Calculate‚ interpret and evaluate payback period‚ net present value‚ profitability index and internal rate of return. 9-1 What are the most commonly used capital budgeting procedures? Why is capital-budgeting decision so important? Why are capital-budgeting errors so costly? 9-2 The treasurer of Anthony Press. has projected the cash flows of projects A‚ B‚ and C as follows. The required rate of return on both projects is 12 %. Year Project A Project B Project C 0 (RM100‚000) (RM200‚000) (RM100
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|Case 9 | |Performance Boating Products‚ Inc. | Performance Boating Products‚ Inc I. Situation Analysis • Performance Boating Products‚ Inc (PBP) manufactures attachments for boat hulls and motors that aid watercraft in reducing drag and maintaining ‘plane’. • PBP attachments can be integrated as part of new
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(freedictionary). Internal Rate of Return The internal rate of return (IRR) is the rate that the present value of cash inflows equal cash outflows. IRR is an estimation of the total return of the project over the life of the project assuming all cash flows are reinvested at the projects return rate. This method will provide Guillermo with an idea of what the project might earn over the life of the project. Once the IRR is determined it can be compared to the desired rate of return Guillermo wishes
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consults 12 June 2010 Table of Contents Introduction....................................................................................................1 Merits of accounting rate of return..............................................................................................1.1 Demerits of accounting rate of return.........................................................................................1.2 Merits of Payback Period.........................................................
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1. Victoria Chemicals evaluate its capital-expenditure proposals in four ways. They are average annual addition to earnings per share‚ payback period‚ net present value‚ and internal rate of return. An earnings per share method is to indicate a company’s profitability. For Victoria Chemical‚ this was calculated with the average annual earnings per share contribution of the engineering-efficiency project over its entire economic life. However‚ for the basis of the calculation‚ the project’s initiator
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on a 5 year projected income statement and cash flow statement as well as each Corporation’s NPV and IRR. The net present value represents the project adds to shareholder wealth. The net present value is also the present value of future cash returns. In order to find the net present value‚ the present value of cash flows and sum of discounted cash flows has to be determined. Finding the present value of cash flows includes the revenue minus the expenses‚ depreciation‚ and tax. The same
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1. When a firm maximizes profits it will simultaneously minimize opportunity costs. Answer: True Terms to Learn: opportunity cost 2. The usual starting point in budgeting is to forecast net income. Answer: False Terms to Learn: operating budget The usual starting point in budgeting is to forecast sales demand and revenues. 3. If the $17‚000 spent to purchase inventory could be invested and earn interest of $1‚000‚ then the opportunity cost of holding inventory
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find the cost of obtaining each source of financing today (not historical). Cost of Capital - The rate of return that a firm must earn on its investment projects to maintain its market value and attract funds. It depends on the risk of that investment (use of funds‚ not source of funds) 1. Cost of Debt (rd) – we use Bonds to represent the cost of long-term debt. Its required rate of return is the yield-to-maturity (YTM) of the bond. After we calculate the rd‚ we need to find the after-tax
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used by businesses. • Three common alternatives to the NPV rule: 1) Payback period 2) Internal rate of return (IRR) 3) Profitability index NBA6060‚ Spring 2014 Hyunseob Kim 4 2 Alternatives to NPV rule: Test • Which of the following rules may be useful when a firm is capital constrained? (that is‚ it cannot invest in all positive-NPV projects) a) Payback period b) Internal rate of return (IRR) c) Profitability index d) All of above NBA6060‚ Spring 2014 Hyunseob Kim
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Chapter 1: Introduction ------------------------------------------------- 1.1 Introduction Rice is the staple food for 65% of the population in India. It is the largest consumed calorie source among the food grains. With a per capita availability of 73.8 kg it meets 31% of the total calorie requirement of the population. India is the second largest producer of rice in the world next to China. The all India area‚ production‚ and yield of rice in the year 2001-02 was 44.62 million hectares‚ 93.08
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