Fin 502 Managerial Finance Andras Fekete PNC’s Weighted Average Cost of Capital Case 5 Due: November 6th, 2006 Prepared for Dr. James Haskins Managerial finance November 5, 2006 TABLE OF CONTENTS List of Figures 3 List of Tables 4 Executive Summary 5 Introduction 6 Statement of Opportunities and Problems 7 Methodology and Analysis 8 Summary and Conclusions 24 Recommendations 25 Works Cited 27 Appendix
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Present Value Analysis. Assuming that the required rate of return is 15% and the initial cost of the machine is $3,000,000. 1. What is the project’s IRR? IRR % IRR= 22.38% 2. What is the project’s NPV? NPV NPV= $3,450,866.74 3. Should the company accept this project and why (or why not)? I believe the company should look into this. The IRR is greater than the Required Rate of Return and the overall NPV is a gain. There does not appear to be a loss in this asset. 4. Explain how depreciation
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Corporate Finance Notes * Chapter One: Introduce to Corporate Finance 1. Three Questions: A. What Long-term asset should be invested? Capital Budgeting B. How to raise cash for capital expenditures? Capital Structure C. How to manage short-term cash flow? Net Working Capital 2. Capital Structure: Marketing Value of Firm = MV of Debt + MV of Equity 3. Finance perspect and Accountant perspect: Finance: Cash Flow ! Accountant: A/R means profit ! 4. Sole proprietorship
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1 Running header: CRUNCHING THE NUMBERS CRUNCHING NUMBERS Abstract The public sector faces complex challenges when allocating financial resources in the most productive way in accordance with government policies. The capital budget process in the public sector explores a variety of objectives to determine the best financial impact for the federal, state, and local government entities. The process chooses capital projects from a number of potential options based on several factors such as
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HW Wenyu Li Chapter 9 9-4 Distinguish between beta (i.e., market) risk, within-firm (i.e., corporate) risk, and stand- alone risk for a potential project. Of the three measures, which is theoretically the most relevant, and why? Beta is a measurement of company’s risk relative to market risk or systematic risk. Beta also measure the risk associated with specified securities or portfolio. In capital assets pricing model theory, securities or portfolios expected return is calculated based on
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internal rate of return, we should be able to see which projects Star should undertake. Conclusion: After calculating the NPV and the IRR for each project, I have determined that both the dishwasher and the trash compactor projects should be pursued. Both of them have shown positive NPVs at the new discount rate of 11.58% (WACC). Both projects also yielded IRRs greater than the given hurdle rate. The disposal did not meet these requirements and therefore should not be undertaken. Based on the
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CHAPTER 7—PROJECT CASH FLOWS AND RISK TRUE/FALSE 1. If an investment project makes use of land that the firm currently owns, the project should be charged with the opportunity cost of the land. 2. Net incremental operating cash flow is calculated by adding back the change in depreciation to the change in income after taxes. 3. A key difference between replacement and expansion project analyses is that with replacement, the incremental cash flows are measured as the net difference between projected
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Question 1(a) To be listed on a recognized stock exchange, a company must go through an initial public offering (IPO) ，which is the first sale of stock by the company to the public. Private listed companies or small firms that are planning to expand the growth of their company often use an IPO as a way to generate and raise the capital needed for their company expansion. Although further expansion is beneficial to the company and its shareholders, there are both advantages and disadvantages that
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INTRODUCTION: Euroland Foods S.A is a multinational producer of high quality ice cream, yogurt, bottled water and fruit juices. Its products are primarily sold throughout Scandinavia, Britain, Belgium, the Netherlands, Luxembourg, western Germany, and northern France. In early January 2001, the senior management committee of Euroland Foods S.A was called together to come up with the firm’s capital budget for the new year. There were 11 projects up for consideration that the committee was
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criteria's that I might use to rank the projects such as the projects' payback period, its IRR, its average income, or its NPV. Also there different quantitative ranking methods that I would use, for example, Net Present Value, Payback Rule, Internal Rate of Return, and Average Accounting Return. Out of the four methods, NPV is going to result better because it is usually the best method for capital budgeting. IRR will only works when the projects have a series of cash flow, but we have a few project
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