Investment Appraisal

In January the sales is £17,000 it increases by £2,000 to £19,000.the total income in January was £32,000 it decreases by £13,000 to £19,000 because the loan was one off income. It an irregular cash inflow which only happened in January. These profit can be use to expand or give the staff bigger salaries for there hard work. A regular cash inflow is good for business you know how

The machine will have a depreciation of $140,000 for the first five years; this is determined by dividing the initial investment by five. The old machine will be sold in 2010 for $25,000 which is below the current book value of $36,000. This is why there is a capital gain of $3,850 that will add to the incremental savings plus the depreciation for that year. The new sheeter will be sold at the end of the last year for $120,000 which will be taxed at 35; this is why a cost of $42,000 appears for the last cash flow (Exhibit 1). The NPV is a positive $1,063,567 and the IRR is 36%, this shows that the project will add value to the company along with having a great return. The payback period for the project is 2.45…Using the growth rate of 3%, the sales are projected to be nearly doubled from 2009 with the new sheeter. However, Pitts believes that he would not be surprised to see them increase by 7% or

Thus, final free cash flows for the project come out to be $-3.750 million, $0.889 million, $2,563 million, $5,719 million and $2,388 million for years 2011, 2012, 2013, 2014 and 2015 years respectively.

Also this cashflows also depend on the financing alternative we choose. In this case I used the Industrial Revenue Bond.

Team then commenced to apply some of the budgeting concepts discussed in class. First, NPV was calculated using the NPV function in Excel - approximately $419,000. In this calculation we found NPV to be a positive number thus indicating that the Super Project investment should be pursued by General Foods.

Estimate the project’s operating cash flows for each year of the project’s economic life. (Hint: Use Table 2 as a guide)

1.1. Review principles of estimating project cash flows. Suggested reading: Ch. 9 “Capital Budgeting and Cash Flow Analysis” in “Contemporary Financial Management”, 11th ed. by Moyer, McGuigan, and Kretlow.

I have been asked to produce a report for management of Matteck plc in which I will evaluate the financial viability of the investment proposal. The company is considering expanding into Asia. This operation would involve the acquisition of a factory, a purchase of several new motor vehicles and a new distribution unit. The following are the estimated costs of the planned investment:

6.The Year 0 net investment outlay for the project is $-475,000. This computed by adding the price of the machinery, installation, shipping, and the change in net working capital. The non-operating cash flow when the project is

The present value of the net incremental cash flows, totaling $5,740K, is added to the present value of the Capital Cost Allowance (CCA) tax shield, provided by the Plant and Equipment of $599K, to arrive at the project’s NPV of $6,339K. (Please refer to Exhibit 4 and 5 for assumptions and detailed NPV calculations.) This high positive NPV means that the project will add a significant amount of value to FMI. In addition, using the incremental cash flows (excluding CCA) generated by the NPV calculation, we calculated the project’s IRR to be 28%. This means that the project will generate a higher rate of return than the company’s cost of capital of 10.05%. This is also a positive indication that the company should undertake the project.

The relatively well posed project with promises of great future pay offs must be examined closely nevertheless to determine its true profitability. As such, the Super Project’s NPV must be calculated, however before we proceed we must acknowledge the relevant cash flows. The project incurred an expense of testing the market. This expense, however, must not be included in our cash flow analysis because it can be considered a sunk cost. This expense is required for ‘taking a temperature’ of the market and will not be recovered. Other sources of cash flow include:

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which results in an expenditure of something on the order of $16 million in the years

You have made an offer by formal tender of £200,000 for this land and estimate the build cost to total £300,000 giving a final cost to you of around £500,000. You envisage the property when completed to have a value at

On the other hand, facilities such as printers, offices, chairs and desks are non-current assets of LFA. In other words, Facilities are bought to support business activities, not to be sold as inventories. According to AASB (Australian Accounting Standards Board) 116, they are non-current assets of LFA, which belong to the column of Property, Plant and Equipment. Relative depreciation expenses and maintenance costs will be allocated to overheads of relevant products and services. Therefore, the costs of facilities which only generate at the start stage of this enterprise cannot be regarded as periodical cost. In other words, it means that in 2016 Income Statement of LFA, these facilities costs cannot be totally counted as expenses.