Closing case: Chapter 4 Tiffany McFatter BUS 650 Instructor Stanley Atkinson January 7, 2013 1. How does Ben’s age affect his decision to get an MBA? There are several factors that go into deciding to get an MBA. One of these factors for Ben is his age. Since he is currently 28 years old, and estimates that he only has about 40 years left to work, he has to decide if giving up two years of paid work will be worth it in the long run to go back to graduate school to obtain his MBA. If he
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Financial concepts are greatly important when determine which would be the best method to use for the firm or personal use. Some financial concepts are time value of money, risk and return, and interest rates. The activity of the assignment is to determine which options are best for the individual if the individual were given three alternatives of his or her inheritance; taking the $5,000 now, $1,000 for the next eight years, or taking a $12,000 at the end of the eight years. Assume that the
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investment. These concepts deal with the time value of money and the other investment factors. “If decisions are made that ignore the interaction of scale and risk, then cash flows are misvalued and suboptimal operations decisions are made” (Lederer & Mehta). Companies use CAPM and DCF to figure out the greatest potential for highest yield of an investment based on average market returns. The Capital Asset Pricing Model (CAPM) takes the two factors of time value of money and market risk into account
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Market Risk Premium = 7.2% …Given, Case Material 3. Risk-free Rate = 5.0% …Given, Case Material 4. Using CAPM, Discount Rate = 5.0% + 1.50X7.2% = 15.8% Appropriate Discount Rate = Cost of Capital = 15.8% Question 2] Value the project using the Adjusted Present Value (APV) approach, assuming the firm raises $750,000 of debt to fund the project and keeps the level of debt constant in perpetuity. Detailed calculations for project’s NPV using APV approach and assuming $750K of debt in perpetuity
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was £18,800 with an average addition of £1,100 per year2. The payback period for the project was 3.10 years, when considering the erosion of Rotterdam, this would increase to 3.46 years2. The net present value of Merseyside is £15.61 million and when considering erosion, the net present value is £11.37 million2. The internal rate of return is 33%, with the erosion, it is 28.2%2. Based on these four criteria, Merseyside is a valid project to consider. When considering the Rotterdam project,
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Suggested Solution By Prof. F.R. Tariq For any query please contact at azeez786@hotmail.com, 0333-4233770, 0321-4401660 ALLAMA IQBAL OPEN UNIVERSITY ISLAMABAD LEVEL MBA Semester Autumn 2002 Paper Financial Management CC. 562/5535 Maximum Marks 100 Time Allowed 3 Hrs Pass Marks 40 NOTE ATTEMPT FIVE QUESTIONS. ALL CARRY EQUAL MARKS Q. 1 Cheryl’s Menswear feels that its credit costs are too high. By tightening its credit standards, bad debts will fall from 5 percent of sales to 2 percent. However
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May 31, 2010 Bunyan Lumber, LLC Bunyan Lumber, LLC has a 7,500-acre forest of Douglas Fir trees that they wish to harvest at the optimal time for profit maximization. The company plans to thin the trees today, which will result in a positive cash flow of $9 million. Thinning the trees allow for optimal growth of the trees until they are ready to be harvested. Our options of when to harvest the trees are 20, 25, 30, and 35 years from today. They are currently 20 years old today, so they
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Net Present Value and Project Evaluation IUJ, Spring 2006 Pham Thi Thuy Ha Marriott Corporation, an American firm, has 3 major lines of business: lodging, contract service and restaurants. Its growth objective is to remain a premier growth company. The four components of its financial strategy are consistent with this growth objective for the reasons: Manage rather than own hotel assets: Marriott sold its hotel assets to limited partners to reduce assets and thus, it can increase ROA
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determines how much longer he can work. If he would wait his MBA at age 40, he would have less time to recoup his cost by working at an increased salary resulting from graduating his MBA program. 2. What other, perhaps non-quantifiable factors, affect Ben’s decision to get an MBA? Asides from a purely financial standpoint, there are several other factors that may affect Ben’s decision to get an MBA. The value he attaches to education, completing a higher degree, or a sense of accomplishment may positively
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Case 1 DIAMOND CHEMICALLS PLC (A): THE MERSEYSIDE PROJECT 1. This case study the payback period, payback period and Net present value, but also the time value of capital was analyzed. Net Present Value and internal rate of return investment criteria are met. 2. In the economic evaluation of the project, it needs to forecast and analysis for the product cost situation and market sales and sales price. Overall consumer buying behavior is occurred when driven by its purchase motivation, affected
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