the project are excluded in the analysis of incremental cash flows in order to avoid the “double-counting” of the cost of money. 4. The concept of the time value of money recognizes that a peso of present return is worth more than a peso of future return. 5. Choose the investments that will maximize the total net present value of the projects subject to the capital availability constraint. 4. The major classifications as to purpose are: 1. Replacement projects -
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products Budgeting relating to opening new stores Inventory valuation for financial reporting Various ethical issues relating to operating the current stores Lack of incentive compensation systems Concepts/Tools Examined Net present value CCA analysis Mark to market financial accounting issues Profit analysis Opportunity cost Financing Asset valuation Restrictive covenant in current financing agreement Financial statement (ratio) analysis HR issues relating to implementing performance
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Meier, 1 Dixon Corporation: The Collinsville Plant (Abridged) Case Analysis Prepared by Renee Meier, Cohort B November 12, 2010 Prepared For Brett Hunkins MBA 634: Measurement II Richard DeVos Graduate School of Management Meier, 2 Dixon Case Analysis Introduction Dixon Corporation, a specialty chemical company is considering the purchase of a sodium chlorate plant in Collinsville, Alabama. This opportunity will allow Dixon to expand its market and product line. Because of the location
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the time value of money (TVM) and use the concept of TVM in the valuation of bonds and stocks. In part two we will understand the methods for computing cash flows and the company’s cost of capital and then use them to learn capital budgeting which involves project selection decisions. COURSE OBJECTIVES The objective of this course is to give the students an operational knowledge of corporate finance by combining theory and applications. Introduce the concepts or risk, return, and time-value-of-money
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FVn = PV*(1+i)^n | PV = FVn / (1+i)^n Present Value of annuity (PVA): the present value of the cash flows from an annuity, discounted at the appropriate discount rate Individual Cash Flow (CFn): Present value of annuity equation: CF/I x [1-1/(1+i)^n] Present Value of Ordinary Annuity: ***PMT x ((1-(1/1+i^n))/i) PVAn = CF x 1-1/(1+i)^n / i PVAn = present value of an n period annuity | CF = level and equally spaced cash flow | I = discount / interest rate | n = number of periods PVAn
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calculate to present value of 3,000,000 in 15 years you first have to multiply it by the possibility, 0.7 giving you 2,100,000. I then used the equation. 2,100,000* 1/(1.1)^15 giving an answer of $502,723.30. After that I calculated the value of the ordinary annuity from year 6-15 by using the equation 200,000*1/(1.1)^6 with the exponent increasing by one for each year. The annuity came to a total of $763,058.55. Once I added up all three payments it comes to a total present value of $2,265,781
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David is the founder of the now world-famous website and Youtube channel MBAbullshit.com with 1 MILLION+ FREE tutorial video views worldwide on YouTube (as of May 2012) Beat The Bullshit This book aims to explain some the most "seemingly complicated" topics in these fields in a conceptual way, rather than explaining the common "how to calculate" way, which is much, much better explained and more easily understood in my step-by-step easy and quick tutorial videos (basic videos are FREE!) on my
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Analysis In order to make a recommendation to Mary Linn as to whether Ocean Carriers, Inc. should purchase a new ship we must first look at the net present value of the ship. In order to do this our team used the provided expected daily hire rates to calculate revenue which we expect to be for the lifetime of this vessel. The expected daily hire rate is the most accurate measure to determine future cash flows for the company. By using the annual operating days over the life of the new vessel we
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Conway with a new diesel-powered boat today; sell the Conway and its spare parts; overhaul the diesel engines in Year 10; sell the diesel and the diesel parts inventory in Year 20. Year | Specific Item | Cash flow after taxes | Present value factor @ 10% | Present value | 0 | Sell Conway | 25,000 | 1.00 | 25,000 | 0 | Tax shield on sale of Conway (39,500-25,000) x .48 | 6,960 | 1.00 | 6,690 | 0 | Sell spare parts of Conway | 30,000 | 1.00 | 30,000 | 0 | Tax shield on sale of Conway parts
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the net present value method. The net present value of this project is $33,035. Our textbook, Managerial Accounting, provides an explanation of this concept: “Under the net present value method, the present value of a project's cash inflows is compared to the present value of the project's cash outflows. The difference between the present values of these cash flows is called the net present value” (Garrison, 2012, p.583). Furthermore, our textbook, states: “Whenever the net present value is zero
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