Assignment: Capital Budgets - StudentOfFortune.com

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LilyRae
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$10.00 Assignment: Capital Budgets

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Due on Nov. 02, 2008
Asked on Nov 01, 2008 at 12:24:34PM

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Assignment: Capital Budgets
Ã‚Â• Resource: Fundamentals of Contemporary Financial Management
Ã‚Â• Due Date: Day 7 [Individual forum]
Ã‚Â• Complete problems 1, 2, 6, 9, 13, & 16 on text pp. 353-357 of Ch. 11. Also complete the
following Evaluating Risk Problem:
Consider a 2-year project with the following information: initial fixed asset investment =
$495,000; straight-line depreciation to zero over the 2-year life; zero salvage value;
selling price =$39; variable costs = $20; fixed costs = $210,000; quantity sold = 150,000
units; tax rate = 31 percent. How sensitive is Operating Cash Flow (OCF) to changes in
quantity sold? State your answer in terms of a dollar amount change (increase or
decrease) in OCF for every additional unit sold.
Ã‚Â• Post your answers as an attachment

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javstudent
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$10.00 hi again LilyRae, A+ work as usual

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Posted on Nov 01, 2008 at 12:27:32PM

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SOLUTIONS TO PROBLEMS - Chapter 11.docx (30K) (Preview)
2008-08-18_174413_Bmald_2.doc (24K) (Preview)
2008-08-18_174430_Bmald_2.xls (15K)

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$35.00 ALL ASSIGNMENTS, DISCUSSION QUESTIONS AND FINAL FINN/200

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Posted on Nov 03, 2008 at 9:43:46PM

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Posted on Jan 16, 2009 at 09:19:40PM

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Preview: ... 10 years if the project’s required return is 12 percent. Is the project acceptable? 2. A firm wishes to bid on a contract that is expected to yield the following aftertax net cash flows a ...

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SOLUTIONS TO PROBLEMS - Chapter 11.docx (30K) (Preview)
2008-08-18_174413_Bmald_2.doc (24K) (Preview)

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amelinda
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$5.00 Capital Budgets-A+ work, all work shown

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Posted on Feb 14, 2009 at 6:08:36PM

A:
Preview: ... t value. Net Present Value Year Cash Flows PVIF @ 12% Present Value 0 -$30,000 1.000 -$30,000 1 5,000 0.893 4,465 2 8,000 0.797 6,376 3 9,000 0.712 6,408 4 8,000 0.636 5,088 5 8,000 0.567 4,536 6 5,000 0.507 2,535 7 3,000 0.452 1,356 8 -1,500 0.404 -606 Net Present Value $155.8 b. Should the project be adopted? It has a positive NPV so it should be accepted. c. What is the meaning of the computed net present value figure? The value of the firm, and the shareholders’ wealth is increased by $155.8 as a result of taking on the project. 6. Two mutually exclusive investment projects have the following forecasted cash flows: Year A B 0 $-20,000 $-20,000 1 10,000 0 2 10,000 0 3 10,000 0 4 10,000 60,000 a. Compute the internal rate of return for each project. Project A: $0 = $10,000(PVIFAr,4) - $20,000, r = 34.9% from calculator Project B: $0 = $60,000(PVIFr,4) - $20,000 b. Compute the net present value for each project if the firm has a 10 percent cost of capital. NPVA = $10,000(PVIFAk,4) -$20,000 = $11,699 NPVB = $60,000(PVIFk,4) -$20,000 = $20,981 c. Which project should be adopted? Why? Project B has a higher NPV, so it should be chosen. It is implicated that the firm's reinvestment opportunities are more precisely shown by the firm's capital costs and not by the internal rate of return of the projects. 9. A junior executive is fed up with his boss’s operating policies. Before leaving the office of his angered superior, the young man suggests that a well-trained monkey could handle the trivia ...

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Posted on Jun 07, 2009 at 10:17:54PM

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Preview: ... ,000(0.322) - $375,000 = $120,470 = $120,484.23 (using a financial calculator) b. The project is acceptable, because its NPV is positive. c. The value of the firm, and therefore the shareholders’ wealth, is increased by $120,470 ($120,484 using a calculator) as a result of undertaking this project. d. The IRR of this project is 18.71% using a calculator. e. The net present value calculation assumes the net cash flows are reinvested at 12%, the project’s required return. The internal rate of return calculation assumes the net cash flows are reinvested at18.71%, the project’s IRR. 5. $12,000 = PV0(FVIF15,25) = PV0(32.919); PV0 = $364.53 (same ans. if using calc.) 6. a. Project A: $0 = $10,000(PVIFAr,4) - $20,000 r = 34.9% from calculator Project B: $0 = $60,000(PVIFr,4) - $20,000 r = 31.6% from calculator b. NPVA = $10,000(PVIFAk,4) -$20,000 = $11,699 (same ans. using calc.) NPVB = $60,000(PVIFk,4) -$20,000 = $20,981 (same ans. using calc.) c. Project B should be chosen because it has the higher NPV. It is assumed that the firm's reinvestment opportunities are more accurately represented by the firm's cost of capital than by the unique internal rate of return of either project in this case. 7. Computation of net investment: New unit cost $29,000 Plus: Installation cost: 3,000 Less: Proceeds from sale of old unit $1,000 Plus: Tax on gain from sale of old unit ($1,000)(.4) 400 Equals: NINV $31,400 Computation of net cash flows: Annual depreciation on new device = [($29,000 + 3,000)/20 years] = $1,600 NCF1-19 = NCF1-10 = [(Rw - Rwo) - (Ow - Owo) - (Depw - Depwo)] (1-T) + (Depw - Depwo) = [0 -(-$9,000) - $1,600)](1 - 0.4) +$1,600 ...

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