Yonsei University Graduate School of Business Corporate Finance Harvard Business Case Investment Analysis and Tri Star Lockheed 1. (A) The payback is 35‚000/5‚000= 7 years Computation of the NPV : 15 NPV= -35‚000 + Σ 5‚000 / ( 1 + 12%)^ 15 i=1 NPV = $- 947. 67 Computation of the IRR : 15 0= -35‚000 + Σ 5‚000 / ( 1 + IRR)^ 15 i=1
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Investment Analysis and Lockheed Tri Star Group effort Total points: 100 (Course grade 25%) This case comprises four serially numbered stand-alone problems and the fifth one appears with the title of Lockheed Tri-Star. You are required to offer your calculations of values as indicated below. In addition to the calculations‚ write a brief summary of your findings in about 100 words for each problem. 1) Rainbow Products 20 points | Machine Purchase | Machine plus service contract
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labor costs. The savings are expected to provide the additional cash flows of $5‚000 per year. The machine costs $35‚000 and will last for 15 years. The cost of capital for this investment is 12% a) The payback period of this project is 7 years. The sum of cash flows during the first seven years equal the initial investment. The net present value (NPV) and IRR of this project is -$945.68‚ and 11.49% respectively. As the project has negative NPV and the IRR is lower than the cost of capital‚ Rainbow
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Investment Analysis and Lockheed Tri Star Problem Sets February 25‚ 2013 1a. The results of NPV‚ payback and IRR calculations are the following. For payback method‚ Rainbow Product will pay back the original investment costs after 7 years. Net Present Value is -$946 and IRR is 11.49%. Rainbow Products should not purchase the machine according to the results of NPV and IRR calculation. The net present value of purchasing this new equipment is negative‚ and the internal rate of return is less than
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o \ Course: Financial Decision Making Date: 01/26/2012 Investment Analysis and Tri Star Lockheed 1 (A) According to the information provided the pay back time shall be 35000/5000 = 7 years. Formula for net present value NPV is as follows (CALCULATING NET PRESENTVALUE‚ PAYBACK PERIOD‚ AND RETURN ON INVESTMENT): 15 NPV= -35‚000 + ∑ 5‚000 / (1 + 12%) ^ 15 i=1 = $947 The IRR 15 0= -35‚000 + ∑ 5‚000 / (1 + IRR) ^ 15
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Investment Analysis and Lockheed Tri Star The Case is divided into 5 different mini Cases. Each case is about another scenario. Case 1 is about a company called Rainbow Products. The company considers the purchase of a paint-mixing machine. The machine costs $35.000 but the company expects an annual saving of $5.000 additional cash flow. The machine is expected to last 15 years and the cost of capital is 12 %. First I would calculate the NPV and the IRR. If the NPV is higher then the return
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Lockheed Tri Star Case Study Introduction By 1966‚ Lockheed had already invested almost $900 million in research and development of the Tri Star L-1011 (Scott‚ 2010). By 1971‚ with over $1 billion in sunk costs‚ Lockheed was seeking a $250 million federal guarantee through a congressional hearing in order to complete the program. Lockheed presented their case as a liquidity issue caused by unrelated military contracts and assured that the Tri Star program was economically sound (text). Through
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Case study: Investment Analysis and Lockheed Tri Star MGMTS-2700 Professor Hamza Abdurezak Harvard University Yang Zhong 1> A. Payback‚ NPV‚ IRR‚ Should purchase or not? Payback: $35‚000/5000=7 year NPV: =Co+ C1…..n/(1+i)^1….n Co=-3‚5000 CF1-CF15= 5‚000; I= 12 Computing result is $-945.67 IRR: 11.49% NPV is negative and IRR is lower 12% so reject the proposal. B. NPV: =Co+ C1…..n/(1+i)^1…
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LOCKHEED TRI STAR CASE STUDY Ignacio Serra N 04/23/2015 Introduction The Lockheed L-‐1011 TriStar was the third wide body passenger jet airliner to reach the marketplace‚ following the Boeing 747 “jumbo jet” and the Douglas DC-‐10. Lockheed began design and testing in 1966 on
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