assigned so that they make the best allocation of resources. Early research shows that methods such as payback model was more widely used which is basically just determining the length of time required for the firm to recover the outlay of cash and the return the project will generate. Other models just basically employed the concept of the time value of money. We have seen that more current models are attempting to include their analysis factors that might significantly affect the decision made by the
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company invest in the project named Goliath Facility. In my analysis‚ I utilized some of the more popular valuation techniques to guide my decision: (i) Payback Method (ii) Discounted Payback Method (iii) Net Present Value (NPV)‚ (iv) Internal Rate of Return (IRR) and (v) Profitability Index. Results of Analyses I outline below the various techniques of assessment‚ the results and the rationale for accepting or rejecting the investment. 1. Payback Method – The investment is outside of
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processing data. * Data - information pertinent to the organization’s business practices. * Software - computer programs used to process data. * Information Technology Infrastructure - hardware used to operate the system. * Internal Controls - security measures to protect sensitive data. Q2: The Accounting Information Cycle Record keeping or the data transformation process is called the accounting cycle‚ and there are nine steps to this: 1. Preparing transaction
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of capital – rate of return expected to be received from alternate investments forgone. NPV – Present value of cash flows less the cost of acquiring the asset acquire assets with positive NPV‚ positive NPV = good project Rate of Return = profit/cost or investment (good investments have higher rate of return than opportunity cost) Higher discount rate ( lower discount factor (lower NPV Investment Decision Rules: 1. accept if positive NPV 2. accept w rate of return > opp cost
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technology takes 3.96 years. Because building takes less time to recover the initial outlay‚ building is better. I also apply the modified internal rate of return (MIRR) to this analysis. The modified internal rate of return is an alternative measure of the annual rate of return on an investment that assumes you reinvest the cash flows at the required rate of return. MIRR is value neutral regarding the reinvested cash flows and is not incorporating any spurious value enhancing/destroying activity. According
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Present Value and the Internal Rate of Return for both Corporations. We made the decision based on more financial sense. Below‚ we have outlined our decision making process. Defined What we have done first to help define our Net Present Value and Internal Rate of Return was to project 5 years in advance the income and cashflow would potentially look like. Understanding that Corporation A has a ten percent discount rate each year and Corporation B has an eleven percent discount rate‚ Learning Team C
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corporate finance (2010‚ P. 203-204). In order to determine if Bethesda Mine should open‚ a thorough analysis of the payback period‚ profitability index‚ average accounting return‚ net present value‚ internal rate of return‚ and the modified internal rate of return have been conducted. Table 1. Cash flow on Investment Tax rate= 38% Year 0 Cash flow (outflow) on investment Opportunity cost of using land= $7‚000‚000 Cost of equipment= $85‚000‚000 Total $92‚000‚000 Table 2. MACRS 7-Year
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be based on discounting cash flows analysis and thereafter determining the Net Present Value (NPV) of each of the proposed project with Internal Rate of Return (IRR)‚ Profitability Index and Payback Period. If the project has a positive NPV‚ it would suggests the project is generating more cash than is required to service the debt and provide the appropriate returns; thus‚ the higher NPV‚ the better it is for the company. The project proposal with the positive and highest NPV‚ IRR and profitability
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incremental after tax cash flow. Then one needs to determine the projects initial outlay‚ the differential cash flows over the project’s life‚ and the terminal cash flow. Also what needs to be looked at is what is the net present value and its internal rate of return. When making the capital-budgeting decision for constructing a building to manufacture cupcakes one should focus on cash flows rather than accounting profits. Accounting profits cannot be reinvested. They are more like profits on paper.
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Case Study #1: Green Valley Medical AEM 4570: Advanced Corporate Finance Name: Di Hu Net ID: dh583 1. What are the key elements of Green Valley’s strategy? a. What kind of hospital is it‚ and how does that relate to their overall strategy? Green Valley Medical Center is a nonprofit teaching hospital comprising of 330 beds affiliated with a large state university in a midsize town located several hours from the state’s two urban centers. It was the only regional hospital
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