Linn purchase the $39M capsize? Hong Kong or the U.S? (Ocean Carriers uses a 9% discount rate.) To analyze these two scenarios, we choose to calculate net cash flow and IRR for every year. The detail calculation is attached in the appendix and the methodology of this approach is enlisted as below. Formula for NPV, IRR calculation 1. Gross operating revenue = Expected daily hire rate X Number of days operating 2. EBIT = Gross operating revenue – Yearly operating costs – Total depreciation
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Notes: FIN 303 Spring 09, Part 7 – Capital Budgeting Professor James P. Dow, Jr. Part 7. Capital Budgeting What is Capital Budgeting? Nancy Garcia and Digital Solutions Digital Solutions, a software development house, is considering a number of new projects, including a joint venture with another company. Digital Solutions would provide the software expertise to do the development, while the other company, American Financial Consultants (AFC) would be responsible for the marketing. Nancy Garcia
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Corporate Management Student Name Affiliate Institution Corporate Management Financial forecasting is an imperative too for a management team. This is because it helps how much cash should be generated from operations hence shaping decisions regarding expenditures that need be made. With an accurate forecast, it is possible for a company to maintain adequate cash levels that helps the company meet its financial obligations such as timely payment of payable accounts and payroll (Alice, 2009)
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to increase in WACC. 5. How does the WACC for a firm and the IRR of a project within the company correlate to each other? A project’s IRR is the discount rate that forces the PV of the expected future cash flows to equal the initial cash flow. It is an estimate of the project’s rate of return. If IRR exceeds the WACC used to finance the project, then the difference benefits the firm’s stockholders. On the other hand, if the IRR is less than the cost of capital, stockholders must make up the shortfall
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1) Which of the following categories of owners have limited liability? A. General partners B. Sole proprietors C. Shareholders of a corporation D. Both a and b 2) The true owners of the corporation are the: A. holders of debt issues of the firm. B. preferred stockholders. C. board of directors of the firm. D. common stockholders. 3) In terms of organizational costs, which of the following sequences is correct, moving from lowest to highest cost? A. General partnership, sole proprietorship,
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Brief Introduction Indian River Citrus Company is a leading producer of fresh, frozen, and made-from-concentrate citrus drinks. Currently, the company has three projects which are introduction of a new product known as lite orange juice; two mutually exclusive projects, Project S and Project L; and a fleet of delivery trucks with an engineering life of three years. All projects have its advantages and drawbacks. Hence, capital budgeting for each project is made for decision-making purpose. Benefits
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in the last quarter. Finally, it guides you through the calculation of NPV and other investment criteria we discuss in class. Although the case is from a privately-owned company in the US, it serves as an illustrative example on how we compute NPV, IRR, payback period, and profitability index in practice. This procedure could be applied (with appropriate adjustments) to other investment decision making by other forms of organizations, including households, publicly-traded companies, not-for-profit organizations
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Capital Budgeting Cash Flows Worksheet 1. A corporation is considering expanding operations to meet growing demand. With the capital expansion, the current accounts are expected to change. Management expects cash to increase by $20,000, accounts receivable by $40,000, and inventories by $60,000. At the same time accounts payable will increase by $50,000, accruals by $10,000, and long-term debt by $100,000. Determine the increase or decrease in net working capital (label it as increase or decrease)
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De La Salle University – Manila Ramon V. del Rosario College of Business Critique Paper on Robert Montoya, Inc. (A) In Partial Fulfillment of the Requirements in FNC535M – Financial Management January 20, 2016 Background of the Case: Robert Montoya, Inc. (RMI), one of the biggest wine producers in the United States, is planning to expand on its product offerings. RMI is owned by Robert Montoya, his brother and a few partners which sells wine throughout the world. However, one
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UWA Plastics evaluates its capital expenditure proposals by classifying a proposal under one of four categories, namely: new product or market, product or market extension, engineering efficiency and lastly safety or environment. If a proposal falls into one of the first three categories listed it must satisfy a number of performance hurdles in order to be considered a viable option. Any proposal that does not satisfy at least three of the four hurdles will not be considered by senior management
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