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Q1. What are the project's annual operating cash flows? Q2. Draw a time line depicting all projects cash flows.
Compute the payback period for each project. Which should Mr. Oram adopt based on the payback approach?
At a required return of 1% per month, what is the NPV of one year's sales under the current policy?
At the end of 5 years she will need $40,000 accumulated. How should she compute her annual contribution?
What would salvage value have to be to make investment attractive?
If the rate used for ABP investment proposals is 10% and the tax rate is 35%, what is the net present value
Warren Buffett, in an interview by students at Columbia University, offered students $100,000 cash in return for 10% of their lifetime earnings.
Compute (1) the cash payback period and (2) the annual rate of return of the proposed capital expenditure.
After taking into account all of the relevant cash flows from the previous question, the company's CFO has estimated the project's NPV
Use a 30% tax rate and a 14.5% discount rate to compute the NPV, IRR, and payback of this investment. Show annual after-tax cash flows used to compute NPV & IRR
If you apply discounted payback criterion, which investment will you choose? Why?
Develop a pro forma to assist you in your valuation and calculate the value implied by the pro forma. What are the price-to-book ratio and the forward P/E ratio
If the stock is currently selling for $50 per share, calculate the cost of equity for the firm.
The tax rate is 35%. Calculate the cash flows for the project. If the discount rate is 6% calculate the NPV of the project.
Which alternative should the company choose? Use the net present value approach
Which of the following do you think would give you the most accurate NPV calculation: (a) a brand new retail startup
For each of the two proposed replacement presses, determine: (1) Initial investment. (2) Operating cash inflows
What is the NPV of this opportunity if the interest rate is 2% per year? Should Marian take it.
What is the NPV of the opportunity if the interest rate is 6% per year? Should you take the opportunity?
Problem: Work out the NPVs of the following. Indicate which projects should be undertaken:
If the investment in the sale is $12,000 and the opportunity cost of the funds is 15% per year. What is the NPV of granting credit?
Why is capital budgeting part of a company's long-term strategic planning process? What are the pros and cons of these methods:
For this base case scenario, what is the NPV of the plant to manufacture lightweight trucks?
Compare two alternatives for equipment purchases using capital budgeting techniques.
What are the projects' NPVs, assuming the WACC is 5 percent? 10 percent? 15 percent?