Loss = $221,000 – $882,000
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acceptable. The higher the NPV, the better the project. Also, it is a good method to evaluate the project because it takes all the relevant costs in account and gives explicit consideration to the time value of money. Fourth, the internal rate of return (IRR) is greater than 10%. This criterion is defined as being the discount rate at which the NPV was zero, in other words, it tests the breakeven point. It is important because it assesses the profitability, and avoids environmental factors, such as interest
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The NPV, IRR, MIRR, and discounted payback (using a payback requirement of 3 years or less) methods always lead to the same accept/reject decisions for independent projects. For mutually exclusive projects with normal cash flows, the NPV and MIRR methods can never conflict, but their results could conflict with the discounted payback and the regular IRR methods. Multiple IRRs can exist, but not multiple MIRRs. This is one reason some people favor the MIRR over the regular IRR.
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should definitely be taken to maximise the shareholder's wealth Internal Rate of Return IRR is another method used in measuring capital budgeting to figure out whether a project is desirable. It is an alternative to NPV, both of which are linked together. The market rate is 12% as opposed to the IRR which is a 109%, which is considerably higher. Based on the IRR rule you should accept a project if the IRR is higher than the required return & reject the project if it is lower than the rate.
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Bethesda Mining Company To be able to analyze the project, we need to calculate the project’s NPV, IRR, MIRR, Payback Period, and Profitability Index. Since net working capital is built up ahead of sales, the initial cash flow depends in part on this cash outflow. So, we will begin by calculating sales. Each year, the company will sell 600,000 tons under contract, and the rest on the spot market. The total sales revenue is the price per ton under contract times 600,000 tons, plus the spot market
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Bank Saderat Iran 1. Bank Saderat Iran was established on September 1952 as a private bank (BSI, Annual Report , 2011). After Iranian revolution, in June 1979 all Iranian banks were nationalized to dismay and became state owned. It has largest network within Iranian banking system with 2700 local branches, 21 overseas branches. 2. Islamic Contracts: these are contracts under which banks are authorized to grant facilities to the customer and participate indirectly in the investments: Quardh Al Hassaneh
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