Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
It’s been two months since you took a position as an assistant financial analyst at Caledonia Products. Although your boss has been pleased with your work, he is still a bit hesitant about unleashing you without supervision. Your next assignment involves both the calculation of the cash flows associated with a new investment under consideration and the evaluation of several mutually exclusive projects. Given your lack of tenure at Caledonia, you have been asked not only to provide a recommendation, but also to respond to a number of questions aimed at judging your understanding of the capital-budgeting process. The memorandum you received outlined your assignment follows: To: The Assistant Financial Analyst From: Mr. V. Morrison, CEO, Caledonia Products Re: Cash Flow Analysis and Capital Rationing We are considering the introduction of a new product. Currently we are in the 34% tax bracket with a 15% discount rate. This project is expected to last five years and then, because this is somewhat of a fad project, it will be terminated. The following information describes the new project: Cost of new plant and equipment: $ 7,900,000 Shipping and installation costs: $ 100,000 Unit sales: Year Units Sold 1 70,000 2 120,000 3 140,000 4 80,000 5 60,000 Sales price per unit: $ 300/unit in ears 1-4 and $ 260/unit in year 5. Variable cost per unit: $ 180/unit Annual fixed costs: $ 200,000 per year Working capital requirements: There will be an initial working capital requirement of $100,000 just to get production started. For each year, the total investment in net working capital will be equal to 10% of the dollar value of sales for that year. Thus, the investment in working capital will increase during years 1 through 3, and thendecrease in year 4. Finally, all working capital is liquidated at the termination of the project at the end of year 5. Depreciation method: Straight-line over 5 years, assuming the plant and equipment have no salvage value after the 5th year. Questions 1. Why should Caledonia focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project? 2. What are the incremental cash flows for the project in years 1 through 5 and how do these cash flows differ from accounting profits of earnings? 3. What is the project’s initial outlay? 4. Sketch out a cash flow diagram for this project. 5. What is the project’s net present value? 6. What is its internal rate of return? 6. Should the project be accepted? Why or why not? 7. What other investment criteria might the Assistant Financial Analyst use and how they can be applied?
The current balance sheet of CBKH shows $800 million of corporate loans ($500 million of which being rated AA- and the remaining rated BBB+), $200 million of bonds issued by an OEC
prepare a cash flow statement
discuss the content of financial statement with reference to Indian companies?
Consider the expected return and standard deviation of the following two assets: Asset 1: E[r1]=0.1 und σ1=0.3 Asset 2: E[r2]=0.2 und σ2=0.4 (a) Draw (e.g. with Excel) the
Nine years ago, Goodwynn& Wolf Incorporated sold a 16-year bond issue with a 11% yearly coupon rate and a 10% call premium. Today, G&W known as the bonds. The bonds originally were
Q. Probability of Success in Application for Debt Finance? I have to advise you that there are signs of overtrading in our recent financial statements and our company is approa
Q. Show the Foreign Tax Credit? Foreign Tax Credit - A U.S. taxpayer who pays or accrues income tax to a foreign country may elect to credit or deduct these taxes in a determin
RECOMENDATION REGARDING THE CURRENT SOUTH AFRICAN VAT SYSTEM
Financials Investments, a group of financial advisors and retirement planners, has been requested to provide advice on how to invest $200,000 for one of its clients. The client has
Pro-forma accounts under Trustee Act v\:* {behavior:url(#default#VML);} o\:* {behavior:url(#default#VML);} w\:* {behavior:url(#default#VML);} .shape {behavior:url(#def
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd