Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows:

YEAR PROJECT A PROJECT B
0 -$100,000 -$100,000
1 32,000 0
2 32,000 0
3 32,000 0
4 32,0000
5 32,000 $200,000

The required rate of return on these projects is 11 percent.

Project A: Net present value is found by taking the original investment cost, $100,000 (that would be a negative amount since it's cash out the door), and then adding the present value of the annual cash inflows expected ($32,000 for 5 years at the required rate of return of 11%). You look up in the present value annuity table the factor for 5 years at 11%, which is 3.696, and multiply by 32,000 to get present value of expected cash inflows = $118,272. Net present value = $118,272 - $100,000 = $18,272 Payback period is the time that it takes a project to recover its initial cost from the revenue it generates. Payback period = Investment required / Net annual cash inflow = $100,000 / $32,000 = 3.125 years.

Project B: In this one, there are no annual cash inflows, just the one inflow of $200,000 in year 5. So you need to find the present value of $200,000 five years from now at 11%. You don't use the annuity table for this one, you use the present value of $1 table. The factor this table gives is 0.593. So the present value of $200,000 five years from now at 11% is $200,000 * 0.593 = $118,600. Net present value = $118,600 - $100,000 = $18,600 The payback period for this project is five years. It's not until the cash inflow of $200,000 in year 5 that the project recovers its original cost.

...Caledonia Products IntegrativeProblem
Charles Fletcher
FIN/370
March 25, 2013
Daneene Barton
Caledonia Products is determining a new business proposal. The organization is...

...Caledonia Products IntegrativeProblem
FIN/470
TEAM PAPER
From: The Assistant Financial Analyst
Re: Cash Flow Analysis and Capital Rationing
Caledonia is a corporation who is interested in adding a new trending project to their project line. The project would only be in production for five years and the company has chosen team A to make an educated recommendation. Tem A will analyze the following:
• Cash flow
• Net present...

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July 31, 2013
Yvette “Betsy” Stewart
1. Why should Caledonia focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project?
It is important that Caledonia Company should focus on the free cash flows instead of the accounting profits. With the free cash flows that the company...

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Tonia Tolliver, Suany Gonzalez, Teresa Powell, Victor Estrada, and Tracy Harriss
FIN/370
November 8th, 2010
Joe Brennan
Caladonia Products IntegrativeProblem
Every new employee is faced with the challenge of proving him or herself before being trusted to complete a task on his or her own without supervision. The new financial analyst at Caladonia has been employed for two...

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Caladonia Products IntegrativeProblem
Caladonia is looking to invest in projects that will yield a high rate of return to the company. They are relying on a fairly new employee to research and report adequate analysis on which direction the company should go in. Learning Team B will use the provided company data to aid the new employee in this venture and to determine the payback periods, the internal rate of return, and to decide which project will...

...Caladonia Products IntegrativeProblem Paper
FIN/370
May 30, 2011
Chrissy Helbling
12a.
Project A :100,000/32,000 = 3.125 years
Project B : 100,000/200,000 = .5
4 years + .5 years= 4.5 years
12b. What is each project’s net present value?
For project A, the projects net present value is $100,000 the initial investment overhead of the project is a negative expenditure because it is an expense to the company. Over the next five...

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As a newly assigned assistant financial analyst at Caledonia Products, Team D has been charged with
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incurred, unit price, projected sales, and market information.
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