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Words 1779

Pages 8

Introduction

You will assume that you still work as a financial analyst for AirJet Best Parts, Inc. The company is considering a capital investment in a new machine and you are in charge of making a recommendation on the purchase based on (1) a given rate of return of 15% (Task 4) and (2) the firm’s cost of capital (Task 5).

Task 4. Capital Budgeting for a New Machine

A few months have now passed and AirJet Best Parts, Inc. is considering the purchase on a new machine that will increase the production of a special component significantly. The anticipated cash flows for the project are as follows:

Year 1 $1,100,000

Year 2 $1,450,000

Year 3 $1,300,000

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)

22.38%

2. What is the project’s NPV? (15 pts) NPV = (1,100,000/1.15) + (1,450,000/1.15)^2 + (1,300,000/1.15)^3 +(950,000/1.15) ^ 4 – 3,000,000 = $450,866.74

3. Should the company accept this project and why (or why not)? (5 pts)

In looking at the overall analysis of the project, I believe it would be beneficial to accept the project because, the projects (IRR) Internal Rate Return are greater than the (RRR) Required Rate of Return and the overall (NPV) Net Present Value is positive meaning the value is greater than zero.

4. Explain how depreciation will affect the present value of the project. (10 pts)

Depreciation is not considered a cash flow, but it does generally reduce a company’s tax liability. So when looking at the depreciation of this project, depreciation would cause an increase in the projects (PV) Present Value, due to the fact that, it would save on the amount of taxes and…...

...DeVry BUSN 379 Case Studty 4 - Latest IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.acehomework.net/?download=devry-busn-379-case-studty-4-latest IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM DeVry BUSN 379 Case Studty 4 - Latest CASE 4 Case Case II is due at the end of this week. For this assignment, prepare a memo in Word, which answers the questions in the Chapter 5 case, S & S Air's Mortgage, on page 165 of the textbook. Use Excel to do any financial calculations. You will be graded on correct financial analysis, proper use of technology, and business-like presentation. Park Sexton and Todd Story, the owners of S&S Air, Inc., were impressed by the work Chris had done on financial planning. Using Chris’s analysis, and looking at the demand for light aircraft, they have decided that their existing fabrication equipment is sufficient, but it is time to acquire a bigger manufacturing facility. Mark and Todd have identified a suitable structure that is currently for sale, and they believe they can buy and refurbish it for about $35 million. Mark, Todd, and Chris are now ready to meet with Christie Vaughan, the loan officer for First United National Bank. The meeting is to discuss the mortgage options available to the company to finance the new facility. Christie begins the meeting by discussing a 30-year mortgage. The loan would be repaid in equal monthly installments. Because of the previous......

Words: 860 - Pages: 4

...DeVry BUSN 379 Case Study 6 - Updated IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.acehomework.net/?download=devry-busn-379-case-study-6-updated IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM DeVry BUSN 379 Case Study 6 - Updated CASE 6 Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company’s geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company’s financial officer. Alma has been asked by Seth to perform an analysis of the new mine and present her recommendation on whether the company should open the new mine. Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $650 million today, and it will have a cash outflow of $72 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the table on this page. Bullock Mining has a 12 percent required return on all of its gold mines. Year Cash......

Words: 445 - Pages: 2

...Devry BUSN 379 Final Exam IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.hwspeed.com/Devry-BUSN-379-Final-Exam-04040444360.htm?categoryId=-1 IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM Question 1.(TCO 1) ) Likeline, Inc., has sales of $445,000, costs of $173,000, depreciation expense of $72,000, interest expense of $36,000, and a tax rate of 35 percent. What is their net income? (Points : 20) Question 2. 2.(TCO 1) Hamble, Inc., has sales of $19,070, costs of $10,460, depreciation expense of $2,530, and interest expense of $1,600. If the tax rate is 35 percent, what is the operating cash flow, or OCF? (Points : 20) Question 3. 3.(TCOs 2 and 3) App Co. issued 15-year, $1,000 bonds at a coupon rate of 6 percent. The bonds make annual payments. If the YTM on these bonds is 5 percent, what is the current bond price? (Points : 20) Question 4. 4.(TCO 3) Fifteenth Bank has an issue of 7% preferred stock with a $100.00 par value that just sold for $109 per share. What is the bank’s cost of preferred stock? (Show your work and round your answer to two decimal places). (Points : 20) Question 5. 5.(TCOs 3 and 5) You own a portfolio that has $2,600 invested in Stock A and $3,400 invested in Stock B. If the expected returns on these stocks are 11 percent and 17 percent, respectively, what is the expected return on the portfolio? (Show your work.) (Points : 20) Question 6. 6.(TCO 3) A stock......

Words: 530 - Pages: 3

...DeVry BUSN 379 All discussions Questions - Updated IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.acehomework.net/?download=devry-busn-379-all-discussions-questions-updated IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM DeVry BUSN 379 All discussions Questions - Updated Week 1 Financial Management (graded) What are some of the most important financial management decisions? Can you provide some real-life examples? Business Ethics (graded) Do you believe that the firm’s social responsibilities conflict with the ultimate goal of shareholder’s wealth maximization? Consider issues such as the protection of the environment and the creation of jobs. Week 2 Time Value of Money (graded) Why does money have a time value? Can you provide at least one real-life scenario in which you can apply the concept of time value of money? Loans and Interest Rates (graded) What is the difference between the annual percentage rate (APR) and the effective annual rate (EAR)? Which rate do you believe is more relevant for financial decisions and why? WEEK 3 Bond Valuation and Risk (graded) What are some of the most important risks associated with bonds? \ Stock Valuation (graded) o Are there any instances in which companies should not pay dividends? o How do dividends impact the value of a share of stock? WeeK 4 Net Present Value and Related Tools (graded) Discuss the pros and cons......

Words: 393 - Pages: 2

...DeVry BUSN 379 Case Study 6 - Updated IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.acehomework.net/?download=devry-busn-379-case-study-6-updated IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM DeVry BUSN 379 Case Study 6 - Updated CASE 6 Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company’s geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company’s financial officer. Alma has been asked by Seth to perform an analysis of the new mine and present her recommendation on whether the company should open the new mine. Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $650 million today, and it will have a cash outflow of $72 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the table on this page. Bullock Mining has a 12 percent required return on all of its gold mines. Year Cash......

Words: 445 - Pages: 2

...DEVRY BUSN 379 Week 5 Homework - Latest IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.acehomework.net/?download=devry-busn-379-week-5-homework-latest IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM WEEK 5 Chapter 11: 4, 7, 17, and 29 Problem 4 Portfolio Expected Return. You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14 percent and Stock Y with an expected return of 11 percent. If your goal is to create a portfolio with an expected return of 12.4 percent, how much money will you invest in Stock X? In Stock Y? Problem 7 7. Calculating Returns and Standard Deviations. Based on the following information, calculate the expected return and standard deviation for the two stocks. Problem 17 Using CAPM. A stock has a beta of 1.15 and an expected return of 10.4 percent. A risk-free asset currently earns 3.8 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? b. If a portfolio of the two assets has a beta of .7, what are the portfolio weights? c. If a portfolio of the two assets has an expected return of 9 percent, what is its beta? d. If a portfolio of the two assets has a beta of 2.3, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain. Problem 29 29. SMLSuppose you observe the following situation: a. Calculate the expected return on each...

Words: 307 - Pages: 2

...DeVry BUSN 379 Week 7 Homework - Latest IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.acehomework.net/?download=devry-busn-379-week-7-homework-latest IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM DeVry BUSN 379 Week 7 Homework - Latest WEEK 7 Please complete the following exercises from Chapter 17 of your textbook and post them in the Dropbox. Chapter 17: 6, 7, and 14 6. Calculating Net Float. Each business day, on average, a company writes checks totaling $19,500 to pay its suppliers. The usual clearing time for the checks is four days. Meanwhile, the company is receiving payments from its customers each day, in the form of checks, totaling $37,200. The cash from the payments is available to the firm after two days. a. Calculate the company’s disbursement float, collection float, and net float. b. How would your answer to part (a) change if the collected funds were available in one day instead of two? LO 2 7. Size of Accounts Receivable. Essence of Skunk Fragrances, Ltd., sells 6,500 units of its perfume collection each year at a price per unit of $270. All sales are on credit with terms of 1/10, net 30. The discount is taken by 40 percent of the customers. What is the amount of the company’s accounts receivable? In reaction to sales by its main competitor, Sewage Spray, Essence of Skunk is considering a change in its credit policy to terms of 3/10, net 30 to preserve its market share. How will......

Words: 356 - Pages: 2

...DeVry BUSN 379 All discussions Questions - Updated IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.acehomework.net/?download=devry-busn-379-all-discussions-questions-updated IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM DeVry BUSN 379 All discussions Questions - Updated Week 1 Financial Management (graded) What are some of the most important financial management decisions? Can you provide some real-life examples? Business Ethics (graded) Do you believe that the firm’s social responsibilities conflict with the ultimate goal of shareholder’s wealth maximization? Consider issues such as the protection of the environment and the creation of jobs. Week 2 Time Value of Money (graded) Why does money have a time value? Can you provide at least one real-life scenario in which you can apply the concept of time value of money? Loans and Interest Rates (graded) What is the difference between the annual percentage rate (APR) and the effective annual rate (EAR)? Which rate do you believe is more relevant for financial decisions and why? WEEK 3 Bond Valuation and Risk (graded) What are some of the most important risks associated with bonds? \ Stock Valuation (graded) o Are there any instances in which companies should not pay dividends? o How do dividends impact the value of a share of stock? WeeK 4 Net Present Value and Related Tools (graded) Discuss the pros and cons......

Words: 393 - Pages: 2

...DeVry BUSN 379 Case Studty 4 - Latest IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.acehomework.net/?download=devry-busn-379-case-studty-4-latest IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM DeVry BUSN 379 Case Studty 4 - Latest CASE 4 Case Case II is due at the end of this week. For this assignment, prepare a memo in Word, which answers the questions in the Chapter 5 case, S & S Air's Mortgage, on page 165 of the textbook. Use Excel to do any financial calculations. You will be graded on correct financial analysis, proper use of technology, and business-like presentation. Park Sexton and Todd Story, the owners of S&S Air, Inc., were impressed by the work Chris had done on financial planning. Using Chris’s analysis, and looking at the demand for light aircraft, they have decided that their existing fabrication equipment is sufficient, but it is time to acquire a bigger manufacturing facility. Mark and Todd have identified a suitable structure that is currently for sale, and they believe they can buy and refurbish it for about $35 million. Mark, Todd, and Chris are now ready to meet with Christie Vaughan, the loan officer for First United National Bank. The meeting is to discuss the mortgage options available to the company to finance the new facility. Christie begins the meeting by discussing a 30-year mortgage. The loan would be repaid in equal monthly installments. Because of the previous......

Words: 860 - Pages: 4

...DeVry BUSN 379 Case Study 6 - Updated IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.acehomework.net/?download=devry-busn-379-case-study-6-updated IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM DeVry BUSN 379 Case Study 6 - Updated CASE 6 Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company’s geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company’s financial officer. Alma has been asked by Seth to perform an analysis of the new mine and present her recommendation on whether the company should open the new mine. Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $650 million today, and it will have a cash outflow of $72 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the table on this page. Bullock Mining has a 12 percent required return on all of its gold mines. Year Cash......

Words: 445 - Pages: 2

...DEVRY BUSN 379 Week 5 Homework - Latest IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.acehomework.net/?download=devry-busn-379-week-5-homework-latest IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM WEEK 5 Chapter 11: 4, 7, 17, and 29 Problem 4 Portfolio Expected Return. You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14 percent and Stock Y with an expected return of 11 percent. If your goal is to create a portfolio with an expected return of 12.4 percent, how much money will you invest in Stock X? In Stock Y? Problem 7 7. Calculating Returns and Standard Deviations. Based on the following information, calculate the expected return and standard deviation for the two stocks. Problem 17 Using CAPM. A stock has a beta of 1.15 and an expected return of 10.4 percent. A risk-free asset currently earns 3.8 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? b. If a portfolio of the two assets has a beta of .7, what are the portfolio weights? c. If a portfolio of the two assets has an expected return of 9 percent, what is its beta? d. If a portfolio of the two assets has a beta of 2.3, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain. Problem 29 29. SMLSuppose you observe the following situation: a. Calculate the expected return on each...

Words: 307 - Pages: 2

...DeVry BUSN 379 Week 7 Homework - Latest IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.acehomework.net/?download=devry-busn-379-week-7-homework-latest IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM DeVry BUSN 379 Week 7 Homework - Latest WEEK 7 Please complete the following exercises from Chapter 17 of your textbook and post them in the Dropbox. Chapter 17: 6, 7, and 14 6. Calculating Net Float. Each business day, on average, a company writes checks totaling $19,500 to pay its suppliers. The usual clearing time for the checks is four days. Meanwhile, the company is receiving payments from its customers each day, in the form of checks, totaling $37,200. The cash from the payments is available to the firm after two days. a. Calculate the company’s disbursement float, collection float, and net float. b. How would your answer to part (a) change if the collected funds were available in one day instead of two? LO 2 7. Size of Accounts Receivable. Essence of Skunk Fragrances, Ltd., sells 6,500 units of its perfume collection each year at a price per unit of $270. All sales are on credit with terms of 1/10, net 30. The discount is taken by 40 percent of the customers. What is the amount of the company’s accounts receivable? In reaction to sales by its main competitor, Sewage Spray, Essence of Skunk is considering a change in its credit policy to terms of 3/10, net 30 to preserve its market share. How will......

Words: 356 - Pages: 2

...DeVry BUSN 379 All discussions Questions - Updated IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.acehomework.net/?download=devry-busn-379-all-discussions-questions-updated IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM DeVry BUSN 379 All discussions Questions - Updated Week 1 Financial Management (graded) What are some of the most important financial management decisions? Can you provide some real-life examples? Business Ethics (graded) Do you believe that the firm’s social responsibilities conflict with the ultimate goal of shareholder’s wealth maximization? Consider issues such as the protection of the environment and the creation of jobs. Week 2 Time Value of Money (graded) Why does money have a time value? Can you provide at least one real-life scenario in which you can apply the concept of time value of money? Loans and Interest Rates (graded) What is the difference between the annual percentage rate (APR) and the effective annual rate (EAR)? Which rate do you believe is more relevant for financial decisions and why? WEEK 3 Bond Valuation and Risk (graded) What are some of the most important risks associated with bonds? \ Stock Valuation (graded) o Are there any instances in which companies should not pay dividends? o How do dividends impact the value of a share of stock? WeeK 4 Net Present Value and Related Tools (graded) Discuss the pros and cons......

Words: 393 - Pages: 2

...DeVry BUSN 379 Case Study 4 - Latest IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.acehomework.net/?download=devry-busn-379-case-studty-4-latest IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM DeVry BUSN 379 Case Studty 4 - Latest CASE 4 Case Case II is due at the end of this week. For this assignment, prepare a memo in Word, which answers the questions in the Chapter 5 case, S & S Air's Mortgage, on page 165 of the textbook. Use Excel to do any financial calculations. You will be graded on correct financial analysis, proper use of technology, and business-like presentation. Park Sexton and Todd Story, the owners of S&S Air, Inc., were impressed by the work Chris had done on financial planning. Using Chris’s analysis, and looking at the demand for light aircraft, they have decided that their existing fabrication equipment is sufficient, but it is time to acquire a bigger manufacturing facility. Mark and Todd have identified a suitable structure that is currently for sale, and they believe they can buy and refurbish it for about $35 million. Mark, Todd, and Chris are now ready to meet with Christie Vaughan, the loan officer for First United National Bank. The meeting is to discuss the mortgage options available to the company to finance the new facility. Christie begins the meeting by discussing a 30-year mortgage. The loan would be repaid in equal monthly installments. Because of the previous......

Words: 860 - Pages: 4

Words: 445 - Pages: 2