1 - Energy Costs
Find information on energy cost: Advantages (government websites)

2 - Cost of Equity, Appropriate Discount Rate (WACC)
Cost of equity 1. Formula Risk Free Rate + (Market Premium x Overall Company Beta)

2. Each part a. Risk free rate (10-year T-bill) i. bond rating chosen * interest rate * b. Market premium c. Beta i. Appropriate Discount Rate (WACC) 1. Formula Weight of Debt x After-Tax Cost of Debt) + (Debt to Equity x Cost of Equity)

2. WACC (important – why is it important for the company, Tesca, to know this?) 3. Each part (optional) a. Weigh of debt b. After-tax cost of debt c. Debt to equity d. Cost of equity

3- Recommended Generator
1. Comparing the two models: a. Warranty Cost Spreadsheet

4 - Cash Flow For Next Twenty Years and Assumptions
Fundamentals factors affecting cost of money: (page 19 of the textbook) 1. 2. 3. 4. Production opportunities Time preferences for consumption Risk Inflation

5 - Capital Budgeting Techniques
Capital budgeting techniques: (page 411 of the textbook) 1. 2. 3. 4. 5. 6. NPV IRR MIRR PI Payback Discount payback

7 - Evaluation of NPV’s Sensitivity Analysis
Based on the sensitivity analysis graph you will need to explain it. (page 436-439)

8 - Recommendations For or Against
Which of the two models should the company choose? If none of them are a good decision for the company, then explain why?

When referring to Exhibit in your paper Example: Please refer to Exhibit 1, which shows………………………. Please refer to Exhibit

...amount of $ 60,000. The discountrate is 10%. The cash flows before depreciation and tax are as follows:
Year Proposal A Proposal B
$ $
0 (60,000) (60,000)
1 18,000 19,000
2 15,000 17,000
3 18,000 19,000
4 16,000 14,000
5 19,000 15,000
6 14,000 13,000
Evaluate the above proposals according to:
1. Pay Back Period.
2. Accounting Rate of Return...

..._______________
1. What is the netpresentvalue of a project with the following cash flows if the discountrate is 14 percent?
[pic]
A. -$3,140.43
B. -$929.90
C. $247.181
D. $1,027.67
E. $1,127.08
2. Timothy is considering an investment of $10,000. This investment is supposedly going to provide him with cash inflows of $2,500 in the first year and $6,000 a year for the following 2 years. At a...

...
A project's average net income divided by its average book value is referred to as the project's average:
A. netpresentvalue.
B. internal rate of return.
C. accounting return.
D. profitability index.
E. payback period.
The internal rate of return is defined as the:
A. maximum rate of return a firm expects to earn on a project.
B. rate of return a...

...Netpresentvalue
In finance, the netpresentvalue (NPV) or netpresent worth (NPW) of a time series of cash flows, both incoming and outgoing, is defined as the sum of the presentvalues (PVs) of the individual cash flows. In case when all future cash flows are incoming (such as coupons and principal of a bond) and the only outflow of cash is the...

...Time Value of Money
Exercise
1. If you invest $1000 today at an interest rate of 10% per year, how much will you have 20 years from now, assuming no withdrawals in interim?
2. a. If you invest $100 every year from the next 20 years starting one year from today and you earn interest of 10% per year, how much will you have at the end of the 20 years?
b. How much must you invest each year if you want to have $50000 at the end of the 20 years?
3. What is...

...Corporation
1. What is a hurdle rate? How do you use it in a project evaluation?
Hurdle rate is the minimum amount of return on a project the company is willing to accept before starting a project. It is used in project evaluation to evaluate the amount of return on the project. A common method for evaluating the hurdle rate is apply the discounted cash flow method to the project, like netpresent...

...Examples Of NetPresentValue (NPV), ROI and
Payback Analysis
Introduction
Terms and Definitions
NetPresentValue - Method of calculating the expected net monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time.
Discount...

...Cynthia should employ is true?
1) Cynthia should rank the projects in increasing order of NPV and choose the highest ranked projects in order until the capital available is exhausted.
2) Cynthia should rank the projects in increasing order of internal rate of return and choose the highest ranked projects in order until the capital available is exhausted.
3) Cynthia should calculate the NPV of various combinations of projects and choose that combination that provides the...

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