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 planning a free cash flow investment and evaluating a project to determine the net present value of the business proposal. In the project financial analyst from Caledonia Products will consider the net value versus the internal rate of return. The research will determine if the organization will become profitable over the duration of five years. Research will also analyze if the investment will be a deficit to the company’s production over the duration of the project.
A factor that Caledonia must take into consideration when determining if to lease versus buying is the security that comes along with owning an asset versus leasing one. With Caledonia owning the equipment, the company could feel more secure than with the leasing of an asset. The lessor can take the asset at any time, when ending the contract. Another factor that Caledonia must take into consideration is the maintenance that comes with owning vs. leasing. Some...

...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 value
• Internal rate or return
The following analysis is provided to aid in the understanding of Team A’s final recommendation:
Free Cash Flows
The focus of what Caledonia receives is the free cash flow. The company should focus on what is received and what can be reinvested. The cash flow allows Caledonia to analyze the actual benefits and the costs involved. If the company calculated the depreciation as an expense, and focused primarily on the accounting profit view the amounts would be substantially lower than what is reflected in the free cash flow.
OPERATING CASH FLOW
0 Year 1 Year 2 Year 3 Year 4 Year Year 5
Unit sold 70,000 120,000 140,000 80,000 60,000
Sales price 300 300 300 300 200
Revenue 21,000,000 36,000,000...

...Caledonia Products IntegrativeProblem
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 receives they can reinvest. To accurately analyze the timing of the benefit or cost we can examine the cash flows. The only cash flows that the company should be interested in are the after-tax basis because these are the flows that are available to shareholders. When we look at the company as a whole, that shows us how important the incremental cash flow is and that interests the company. These incremental cash flows are the marginal benefits from the project and since the firm accepts the project they are the increased value to the firm.
2. What are the incremental cash flows for the project in years 1 through 5 and how do these cash flows differ from accounting profits or earnings?
21,000,000 36,000,000 42,000,000 24,000,000 15,600,000 Project Revenue
200,000 200,000 200,000 200,000 200,000 Minus fixed expenses
12,600,000 21,600,000 25,200,000 14,400,000 10,800,000 Minus variable expenses
8,200,000 14,200,000 16,600,000 9,400,000...

...Caladonia Products IntegrativeProblem
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 months and has proven to be a wise hiring decision based on the Chief Executive Officer (CEO) view however he is still hesitant to give the assistant any large responsibilities without supervision. The CEO has tasked the assistant with both the calculation of the cash flows associated with a new investment under consideration and the evaluation of several mutually exclusive projects (Keown, Martin, Perry, & Scott, 2005). The lack of experience on the assistants part has also lead to the CEO requesting not only that the assistant provide a recommendation but also to respond to a number of questions aimed at judging the assistants understanding of the capital budgeting process (Keown, Martin, Perry, & Scott, 2005).
Financial Assistants Assignment
The financial assistant received the important assignment by memorandum from the CEO. The memorandum stated that the company is considering the introduction of a new product (Keown, Martin, Perry, & Scott, 2005). Caradonia is currently...

...
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 be the most beneficial project for the company to invest in, in hopes of having a successful ROI.
The initial working capital shown in the cash flow chart for each project is $100,000. Project A has an annual cash flow of $32,000 but project B receives a lump sum in the 5th year of $200,000. The ROI on the initial investment is 0.11.
12 a.) The payback period for Project A is 3.125 years ($100000/32000 = 3.125 year). Project B’s payback period for $200,000 is 5 years or an estimated 4.5 years for the first 0.5 payment of $100,000 with a balance of $100,000 due at the 5th year mark.
12 b.) The NPV of project A is determined by taking the cash inflows minus the investment cost for Project A which will give you a net value of $18,272. -$100,000 for project A is the companies expense amount for funding the project.
NPV = $118,272 - $100,000 = $18,272
The NPV for Project B equals the present value of $1.00 for 5 years at 0.11 which yields a NPV of $18,600. In order to find...

...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 years the group expects to add the present annual value of $32,000, the return rate will be 11% utilizing the annuity table. The factor will be 3.696 at 11% for five years. To calculate the cash inflow, multiply the annual $32,000 by 3.696 at 11% to equal $118.272. Over a five year period the total cash inflow is $118,272 with a net value of $18,272 for project A. Net present value = $118,272 - $100,000 = $18,272
The first four years for project B, there was no cash flow. In year five there was $200,000 in cash inflow. To calculate the present value of the $200,000 for five years, now at 11, utilize the present value of $1.00 table. The result factor of the table is 0.593. The present value of $200,000 in five years at 11% calculates to be $200,000 multiplied by 0.593, which equals $118,600. The net present value for project B is $18,600. Net present value = $118,600 - $100,000 = $18,600
12C
The cash flow associated with these projects are as follows: |
Year | Project A |...

...What are some of the key differences between financial and managerial accounting? How do these differences impact the type of information that must be gathered and reported? What are the different types of decisions that users of financial accounting information must make? What are the different types of decisions that users of managerial accounting information must make?
What are the differences between job-cost and process-cost systems? When would it be appropriate to use each type of system? What is the effect of each system on the product cost? What type of system does the company you work for use? (if you are familiar)? What type of system do you think would work best for your company and why?
What is the difference between product costs and period costs? Give examples of each. How are each recorded on the financial statements?
What are the differences between a direct cost and an indirect cost? Which is the more difficult cost to track? Why? How do indirect costs affect the cost of a product? Should indirect costs be included in product cost? Why or why not?
Product cost is the cost of everything dealing with the labor and material used and period cost includes all other expense not direct related to the labor and material cost such as selling and administrative expense. The product cost is recorded as an inventory until it is sold then is recoded as cost of goods sold and cost of goods sold is recorded on the income statement and the current...

...Caladonia Products IntegrativeProblem
FIN 370
As a newly assigned assistant financial analyst at Caledonia Products, Team D has been charged with
calculating the cost of two projects, projected returns, cost of equipment, and finally a recommendation
as to which project to pursue and why. In order to make a recommendation we need all potential cost
incurred, unit price, projected sales, and market information.
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 |32,000 |0 |
|5 |32,000 |$200,000 |
The required rate of return on these projects is 11%.
1. What is each project’s payback period?
Project A’s payback period is 3.125 years...
$100,000 / $32,000 = 3.125
Meaning that in 3.125 years, there will be an influx of $100,000.
Project B’s payback period is 4.5 years...
Meaning that in 4.5 years, there will be an influx of $200,000.
2. What is each project’s net present value?
Project A’s net present value would be $18,269 and Project B’s net present value would be $18,690.
3. What is each...