Net present value

Phase-1 Year Net-cash-flow PV @ 5% NPV Alternative-1 Year Net-cash-flow PV @ 5% NPV Alternative-2 Year Net-cash-flow PV @ 5% NPV CAPACITY PLANNING 0 -300 -300 -7.48 0 0 45.37 0 1 10 9.52 2 12 10.88 3 15 12.96 4 15 12.34 5 15 11.75 6 15 11.19 7 15 10.66 8 15 10.15 9 10 15 315 9

There are costs for the first two years and then there are net positive cash flows for the subsequent ten years. A net present value calculation will be used in order to determine if the company should undertake this project or not. The present value calculations will be done according to this formula: INCLUDEPICTURE "http://i.investopedia.com/inv/dictionary/terms/NPV.gif" * MERGEFORMATINET Source: Investopedia (2012) The present value of the costs is as follows: Year 1 2 Cash Flow -25

Chapter 6 | Capacity Planning | | TRUE/FALSE 1. Capacity is the maximum rate of output of a process. Answer: True Reference: Introduction Difficulty: Easy Keywords: capacity, maximum output rate 2. Capacity decisions should be made separate from strategic decisions. Answer: False Reference: Introduction Difficulty: Moderate Keywords: capacity decision, strategic decisions 3. Capacity can be expressed by output or input measures

investment projects create (vs destroy) value. Finance>>Working capital management: The management of short-term assets and liabilities. Ensures cash inflows = cash outflows at all times. Finance>>Capital Structure: The management of long-term financing. Balances debt & equity to maximize value. Payout>>Dividends and Share Repurchases: The management of discretionary cash and cash flow. Balances dividend payments and cash retention needs. Value = the discounted sum of cash outflows

Introduction The following paper analyzes a project from financial perspectives using the capital budgeting techniques like Net Present Value (NPV) and Internal Rate of Return (IRR). Background My dad has a textile business, involved in embroidery and painting of the fabric. I have been visiting my dad’s office complex and observing the whole process of clothes manufacture. The most important asset for the business is a large machine required for whole painting process. The existing machine with

be analyzed with a net present value calculation. The future cash flows will be calculated and then discounted to present day, then tabulated so that the net present value of the project is determined. This NPV will allow management to make a decision with respect to whether or not the project should be undertaken or not. Caledonia should focus on free cash flows for the project rather than accounting profit. The reason for this is that the free cash flows are the actual value that is being added

a bear market d. 0 being sold by insiders Objective: Create a financial plan. 15. __________ says to forecast the firm’s cash flows, and analyze the incremental cash flows of alternative decisions. a. 0The signaling principle b. 0The time value of money principle c. 0The principle of incremental benefits d. 0The principle of risk-return Objective: Create a financial

flow targets and maintain Stryker’s 20% growth benchmark. To what extent have they been shaped by elements of corporate finance theory? They are heavily influenced by corporate finance theory All submissions are required to show the net present value (NPV), internal rate of return (IRR) and payback period. They need to highlight the project’s anticipated outgoing cash flow and earnings

1. Given the proposed financing plan, describe your approach (qualitatively) to value AirThread. Should Ms. Zhang use WACC, APV or some combination thereof? Explain. (2 points) * From the statement of AirThread case, we know that American Cable Communication want to raise capital by Leveraged Buyout (LBO) approach. This means ACC will finance money though equity and debt to buy AirThread and pay the debt by the cash flows or assets of AirThread. * In another word, it’s a highly levered transaction

Methods of the feasibility study. Net present value We will determine the viability of the investment using the Net present value method. It will also help to estimate the costs that will be incurred in the future and the benefits that business will get. We choose this method because it shows actual benefits and takes into consideration time value of money ( Baker and Powell, 2000) PV = FV/ (1+r) n PV- present value, FV- future value in n periods, r-expected rate of return. Cost /benefit Analysis