Net Present Value/Present Value Index The management team at Savage Corporation is evaluating two alternative capital investment opportunities. The first alternative‚ modernizing the company’s current machinery‚ costs $45‚000. Management estimates the modernization project will reduce annual net cash outflows by $12‚500 per year for the next five years. The second alternative‚ purchasing a new machine‚ costs $56‚500. The new machine is expected to have a five-year useful life and a $4‚000
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of Business and Public Management Department of Management and Leadership March 3‚ 2014 TESCA CASE STUDY SUMMARY RESULTS AND RECOMMENDATIONS The proposed refrigerator manufacturing and sales project for Tesca Works‚ Inc. is a financially complicated project which on the surface‚ given the increase in energy costs and customer demand may seem like a winning proposition. However‚ when we delve further into the details of the financial projections along with projections of
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Net present value In finance‚ the net present value (NPV) or net present worth (NPW) of a time series of cash flows‚ both incoming and outgoing‚ is defined as the sum of the present values (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 purchase price‚ the NPV is simply the PV of future cash flows minus the purchase price (which is its own PV). NPV is a central tool in discounted cash
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MGMT 640 Section 9056‚ Mid-term Exam Fall 2010 This exam consists of 33 multiple-choice questions. Enter your answers on the Answer tab of the Excel spreadsheet that has been provided. (The worksheet tabs are located at the bottom of your worksheet.) Put your calculations on the Calculations tab as evidence of your work. Your calculations will be used as evidence of your independent work only and will not be used for partial credit for incorrect answers. Change the Excel file name to include
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Exam1 - KEY 1. What is the primary disadvantage of the corporate form of organization? Name at least two advantages of corporate organization. The primary disadvantage of the corporate form is the double taxation to shareholders of distributed earnings and dividends. Some advantages include: limited liability‚ ease of transferability‚ ability to raise capital‚ and unlimited life. 2. Evaluate the following statement: Managers should not focus on the current stock value because doing so will
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Assignment “Net Promoter Score: a strong indicator of loyalty and growth?” 2 Table of Content Page Introduction…………………………………………………………………………3 1 Main advantages of the NPS……………………………………………...4 1.1 1.2 1.3 2 Simple and understandable – the calculation of the NPS……...4 Simple categorization of the customer groups - …………………. application of the NPS……………………………………………...5 Motivating Change - customer-focused management by NPS...6 Main disadvantages of the NPS ................................
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Initial investment An initial investment is the money a business owner needs to start up a firm. It might include the business owner’s own money‚ money borrowed from an array of sources including family and friends or banks‚ or capital raised from investors. The term initial investment is also used as the money a business owner uses to invest in a capital investment venture such as a piece of equipment or a building. IRR The higher a projects internal rate of return‚ the
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following number years? a) 3 years $1‚191 b) 5 years $1‚338 c) 10 years $1‚791 2. If you require a 9% return on your investment which would you prefer? a) $5‚000 today PV = $5‚000 b) $15‚000 five years from today PV = $9‚748.50 c) $1‚000 per year for 15 years PV = $8061 Select option b 3. The Lancer Leasing Company has agreed to lease a hydraulic trencher to the Chavez Excavation Company for $20‚000 per year over
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flows for the next five years are forecasted as: Year Cash Flow 1 -$50‚000 2 -$20‚000 3 $100‚000 4 $400‚000 5 $800‚000 A. Assume annual cash flows are expected to remain at the $800‚000 level after Year 5 (i.e.‚ Year 6 and thereafter). If TecOne investors want a 40 percent rate of return on their investment‚ calculate the venture’s present value. B. Now assume that the Year 6 cash flows are forecasted to be $900‚000 in the stepping stone
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DCF methods for investments that have got strategic implications. * There are various reasons for the use of open approach. Since the outcomes of these projects are highly unforeseen‚ according one interviewee‚ the application of quantitative tools is not plausible. Therefore‚ companies tend to apply the rule of thumb methods rather than standardized quantitative models. The justification for not applying quantitative models is some times attributed to the nature of a project. Capital inv
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