company is willing to accept before starting a project. It is used in project evaluation to evaluate the amount of return on the project. A common method for evaluating the hurdle rate is apply the discounted cash flow method to the project‚ like net present value. 2. How does Teletech Corporation currently use the hurdle rate? They used it based on the firm’s rating‚ beta‚ cost of capital‚ and they calculated WACC of 9.3% for the whole corporation. 3. What are Rick Phillips’s arguments for the
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Open Documentthe following best illustrates that the management of a firm is adhering to the goal of financial management? A. decrease in the per unit production costs B. increase in the number of shares outstanding C. decrease in the net working capital D. increase in the market value per share 3. Which of the following can help align the behaviour of managers with the goals of shareholders? A. management compensation B. managerial labour markets C. an independent board of directors D. all of the above
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Open Documentthat inflow are reinvested at 80 percent of the internal rate of return This is a correct answer It is the difference in the reinvestment assumptions that can be significant in determining when to use the present value or internal rate of return methods. Under the net present value method‚ cash flows are assumed to be reinvested at the firm ’s weighted average cost of capital Points earned on this question: 1 Question 2 (Worth 1 points) A project has initial costs of $3‚000 and subsequent
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Open Document(60‚000) 1 18‚000 19‚000 2 15‚000 17‚000 3 18‚000 19‚000 4 16‚000 14‚000 5 19‚000 15‚000 6 14‚000 13‚000 Evaluate the above proposals according to: 1. Pay Back Period. 2. Accounting Rate of Return (ARR) 3. Net present value method (NPV) Proposal A is better than B‚ because ARR and NPV are higher than Proposal B 2. There are two Proposals. Proposal A and Proposal B. Proposal A costs $ 80‚000 and Proposal B costs $ 100‚000. The
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Open Document1.Sachin has asked his flat mate Jason for a $500 loan to cover a portion of his rent and utility costs. Sachin proposes repaying the loan with $300 from each of his next two financial aid disbursements‚ the first 4 months from now and the second 12 months from now. Jason’s alternative is to earn 5% annually in his money market account. Assume there is no risk of default‚ and that compounding is monthly. What is the NPV of the loan? (Enter just the number without the $ sign or a comma; round off
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Open DocumentPapa Geo’s – Restaurant Budget Proposal For 2012 - 2017 BUSN-278 [Term] Professor[name] DeVry University ------------------------------------------------- Table of Contents Section | Title | Subsection | Title | Page Number | 1.0 | Executive summary | | | | 2.0 | Sales Forecast | | | | | | 2.1 | Sales Forecast | | | | 2.2 | Methods and Assumptions | | 3.0 | Capital Expenditure Budget | | | | 4.0 | Investment Analysis | | | | | | 4.1 | Cash flows
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Open Document(p60) (p8) Question 16 Answer = 3 Net profit is the difference between the total costs and the total income over the life of the project. ((-155 000) + (-5 000) + 40 000 + 50 000 + 50 000 + 50 000 + 30 000) = R60 000 Question 17 Answer = 4 Net profit is the difference between the total costs and the total income over the life of the project. ((-140 000) + 15 000 + 5 000 + 20 000 + 30 000 + 60 000 + 70 000) = R60 000 Additional information about net profit: advantage as method for comparing
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Open DocumentAs with any other merger analysis‚ we need to examine the present value of the incremental cashflows. The cash flow today from the acquisition is the acquisition costs plus the dividends paidtoday‚ or:Acquisition of Hybrid–$550‚000‚000Dividends from Hybrid$150‚000‚000Total–$400‚000‚000Using the information provided‚ we can determine the cash flows to Birdie Golf from acquiringHybrid Golf. All earnings not retained are paid as dividends‚ so the cash flows for the next five yearswill be: Year 1Year
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Open Documentnew vessel in present value terms? Compared to the book value of the ship of $39M‚ what can you conclude about the effect of the installment payments? 3. Should Ms. Linn purchase the capesize carrier? Assume that it is going to be sold for scrap after 15 years. [Hint: Construct the Free Cash Flows of the project.] 4. Does your conclusion in (3) change if you instead assume that Ocean Carriers operates the capesize for the full life of 25 years before selling it for scrap value (grown by inflation)
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Open DocumentQuestion 1 2 out of 2 points | | | Assume that the economy is in a mild recession‚ and as a result interest rates and money costs generally are relatively low. The WACC for two mutually exclusive projects that are being considered is 8%. Project S has an IRR of 20% while Project L ’s IRR is 15%. The projects have the same NPV at the 8% current WACC. However‚ you believe that the economy is about to recover‚ and money costs and thus your WACC will also increase. You also think that the projects
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