A project’s average net income divided by its average book value is referred to as the project’s average: A. net present value. 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 project will generate if the project in financed solely with internal funds. C. discount rate that equates the net cash inflows of a project
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CAPACITY PLANNING Real Options Analysis Practice Questions and Solutions CAPACITY PLANNING Question 1: PROJECT SABLE Use a 30% per year discount rate to evaluate Project Sable‚ which has two phases. You may invest in the first‚ in both or in neither. You may not invest in the second phase without investing in the first. Phase 1 requires an investment of $100. One year later the project delivers on the average $120. At that time‚ after the phase 1 payout has been received‚ you may invest
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time value of money (TVM) in business? What considerations are made when calculating TVM? How may you use TVM to create your own‚ or someone else’s‚ retirement plan? Week Three Discussion Questions • How do you define working capital? What may happen if an organization neglected to manage its working capital? What techniques do you recommend for your organization? Why? • What is capital planning? Why is the internal rate of return important to an organization? Why is net present value
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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 net present value. 2. How does Teletech Corporation currently use the hurdle rate? They used it based on the firm’s rating‚ beta‚ cost of capital‚ and they calculated WACC of 9.3% for the whole corporation. 3. What are Rick Phillips’s arguments for the
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NET PRESENT‚ VALUE‚ MERGERS AND ACQUISTIONS TRIDENT UNIVERSITY INTERNATIONAL AVIE MARIE JOHNSTONE STRATEGIC CORPORATE FINANCE FIN501 MODULE 5 CASE ASSIGNMENT PROFESSOR WALTER WITHAM
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000) (8‚100) Tax cost (2‚730) (3‚075) (4‚590) Net cash flow $6‚020 $5‚175 $10‚710 Discount factor (6%) .943 .890 Present value $6‚020 $4‚880 $9‚532 NPV $20‚432 11. a. Year 0 Year 1 Year 2 Year 3 Year 4 Before-tax cash flow $(500‚000) $52‚500 $47‚500 $35‚500 $530‚500 Tax cost (7‚875) (7‚125) (5‚325) (4‚575) After-tax cash flow 44‚625 40‚375 30‚175 525‚925 Discount factor (7%) .935 .873 .816 .763 Present value $(500‚000) $41‚724 $35‚247 $24‚623 $401‚281 NPV
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References: Byrd‚ J.‚ Hickman‚ K.‚ & McPherson‚ M. (2013). Managerial Finance. San Diego‚ CA: Bridgepoint Education Inc. Juhász‚ L. (2011). Net present value versus internal rate of return. Economics & Sociology‚ 4(1)‚ 46-53‚126. Retrieved from http://search.proquest.com/docview/1038451731?accountid=32521 Klein‚ T. C. (2005). Internal rate of return for law firm financial executives: A simple
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semiannually. The market price of the bond is $1‚000‚ equal to its par value. a. What is the payback period for this bond? b. With such a long payback period‚ is the bond a bad investment? c. What is the discounted payback period for the bond assuming its 4% coupon rate is the required return? What general principle does this example illustrate regarding a project’s life‚ its discounted payback period‚ and its NPV? A8-1. a. Payback on this bond is 25 years. You pay $1‚000. You receive $40 a year
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$2) – (4‚500 × $2) = $1‚000 U 4. Stiner Company’s total materials variance is A) $2‚000 U. B) $2‚000 F. C) $2‚100 U. D) $2‚100 F. = $1‚000 + $1‚000 = $2‚000 U 5. Which of the following will increase the net present value of a project? A) An increase in the initial investment. B) A decrease in annual cash inflows. C) An increase in the discount rate. D) A decrease in the discount rate. 6. Which of the following is true? A) The
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INF3708/201/3/2013 SOFTWARE PROJECT MANAGEMENT TUTORIAL LETTER 201 FOR INF3708 SOLUTIONS Solutions (Highlighted) - Assignment 01 – Semester 1 ASSIGNMENT 01 - COMPULSORY Study material Total marks Hughes & Cotterell: Chapters 1 – 4 25 marks = 100% UNIQUE NUMBER: 203647 1. A 1. 2. 3. 4. 5. is said to be “A specific plan or design” or “A planned undertaking” System Scope Project Software Management -2- INF3708/201 2. Software Project Management scope normally comprises the
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