Introduction Schering Plough is a large pharmaceutical company who is about to lose the patent to its largest revenue generating drug‚ Claratin. The loss of exclusive rights to this product could decrease Schering Plough’s revenue by over 90%. Schering Plough in hindsight of what will become of their financial position with the expiration of this patent has decided that it must develop a new product which uses Loratadine‚ the main component of Claratin. The two drugs the company wishes to
Premium Net present value
Title Page Number 1.0 Executive Summary 1 2.0 Sales Forecast 2.1 Sales Forecast 2.2 Methods and Assumptions 2 3.0 Capital Expenditure Budget 3 4.0 Investment Analysis 4 4.1 Cash Flows 5 4.2 NPV Analysis 5 4.3 Rate of Return Calculations 5 4.4 Payback Period Calculations 6 5.0 Pro Forma Financial Statements 5.1 Pro Forma Income Statement 7 5.2 Pro Forma Balance Sheet 7 5.3 Pro Forma Cash Budget 8 6.0 Works Cited 9 7.0 Appendices 10 7.1 Appendix 1: [Sales Budget]
Premium Net present value
calculated the present value of the future Free Cash Flows until 2006. After that‚ based on the assumption that after 2006 CF would grow at 5%‚ we estimated the terminal value of the company. Finally‚ based on these assumptions‚ the NPV of the project would be: 1228‚485 2. What is the Internal Rate of Return (IRR) of this project? The internal rate of return is the rate that would make the net present value of the firm’s project equal to zero. In other words‚ the IRR is the
Premium Net present value Cash flow Internal rate of return
|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
Premium Net present value Discounted cash flow Internal rate of return
Primary Functions (white) 12 character‚ sevensegment screen display Time Value of Money (TVM) Payments per year‚ interest conversion‚ amortization‚ Bond calculations SHIFT Down (orange functions on key bevel) \ SHIFT Up (blue functions above keys) ] 3 Input key‚ markup‚ cost‚ Date and change of price and margin days‚ IRR per year‚ NPV‚ beginning/end of payment period K memory register‚ Swap‚ percent change‚ percent‚ cash flow cash flow count‚ delete amount‚ statistics entry‚ statistics
Premium Net present value Mathematics Rate of return
Assignment | Cost of Capital‚ Capital Budgeting and Financial Planning | Chapter(s) | 9‚ 10‚ 12 | Group Name | | Student Name(s) | | Date | | Instructions: HW Assignments will be uploaded to Kean Blackboard and must be accessed from there. You must work in groups where assigned (or independently if not assigned to groups) on homework assignments. Points are noted against each question. You are required to submit Home Work assignments electronically on Kean Blackboard using MS-Office
Premium Net present value Internal rate of return
a business must pay in income taxes. As you can see above‚ not taking depreciation will result in Company D paying $121‚600 additional in taxes. 4 PART B2 The time value of money Before we can address a decision process for Net Present Value (NPV) and Internal Rate of Return (IRR) we must first understand the time value of money. In our case we will use the time value of $1. A very simple explanation of this concept is to say
Premium Net present value Rate of return
arithmetic average. However‚ this only occurred because the two outcomes were equally likely. (For example‚ we will not get this result in Problem 13-2‚ where the three outcomes do not each have a 1/3 chance of happening.) We can visualize the calculations using the spreadsheet below: outcome extremely successful not as accepted A B C = A*B probability 50% 50% annual sales $5‚000‚000 $1‚000‚000 expected value = prob*sales $2‚500‚000 $500‚000 $3‚000‚000 ©2011 Pearson Education‚ Inc. Publishing
Premium Variable cost Depreciation Fixed cost
Paperco is what is the Net Present Value (NPV) of replacing its existing mechanical drying equipment with the more efficient equipment from Pressco‚ assuming (1) the rumored tax legislation is enacted; (2) Paperco fails to sign the contract in time to receive the investment tax credit; and (3) the equipment is installed in December 1986. II: General Framework for Financial Analysis: “Net Present Value (NPV) is a method of ranking investment proposals using the NPV‚ which is equal to the present value
Premium Net present value Depreciation Discounted cash flow
Mary Linn‚ the Vice President of Finance for Ocean Carriers‚ needs to evaluate the proposal’s NPV and determine whether or not to accept the proposal by considering expected cash flows‚ tax implications‚ and future market conditions. (b) Statement of Facts and Assumptions. In our analysis‚ we assumed that the ship was sold after 15 and 25 years‚ with and without tax. In both sets of calculations‚ the ship had a salvage value of $5 million for the sale of the steel to the demolition yard
Premium Supply and demand