to rank competing investments. In this case‚ our group using some tools which are Payback Period‚ Net Present Value (NPV) ‚ Profitability Index (PI)‚ and Internal Rate of Return (IRR). We are only using quantitative considerations that we think to be relevant and no other project characteristics are deciding factors in our selection of the best four projects. Payback Period NPV PI IRR Sum of Cash Flow Benefits Excess of cash flow over initial investment Project 1 6 years 22 days $ 73.09
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Flow Analysis Cash flow analysis on Exhibit 1 represents net cash flow calculation using the base assumption. According to this calculation‚ Nucor would have net present value of $(11.99) million which is a negative value. This negative value on NPV indicates potential unprofitable consequences after implementing SMS’s compact strip production (CSP); therefore‚ Nucor should not invest in this new technology. Scenario Analysis Instead of using the given assumptions‚ I have set two alternatives
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CAPITAL BUDGETING The process in which a business determines whether projects such as building a new plant or investing in a long-term venture are worth pursuing. Oftentimes‚ a prospective project’s lifetime cash inflows and outflows are assessed in order to determine whether the returns generated meet a sufficient target benchmark. Also known as "investment appraisal." Generating investment project proposals consistent with the firm’s strategic objectives; Estimating after-tax incremental
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adequately (Merck 1999‚ p.788). There are two types of diabetes mellitus‚ which are type 1 diabetes and type 2 diabetes. A hormone called insulin‚ released by the pancreas‚ is the primary substance responsible for maintaining appropriate blood sugar levels. Blood sugar levels vary throughout the day‚ rising after a meal and returning to normal within two hours. Blood sugar levels are normally between 70 and 110 milligrams per deciliter (mg/dL) of blood in the morning after an overnight fast (Merck 1999
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both options would fail the NPV test by yielding negative results. I make this recommendation after thorough analysis of estimated cash flow and with the desire that our required 15-year life span will be amended. With the expected 9% discount rate‚ commissioning a capsize carrier for 15 years and then scrapping it as is company policy would ultimately yield a NPV of (1‚252‚916). However‚ if Ocean Carriers decided to commission its ship for 25 years‚ then the NPV would be a positive 368‚557.
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Case Study: ‘Ocean Carriers’ By: Alyssa Linder Wenliang Zhang Xhangoli‚ Eva 1. Daily spot hire rates are determined according to supply and demand of the shipping capacity. According to the article‚ the supply of ships available equals the number of ships currently in the fleet plus any new ships added‚ minus any scrapings and sinking. According to Exhibit 2‚ there are a limited number of ships older than 24 years which are likely to be scraped. For those ships under the age group
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994 Payback 3.49 years NPV $18‚994 IRR 14.03% a) What are the investment’s payback period‚ IRR‚ and NPV‚ assuming the firm’s WACC is 10%? SEE TABLE b) If the firm requires a payback period of less than 4 years‚ should this project be accepted? Be sure to justify your choice. Yes‚ since the payback of 3.49 is less than the maximum of 4 years. c) Based on the IRR and NPV rules‚ should this project be accepted? Be sure to justify your choice. Yes‚ since NPV > 0 and IRR > discount rate
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Mini Case - The MBA Decision 1. How does Ben’s age affect his decision to get an MBA? Ben’s age is a very important factor which can affect his decision to get an MBA degree. Firstly‚ Ben is now 28 years old and expects to work for 40 more years. So he has an expected work life of 68 years. So the earlier he gets an MBA‚ the better for him. For example: probably it won’t benefit him much if he decided to get an MBA at the age of 60. No one would hire him as an investment banker even if
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TO: General Manager of Phuket Beach Hotel RE: Investment Consultation: Planet Karaoke Pub Vs. Beach Karaoke The Phuket Beach Hotel faces development options in its future. Planet Karaoke Pub‚ a restaurant chain‚ has approached the hotel to obtain a 4 year lease to occupy a 3‚000 square foot space. Should the Phuket Beach Hotel invest in Planet Karaoke’s proposal? Or‚ should the hotel develop its own karaoke business? Kornkrit and Wanida believe Group 3 is the most equipped to handle the analysis
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http://www.netplaces.com/investing/a-look-at-the-big-picture/how-interest-rates-affect-everything.htm Clements‚ J. (2014‚ September 3). ehow.com. Retrieved October 16‚ 2014‚ from http://www.ehow.com/info_12036641_relationship-between-interest-rates-npv-irr.html Investopedia.com. (n.d). Retrieved October 17‚ 2014‚ from http://www.investopedia.com/terms/w/wacc.asp
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