Net Present Value Essay Examples

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Net Present Value Essay

1196 words - 5 pages ; There are four methods which we can use to evaluate the investments. 1) The Payback period 2) The accounting rate of return 3) The net present value method 4) The internal rate of return method A. The Payback period; The payback period is the number of years it takes to recover its initial investment. This method assists with the project risk and liquidity. The projects with the less payback period consider less risky than the projects with greater payback period. Payback period = initial investment Annual cash flow B. The Accounting rate of return; The accounting rate of return is VIEW DOCUMENT
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Net Present Value And Other Investment Criteria

1552 words - 7 pages The purpose of this paper is to explain the importance of net present value along with other investment criteria used in determining the value of business decisions regarding today’s investments for future returns. The paper will define what is meant by net present value and show how managers can use it as an analysis tool to decide if an investment is worth the calculated risk. Also, there will be three methods discussed that managers can use to propose the best financial projects to invest in to increase revenue for its owners. The methods discussed will include: the net present rule, the payback rule, and the internal rate of return. With each method there will be an explanation of VIEW DOCUMENT
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Understanding the Concepts – Market Prices, Valuation Principle, Net Present Value, Interest Rates, and Bonds

916 words - 4 pages careful evaluation you can than make your decision based on the cash that can be paid out today to the firms investors. In essence, this is when the valuation principle comes into play through analyzing the benefits and costs providing figures that would help to make decisions based on the best alternative that would allow investors to make a profit. Describe how net present value is related to cost benefit analysis Your net present value described as a series of cash flows which are both incoming and outgoing. Your net value is the sum of the present values of the individual cash flows as with the cost benefit analysis the benefits and costs are often displayed in terms of VIEW DOCUMENT
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Internal Rate Of Return (IRR) And Net Present Value (NPV) Are Both Powerful Tools Used In Business To Determine Whether Or Not To Invest In A Particular Project; Both Methods Have Its Pros And Cons

914 words - 4 pages Internal Rate of Return (IRR) and Net Present Value (NPV) are both powerful tools used in business to determine whether or not to invest in a particular project; both methods have its pros and cons. If given a choice I would choose NPV, because of the potential to anticipate profitability.As it is assumed that the objective of a firm is to create as much shareholder wealth as possible for its owners through the efficient use of resources, the preferred method in determining whether or not to invest in a project is NPV. The reason for this is that NPV takes into account all the costs and benefits of an investment opportunity, making a logical allowance for the time factor. Generally speaking VIEW DOCUMENT
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Captial Budgeting Essay

1020 words - 5 pages Capital Investing Adam Copen Acc/543 August 9, 2012 Kyra Squirrel When it comes to capital investing many techniques can be used. Picking the right technique for a company can be a long draw out process. “Once a company purchases a capital asset, it is committed to that investment for an extended period of time” (Edwards, 2007). Guillermo Furniture wants to discover the technique will provide the greatest returns. There are two major capital investing techniques. One is net present value (NPV), and one is internal rate of return (IRR). “Managers can choose from among numerous analytical techniques to help them make capital investment decisions. Each technique has VIEW DOCUMENT
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Cash Flow Npv Essay

934 words - 4 pages 1. Assume that the before-tax required rate of return for Deer Valley is 14%. Compare the before-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be profitable investment. Show calculations to support your answer. We have to calculate the net present value of cash flows and compare this amount to the cost of investments. Net present value of cash flows (cash inflow – cash outflow) X the factor for PV of cash flows for ordinary annuity of $1 at 14% for 20 years, which is 6.6231 take from PV Table 1. Cash Inflow Additional skiers that the lift will allow x number of days per year when extra capacity will be needed x cost of lift VIEW DOCUMENT
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Investment Decision Essay

1021 words - 5 pages CAPITAL BUDGETING DECISIONS 12/24/2012 Prof.Dr. Anuj Verma 2 LEARNING OBJECTIVES Understand the nature and importance of investment decisions Explain the methods of calculating net present value (NPV) and internal rate of return (IRR) Show the implications of net present value (NPV) and internal rate of return (IRR) Describe the non-DCF evaluation criteria: payback and accounting rate of return Illustrate the computation of the discounted payback Compare and contrast NPV and IRR and emphasize the superiority of NPV rule 12/24/2012 Prof.Dr. Anuj Verma 3 Nature of Investment Decisions The investment decisions of a firm are generally known as the capital budgeting VIEW DOCUMENT
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Accounting Essay

587 words - 3 pages from now the land will be worth 2.5 times what he paid for it. Sell the property. A realty company has offered to purchase the property by paying $150,000 immediately and $23,000 per year for the next 16 years. Control of the property would go to the realty company immediately. To sell the property, Professor Ryatt would need to pay the mortgage off, which could be done by making a lump-sum payment of $71,000. Required: Professor Ryatt requires a 14% rate of return. Would you recommend he keep or sell the property? Show computations using the total-cost approach to net present value. The net annual cash inflow from rental of the property would be: |Net operating income VIEW DOCUMENT
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Fin 571 Week 5 Connect Problems

1049 words - 5 pages 1. The difference between the present value of an investment?s future cash flows and its initial cost is the: • net present value. • internal rate of return. • payback period. • profitability index. • discounted payback period. 2. Which statement concerning the net present value (NPV) of an investment or a financing project is correct? • A financing project should be accepted if, and only if, the NPV is exactly equal to zero. • An investment project should be accepted only if the NPV is equal to the initial cash flow. • Any type of project should be accepted if the NPV is positive and rejected if it is negative. • Any type of project with greater total cash inflows than total cash VIEW DOCUMENT
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Project Management Essay

616 words - 3 pages QUESTION 1 Basic Information: Sales: Year 1 Nil Year 2 RM 10,000 Year 3 -6 RM 15,000 Costs: Fixed cost Year 1-6 RM 3,000 Variable cost 30% of sales Investment RM 25,000 Terminal Value of InvestmentRM 5,000 Depreciation 10% of initial investment Please prepare the Cash Flow Statement and estimate – (a) Payback Period; (b) Net Present Value (NPV) at 10% discount rate; and (c) Internal Rate of Return for the Project. Also prepare a Profit &Loss Statement and compute the average profit for the Project life. ANSWER: Cash Flow Statement Cash Flow Statement |   | RM |   | Year 1 VIEW DOCUMENT
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Discussion on Npv

935 words - 4 pages 1. Net Present Value: Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows. NPV compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account. NPV is calculated using the following formula: NPV= -C0 + C11+r+ C21+r2+…+ Ct(1+r)t - C0 = initial investment C = cash flow r = discount rate t = time If the NPV of a prospective project is positive, the project should be accepted. However, if NPV is negative, the project should probably be rejected because cash flows will also be negative. Example of Net Present Value To provide an example of VIEW DOCUMENT
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Comprehenseive Problem-Finance

1780 words - 8 pages revenue; compute return on stockholders’ equity; average stock prices for each of the four years; and compute the ratio of price to book value for each of the four years. SUN MICROSYSTEMS, INC. Summary Consolidated Statement of Income (in millions) 2001 2000 1999 1998 Dollars Dollars Dollars Dollars Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $18,250 $15,721 $11,806 $9,862 Costs and expenses: Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . 10,041 7,549 5,670 4,713 VIEW DOCUMENT
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You Know That When Expanding and Investing in Projects Overseas as Acme Plans to, It Is Essential to Understand Such Things as Return on Equity (Roe) and Internal Rate of Return (Irr). Using Internet...

655 words - 3 pages is generating for share holders. Ultimate goal of a company is to create value for shareholders. Thus, ROE is the right measure to find out if company is efficient in generating profit on its equity (and asset) or not. However, ROE is not the absolute indicator of investment value. If value of shareholder's equity falls, ROE will go up. Similarly, if company is taking large write-down, ROE will fall sharply. Share buyback also lowers ROE while there is no change in company's operation. (McClure, 2010) Internal Rate of Return (IRR) is an indicator of yield of an investment.IRR is widely used method in capital budgeting decisions. IRR is the discount rate where total present value of all VIEW DOCUMENT
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El Caso Marriot Hotel

2055 words - 9 pages Attached is the case study, some of the requirements and the calculations that I did. I am really uncertain how to solve the problem. I believe the problem in the case study is the following: The company uses divisional hurdle rates in evaluating projects which could have a significant impact on the firm's financial and operating strategies. Increasing the hurdle rate decreases present value of a project. Since the project costs are fixed, changes in the value of inflows means changes in the net present value of the project. Therefore, if hurdle rates were to increase, Marriott's growth would decline as profitable projects no longer met the hurdle rates. On the other hand, if hurdle VIEW DOCUMENT
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Acc212 Chapter22-24

2071 words - 9 pages ) $2,500,000 5 years $1,500,000 5 years The company has a 30 tax rate and it uses the straight-line depreciation method. Compute the net present value for each piece of equipment under each of the two product lines. Which, if either, of these two investments is acceptable? pg . ..j 3. |Product A ||Product B | Sales ||$750,000 ||$600,000 | Estimated costs: |||||| Direct materials |$ 15,000 |||$ 8,000 || Direct labor |120,000 |||80,000 || Other cash operating |||||| Expenses |30,000 |||25,000 || Depreciation* |500,000 |||300,000 || |||||| Total costs ||665,000 ||413,000 | ||||| Income before taxes |||85,000 ||187,000 | Income taxes (30) |||25,500 VIEW DOCUMENT
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Money Exam

1108 words - 5 pages activities for the firm is that cash flows from operating activities is a lot higher than net income. Adding back the depreciation of $230,000 and including accounts payable of $250,000 come into play. Whoever reads the statement of cash flows can see how much cash was made from day to day operations. 30. The buildup in plant and equipment has not been financed in a satisfactory manner because the plant and equipment has been financed by the increase in accounts payable. It would benefit the company if they did long term financing to go side by side with profits. 31. Book value per share (2009) --- (1,390,000 – 90,000) / 150,000 = $8.67 Book value per share (2010 VIEW DOCUMENT
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Business Finance

1069 words - 5 pages Year 4 $950,000 You have now been tasked with providing a recommendation for the project based on the results of a Net Present Value Analysis. Assuming that the required rate of return is 15% and the initial cost of the machine is $3,000,000. 1. What is the project’s IRR? (10 pts) 22% 1,100,000/ (1+0.15) ^1 = 1,100,000/1.15 = 956,521.74 1,450,000/ (1+0.15) ^2 = 1,450,000/1.3225 = 1,096,408.32 1,300,000/ (1+0.15) ^3 = 1,300,000/1.52087 = 85, 4771.10 950,000/ (1+0.15) ^4 = 950,000/1.74901 = $543,165.58 2. What is the project’s NPV? (15 pts) NPV = 956,521.74 + 1,096,408.32 + 854,771.1 + 543,165.58 -3,000,000 NPV VIEW DOCUMENT
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Bill Miller

577 words - 3 pages Bill Miller and Value Trust Value Trust has surpassed the S&P 500 by an average of 3.67% for the previous fifteen years. Value Trust also maintained Morningstar’s five star rating. Mutual fund investment performance can be measured by finding out its net asset value and Annual Total Return. Net Asset Value can be computed as the fund’s total assets minus the liabilities divided by funds shares outstanding. Annual total return can be measured by the increase or the decrease in net asset value plus the fund’s income distribution. These are used to find the measure of the percentage of annual growth rate of net asset value assuming that reinvestment, and the absolute dollar value today of VIEW DOCUMENT
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Marketing

532 words - 3 pages . Considers the time value of money value 2. Considers the riskiness of the project's 2. Requires an estimate of the cost of capital in order to calculate the payback cash flows (through the cost of capital) 3. Ignores cash flows beyond the discounted payback period Net Present Value Advantages 1. Tells whether the investment will increase he firm's value 2. Considers all the cash flows 3. Considers the time value of money 4. Considers the risk of future cash flows (through the cost of capital) Disadvantages 1. Requires an estimate of the cost of capital in order to calculate the net present value. 2. Expressed in terms of dollars, not as a percentage. Profitability Index VIEW DOCUMENT
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Valuation Basics

836 words - 4 pages 1. A best selling author decides to cash in on her latest novel by selling the rights to the book’s royalties for the next four years to an investor. Royalty payments arrive once per year, starting one year from now. In the first year, the author expects $400,000 in royalties, followed by $300,000, then $100,000 then $10,000 in the three subsequent years. If the investor purchasing the rights to royalties requires a return of 7 percent per year, what should the investor pay? What the investor should pay is the present value of royalty payments. The discounting rate is given as 7%. We get Year Royalty Payment (1) Discounting Factor (2) Present Value (1X2) 1 400,000 VIEW DOCUMENT
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Homework Solution

5464 words - 22 pages considered impaired. There is no evidence of impairment in the present problem.) Thus, at December 31, 2013, the investment is reported at $168,000 (i.e., $12 x 14,000 shares purchased on January 1, 2013.). (The following is not addressed in the problem. We are providing this discussion for completeness. Noncontrolling investments in marketable equity securities that also do not convey to the holder of the securities “significant influence” over the investee are reported in the balance sheet at fair value. If the securities are designated as “trading securities,” the change in fair value is reported in net income. If the securities are designated as “available for sale securities,” the VIEW DOCUMENT
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Johnson Controls

1707 words - 7 pages methods for evaluating the capital investments of Johnson Controls in the emerging markets to reduce risk providing a rationale of how risk will be reduced. Capital investments are evaluated by different methodologies depending upon the nature of risk and projects. There are three most popular traditional approaches to gauge the effectiveness of the investment. These approaches are; payback period, internal rate of return and net present value. Out of these approaches, NPV and IRR are the most popularly used by investors and companies (Weygandt, Kimmel & Kieso, 2012). With that said, a methodology that Johnson Controls could use to help in evaluating capital budget investments is net present VIEW DOCUMENT
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Lasting Impression

739 words - 3 pages B Year 1 $128,400.00 $87,600.00 Year 2 $310,560.00 $206,880.00 Year 3 $476,680.00 $303,040.00 Year 4 $644,440.00 $388,720.00 Year 5 $1,094,000.00 $595,600.00 Payback Period Press A Press B 4 years + [(662,000 – 644,440)/191,760] 3 years + [(361,600 – 303,040)/85,680] = 4 + (17.600/191,760) = 3 + (59.560/85,680) = 4 + 0.9178 = 3 + .68347 = 4.09 years = 3.8 years Net Present Value (NPV) Press A Press B Cash Flow PVIF 14% PV Cash Flow PVIF 14% PV 1 $128,400.00 0.877 $112,631.58 1 $87,600.00 0.877 $76,842.11 2 $182,160.00 0.769 $140,166.20 2 VIEW DOCUMENT
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Management

3860 words - 16 pages paid. ------------------------------------------------- The reason: The borrower is not required to pay the bond premium at the maturity date of the bonds. Thus, the bond premium is considered to be a reduction in the cost of borrowing. ------------------------------------------------- 9.How to determine the market value of a bond. The current market price (present value) of a bond is a function of three factors: 1. the dollar amounts to be received, 2. the length of time until the amounts are received, and 3. the market rate of interest. The process of finding the present value is referred to as discounting the future amounts. PV= Future Value / 1(1+i VIEW DOCUMENT
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Diamond Chemicals

1969 words - 8 pages study Statement of the Problem To determine if the proposed project by the controller of Diamond Chemicals is cost effective to the company by calculating key indicators - Payback Period (PBP), Cost Benefit Analysis, Present Value/Future Value (PV/FV), Net Present Value (NPV), Internal Rate of Return (IRR) and Return on Investment (ROI). Along with determining feasibility of the proposed project, we have to provide suggestions on the proposal by the assistant plant manager to include his EPC project as part of the current project, as the upper management rejected his expansion plan due to budget issues. Controller cannot include EPC project within the current project as it is a classic VIEW DOCUMENT
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S1-3 Accounting Concepts

5367 words - 22 pages ) Measurement in Accounting: Attribute Seminar Question 2 Phenomenon (Object) Property, plant & equipment Inventory Short-term equity investment Attribute b. Model-based i. ii. iii. iv. Net present value (discounted net cash flow) Black-Sholes model Binomial model Others 29 30 Measurement in Accounting: Unit Question 3: Problems of Measurement in Accounting Question 4: (Is aggregation (e.g. total assets) meaningful?)  Unit of measure?  Problems:  Nominal $  Purchasing power  Mixed attributes, and  Mixed unit of measure 31 32 Average Price-to-Book Ratio of the S&P 500 Companies, Dec 1977-Mar 2001 (Source: Lev 2001) Seminar 2 Agenda VIEW DOCUMENT
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Enivrontmental

2275 words - 10 pages ) Due to population growth, demand is higher in the second period. Thus the marginal willingness to pay is given by P ’12 − 0.3q in later period. What would be the dynamically efficient allocation? (Use 10% discount rate). Compare your answer to the one from part a). d) In addition to part c) also marginal cost is higher in the second period than in the first, due to the reserve depletions. The new marginal cost is given by MC ’ q. What would be the dynamically efficient allocation in this case? Compare your answer with the one from part c). a. From the condition previously mentioned, we know that dynamic efficiency is achieved if the present value of the marginal net benefits in VIEW DOCUMENT
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Week One Discussion

2302 words - 10 pages to as the unlevered free cash flow because it is the cash flow before interest on debt is considered. We can reconcile the free cash flow to the firm with the free cash flow to equity by noting that the difference between the two are: Interest paid on debt, and Net new debt financing. In other words, (EQ 14) net Free cash flow to the firm = FCFE + ⎡ interest (1-tax rate ) ⎤ ⎢ expense ⎥ borrowings ⎣ ⎦ Valuation using free cash flow The valuation of a company requires discounting the future cash flow to the present. The cash flows that we use in this valuation are forecasted free cash flows. The model that we use to determine a value today depends on the assumptions VIEW DOCUMENT
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Capital Budgeting Fundamentals

4179 words - 17 pages Valuation and Capital Budgeting Part I, HEC-ULg 2013-2014 – Marie Lambert 5 Time-value-of-money concept • Compounding and discounting Figure 4.8 – Ross, Westerfield and Jaffe, 8th ed., page 75 Valuation and Capital Budgeting Part I, HEC-ULg 2013-2014 – Marie Lambert 6 Time-value-of-money concept • Net present value criterion Example – Ross, Westerfield and Jaffe, 8th ed., pg 92 Valuation and Capital Budgeting Part I, HEC-ULg 2013-2014 – Marie Lambert 7 Basics of capital budgeting • Different issues need to be addressed - What do we need to value? We should evaluate the future cash flows that are generated from the asset that is being valued cash flows income or VIEW DOCUMENT
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Capital Budjeting

1760 words - 8 pages . When no such value can be added through the capital budgeting process and excess cash surplus exists and is not needed, then management is expected to pay out some or all of those surplus earnings in the form of cash dividends or to repurchase the company's stock through a share buyback program. Choosing between capital budgeting projects may be based upon several inter-related criteria. (1) Corporate management seeks to maximize the value of the firm by investing in projects which yield a positive net present value when valued using an appropriate discount rate in consideration of risk. (2) These projects must also be financed appropriately. (3) If no positive NPV projects exist and VIEW DOCUMENT
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The Real Options Theory

2150 words - 9 pages , management can maximize its potential while limiting losses (Westerfield, Jaffe & Jordan, 2009). Reason for Use The theory of real options arose because of corporate dissatisfaction and those using capital budgeting techniques, because it was noted that discounted cash flows lacked in flexibility (Tong & Reuer, 2007).While the old-fashioned approaches are valued, and they do not take into account for the reality of the situation or the variations that could occur. Techniques such as discounted cash flow approaches and net present value method have proven to imprecisely represent the outcome of the investment because it does not allow for flexibility in the plan. Without real VIEW DOCUMENT
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Ginny´S Restaurant

1179 words - 5 pages 1. The net present value of Virginia’s assets is approximately $4.83 million dollars. This value was obtained from summing the $2 million Virginia receives today plus the present value of the $3 million she will receive exactly one year from now. These calculations are depicted in Table A. Thus, Virginia has approximately $4.83 million dollars at her disposal to spend and consume today if she pleases. This figure takes into account how much she could borrow today in order to have exactly $3 million to pay back one year from now, plus the original $2 million she receives today. Of course, if she consumes nothing today, she will have a greater amount to spend in exactly one year. If Virginia VIEW DOCUMENT
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Client Understanding

1362 words - 6 pages on the net profit of a business. Valuation procedures for inventory are different from cash, cash equivalents, temporary investments, and receivables. The aforementioned items consist of amounts or values that are easier to estimate as funds expected to be received from them. Conversely, inventory values disclosed on financial statements do not guarantee the expected amount of cash to be received in the future but the acquisition value of a cost expected to generate future revenues. Therefore, it is critical for a business to value inventory properly. Proper valuation considers the goods on hand, most reasonable cost flow assumption, and decline in market value of inventory after the VIEW DOCUMENT
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Omega Health Foundation

1114 words - 5 pages Omega Health Foundation Trinette M. Landry FIN/HC571 October 11, 2010 Instructor: Moses Padilla Omega Health Foundation When doing a financial analysis of a business understanding the principles of finance and how, they relate to a certain company is important. Omega Health Foundation is a complex business with two hospitals, Omega and Able Memorial, plus a number of related medical service providers. All of the related entities are nonprofit with the exception of Omega Medical Management, INC (Cleverly & Cameron, 2007). Within this paper I will explain the principles of finance, compare and contrast net income and cash flow, compare and contrast market value and book value VIEW DOCUMENT
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Lab Exercise

1339 words - 6 pages %, and 15.7% respectively. So, I use the average value, which is 18.7% as the anticipated tax rate for the future calculation because Google is a mature and stable company that its tax rate will not fluctuate significantly on an annually basis. In addition, the depreciation and capital expenditure given by Capital IQ are reasonable because they use the average margin from the previous three years values to predict future. The change in net working capital from year 2014 to 2018 are also reasonable and in a decreasing trend due to a decrease in income tax rate. By applying those values in the table, we can get the anticipated free cash flows over the next five years for Google (Appendix B). The VIEW DOCUMENT
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Finance Capital Budgeting Memo

1146 words - 5 pages budgeting deals with the investments in fixed assets, estimate expenditure, outflows and long term gains, and helps evaluate the adequacy of returns. First you must analyze the worth of each project and its return for the future. Some techniques that can be used to evaluate the project include, simple payback period, discounted payback period, net present value, internal rate or return, profitability index, and modified internal rate of return. I have ranked the projects based on the following metrics I have listed above. Below, I have constructed a table with metrics you proved me and the rankings my rankings. Metrics | Project A | Project B | Ranking | Payback period (in years | 3.20 VIEW DOCUMENT
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Accounting Assignment

801 words - 4 pages fair value; this indicates a faithful and reliable representation. iii. Inventories represent stock and their cost is stated at the lower of cost and net realisable value. The value of inventories includes a proportion of supply chain variable expenditure and transfers of gains or losses from equity that are related to inventories. The weighted average cost has been assigned to individual items. The Warehouse Group deal with the trade off between relevance and faithful representation by the use of net realisable value based on the estimated selling price during the course of normal business; less the estimated costs necessary to make the sale; this method insures relevancy. Question 2 VIEW DOCUMENT
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Fianacial Statement Analysis Foundation

3075 words - 13 pages (enterprise) Value – Debt Value r = discount rate, the cost of capital, or the required rate of return 57 DCF Valuation for Coca-Cola In millions of dollars except per-share numbers. Required return for the firm is 9%. Actual cash flows 1999 Cash from operations - Cash investments (I) Free cash flow 2000 3,657 947 2,710 Discount rate (1.09)t 1.09 1.1881 1.2950 1.4116 2,486 2,449 2,756 3,224 Present value of free cash flows Total present value to 2004 14,367 Continuing Value (CV) * Present value of CV 121,965 Enterprise value 136,332 Book value of net debt Value of equity (1999) 2001 4,097 1,187 2,910 2002 4,736 1,167 3,569 2003 5,457 906 4,551 2004 5,929 618 5,311 1.5386 VIEW DOCUMENT
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Accounting Case Study On General Mills

1628 words - 7 pages % more than the two previous years.2000: (2,698/5,173) = .522 = 52.2%2001: (2,841/5,450 = .521 = 52.1%2002: (4,767/7,949) = .599 = 59.9%4. Net Income:2000: $614 million2001: $665 million2002: $458 millionWhen comparing the net income figures for the past three years, it is seen that between 2000 and 2001, the net income increased by $51 million, but between 2001 and 2002, the net income decreased by $207 million.5. A company's stock price is usually influenced by the amount of net income because when finding the price of the stock, you must divide the number of stocks by the net income. So, the higher the net income, the lower the price of stocks, which is what buyers look for (means better VIEW DOCUMENT
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Eagle Impairment Loss

1097 words - 5 pages amortization | 564 | 604 | 652 | 718 | 804 | Earnings before interestand taxes (EBIT) | 849 | 908 | 980 | 1,077 | 1,207 | Available tax-loss carryforwards | 0 | 0 | 0 | 0 | 0 | Net taxable earnings | 849 | 908 | 980 | 1,077 | 1,207 | | | | | | | Income taxes | 296 | 317 | 342 | 377 | 422 | Net operating profit after-tax | 553 | 591 | 638 | 700 | 785 | | | | | | | Add back depreciation and amortization | 564 | 604 | 652 | 718 | 804 | Subtract capital expenditures | (848) | (903) | (980) | (1,077) | (1,201) | Subtract new net working cap. | 0 | 0 | 0 | 0 | 0 | Free cash flow | $269 | $292 | $310 | $341 | $388 | Present value of free cash flows at 15% | 235 VIEW DOCUMENT
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Mini Case

935 words - 4 pages / .115) NPV = $12,391,304 b. After the announcement, the value of Stephenson will increase by $12,391,304, the net present value of the purchase. Under the efficient-market hypothesis, the market value of the firm’s equity will immediately rise to reflect the NPV of the project. Therefore, the market value of Stephenson’s equity after the announcement will be: Equity value = $582,000,000 + 12,391,304 Equity value = $594,391,304 Market value balance sheet | | Old assets | $582,000,000 |   | | |   | NPV of project | 12,391,304 |   | Equity | $594,391,304 |   | Total assets | $594,391,304 |   | Debt & Equity | $594,391,304 | Since the VIEW DOCUMENT
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Bus401 Final Paper

1881 words - 8 pages , internal rate of return, and net present value help to determine if the project is a good fit for the organization. Other important factors that must be considered are market analysis, and risk. Below, each of these important factors will be reviewed and a recommendation made in regards to the project proposed for Caledonia Products. In the case of the proposed project, Caledonia Products focus should be firmly on that of cash flows. Principle number one of finance is that cash flow is what matters (Keown, Martin & Petty, 2012, p. 4). In other words, cash is king. While the accounting profits of projects or businesses are important, the importance of cash outweighs that. The ultimate reason VIEW DOCUMENT
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Tcs Financial Essay

4638 words - 19 pages asset is estimated in order to determine the extent of impairment. Recoverable amount is the higher of an assets net selling price and value in use. In assessing value in use, the estimated future cash flows expected from the continuing use of the asset and from its disposal are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of time value of money and the risks specific to the asset. Reversal of impairment loss is recognised as income in the statement of profit and loss VIEW DOCUMENT
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Accounting Final Exam Study Guide

3659 words - 15 pages of bond face value | Outflow | Contributed Capital | Issuance of stock for cash | Inflow | | Repurchase of stock with cash | Outflow | Retained Earnings | Payment of cash dividends | Outflow | * Net increase (decrease) subtotal combines cash flows from operating, investing, and financing activities to produce an overall net change in cash. * Net change in cash is added to the beginning cash balance to arrive at the ending cash balance, which is the same cash balance as reported on the balance sheet. * Supplemental disclosure * Noncash Investing and Financing Activities - in addition to their cash flows, all companies are required to report material investing and VIEW DOCUMENT
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Valuation Khakis‘R Us

3320 words - 14 pages % 1.38 6.03% 17.25% 12.92% 8 Appendix 4 ‐Discounted Cash Flow(4) Calcualte the PV Perpetuity Growth Method WACC Unlevered Free Cash Flow Net Present Value of FCF Terminal growth rate Terminal value Present value of the terminal value Enterprise value Less net debt Equity value Equity value per share EBITDA Multiple Method WACC Unlevered Free Cash Flow Net prensent value of FCF Terminal multiple Terminal value Present value of the terminal value Enterprise value less Net debt Equity value Equity value per share 24.79 25.58 29.24 33.06 12.92% 33.90 $101.12 5% $449.43 $244.80 $345.92 ‐30 $315.92 $31.59 Implied EBITDA Terminal Multiple Terminal Year Free Cash Flow VIEW DOCUMENT
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Airthread Valuation

1809 words - 8 pages |   |   |   |   | 4,280.82 | Perpetuity Growth formula @ WACC in 2.a | Present Value of TV | 2,730.16 | | | | | | | | | | | | | (D) Synergies | 3,134.84 | | | | | | 5. Non operating investments |   |   |   | Table 5.a: P/E Estimation | | | | Companies | Equity Market Value | Net Income | P/E | Universal Mobiles | 65173 | 3794 | 17.18 | Neuberger Wireless | 94735 | 4103 | 23.09 | Agile Connections | 37942 | -30 | NA | Big Country Communications | 47314 | 3384 | 13.98 | Rocky Maximum Wireless | 5299 | 240 VIEW DOCUMENT
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Accounting

2684 words - 11 pages would be valued at the lower of its carrying value and fair value less cost to sell. In this case this means the cleaning equipment would be remeasured at its estimated selling price of $5,000, which is net of selling costs. EXERCISE 4-13 (20-25 minutes) |Calculation of net income: | | | 2009 net income after tax |$43,000,000 | | 2009 net income before tax | | | [$43,000,000 ( (1 – .44 VIEW DOCUMENT
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3699 words - 15 pages the usefulness or depreciation of assets. There are 14 different items to include and fully support in your financial projections. With these different items it is best to give a month-by-month breakdown for the first year, a quarterly breakdown for the next two years, and an annual breakdown for the final two years you are projecting. Financial projections has its purpose to show what the company is capable of realizing in revenues and profits. This are also used to develop a series of analysis that help make economic and financial judgements about the company’s potential - payback period, Net Present Value (NPV) and Internal Rate of Return (IRR). Payback period helps the company see VIEW DOCUMENT
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1462 words - 6 pages incremental cash flows associated with the acquisition of the Collinsville plant without the laminate technology and estimate the acquisition’s net present value. (25 points) Assumptions: Tax rate = 48% Capital expenditure between 1973-1979 = ($200,000 + $500,000)/2 = $350,000 Capital expenditure after 1979 = ($475,000 + $600,000)/2 = $538,000 PV of FFCF = FFCF discounted at WACC = 15.7% Below are the calculations Pro Froma Financial Statements for the Collinsville Plant Without Laminate ('000s) |   | 1979 | 1980 | 1981 | 1982 | 1983 | 1984 | EBIT | | $833 | $2,218 | $3,035 | $3,134 | $3,026 | NOPAT (tax = 48%) | | $433 | $1,153 | $1,578 | $1,630 VIEW DOCUMENT
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FIN 571 Week 1 Connect Problems

1283 words - 6 pages ¬ƒciency. e) maintain steady growth in both sales and net earnings. 4. Accounting concepts for a firm to create value it must: a) have a greater cash inflow from its stockholders than its outflow to them. b) create more cash flow than it uses. c) reduce its investment in fixed assets since fixed assets require the use of cash. d) avoid payments to the government so dividends can be increased. e) avoid the issuance of debt securities Find the week 1 connect problems answers here FIN 571 Week 1 Connect Problems 5. The primary goal of financial management is to: a) maximize current dividends per share of the existing stock. b) maximize the current value per share of the VIEW DOCUMENT