following is not a capital budgeting decision? a Whether to acquire a subsidiary company. b Whether to expand a product line. c Whether to fill a special order. d Whether to purchase a fleet of trucks. 2 Which of the following is an example of a nonfinancial consideration in capital budgeting? a Will an investment generate adequate cash flows to promptly recover its cost? b Will an investment generate an acceptable rate of return? c Will an investment have a positive net present value? d Will an investment
Premium Net present value Cash flow Investment
GROUP ASSIGNMENT CASE 23: DANFORTH & DONNALLEY LAUNDRY PRODUCTS COMPANY Purpose of Meeting: To make capital budgeting decision with respect to the introduction and production of a new product‚ a liquid detergent called Blast. Need to consider what types and which cash flows should be included in capital budgeting analysis. D&D was producing and marketing two major product lines: 1. Lift-Off: Low –suds‚ concentrated powder. 2. Wave: Traditional powder detergent. Questions &
Premium Net present value Laundry detergent Inventory
Week One Discussion Questions • What is the capital market? How is the primary market different from the secondary market? In your opinion‚ are these markets efficient? Why? • What are three primary roles of the U.S. Securities and Exchange Commission (SEC)? How does the Sarbanes-Oxley Act of 2002 augment the SEC’s role in managing financial governance? Do you think businesses became more ethical after Sarbanes-Oxley was passed? Provide examples to support your answer. • What ratios measure
Premium Net present value Investment Time value of money
McGraw Hill R-3 Fundamentals of Financial Management Sharan Vyuptkesh 2nd 2008 Pearson Other Reading Sr No Journals articles as Compulsary reading (specific articles‚ complete reference) OR-1 The Cost of Capital for Alternative Investments- Harvard Business School Working Paper -http://www.hbs.edu/research/pdf/12-013.pdf ‚ OR-2 wing Your Nest Egg: Risk and Return-Iowa State University-http://www.extension.iastate.edu/publications/pm1821.pdf ‚ ‚ OR-3 Inventory
Premium Corporate finance Net present value Finance
decision-making process. The net present value method is one of the useful methods that help financial managers to maximize shareholders’ wealth. The capital budgeting decision mergers Acquisitions Net Present Value Financial managers are working for the shareholders and their primary goal is profit maximization in order to maximize the wealth of the company and the shareholders. The Capital budgeting decision focuses on the net present value method‚ the payback
Premium Net present value Mergers and acquisitions
Papa Geo’s – Restaurant Budget Proposal For 2012 - 2017 BUSN-278 [Term] Professor[name] DeVry University ------------------------------------------------- Table of Contents Section | Title | Subsection | Title | Page Number | 1.0 | Executive summary | | | | 2.0 | Sales Forecast | | | | | | 2.1 | Sales Forecast | | | | 2.2 | Methods and Assumptions | | 3.0 | Capital Expenditure Budget | | | | 4.0 | Investment Analysis | | | | | | 4.1 | Cash flows
Premium Net present value Cash flow Internal rate of return
Part I A. Present Value with Discount rate of 7% = 15000/(1+7%) = 15000/1.07 = $14‚018.69 Present Value with Discount rate of 4% = 15000/(1+4%) = 15000/1.04 = $14‚423.08 B. Account A - Present Value with Discount rate of 6% = 6500/(1+6%) = 6500/1.06 = $6‚132.08 Account B - Present Value with Discount rate of 6% = 12600/(1+6%)^2 = 12600/1.1236 = $11‚213.96 C. Present Value of Gold Mine 7% = 4900000/1.07 + 61‚000‚000/(1.07)^2 + 85‚000‚000/(1.07)^3 = 45‚794‚392.52 + 61‚000‚000/1.1449 + 85
Premium Net present value Cash flow Internal rate of return
rounded to the nearest dollar? (A) (B) $19‚292 (C) $144‚105 (D) 3. $14‚938 $40‚000 A firm’s profit before tax is $150 000 and depreciation expense is $30‚000. Assuming a company tax rate of 30%‚ the firm’s cash flow from operations is: (A) $840‚000 (B) $180‚000 (C) $135‚000 (D) $75‚000 4. Given an effective annual interest rate of 14 per cent‚ the present value of a perpetuity consisting of yearly payments of $25‚000 starting immediately is
Premium Net present value Rate of return Time value of money
Keywords: capacity‚ maximum output rate 2. Capacity decisions should be made separate from strategic decisions. Answer: False Reference: Introduction Difficulty: Moderate Keywords: capacity decision‚ strategic decisions 3. Capacity can be expressed by output or input measures. Answer: True Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: capacity‚ input measures‚ output measures 4. Input measures of capacity are inherently
Premium Capacity utilization Net present value Cash flow
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 use of the risk-adjusted hurdle-rate system? What are Buono’s arguments against the system? Both arguments were discussed because the firm has two segments in the corporation with different cost of capital. Phillips’ argument
Premium Net present value Weighted average cost of capital Internal rate of return