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Cash Flow Estimation and Risk Analysis 1. Why are incremental cash flows the relevant cash flows for capital budgeting analysis? Why not just analyze the levels of cash flow and be done with it? Fully explain.
2. Should cannibalization effects be considered sunk costs or opportunity costs in a capital budgeting context? Explain.
3. What problem would arise if in projecting cash flows for a capital budgeting decision on a project interest expense was not excluded?
4. Why do firms typically choose to use MACRS depreciation methods to compute depreciation expense for tax purposes yet report depreciation expense to stockholders using straight line depreciation?
5. Carrying out NPV analysis using computer simulation methods tends to lead to a more ambiguous capital budgeting accept/reject situation than conventional NPV analysis (which concludes with either an "accept" or "reject" decision). Why then use simulation analysis if the technique clouds the accept/reject decision?
6. In a capital budgeting context what is an "embedded option"? Briefly explain how an embedded option can affect the value of a conventionally-calculated project NPV.
Stock valuation method uses discounted cash flows theory to compute the theoretical value of a stock. The most popular academic method is dividend growth model.
The KPMM Accounting company buy 10 laser toner cartridges for 60 dollar each for a total of 600 dollar on June 1 and recorded buy as an asset.
Consider two company, With and Without, that have identical assets that generate identical cash flows. Without is an all-equity firm with one million shares outstanding that trade for a price of dollar 24 per share.
Determine the interest expense that Rainey Corporation will show with respect to these bonds in income statement for the fiscal year ended September 30, 2010, suppose amortized premium is $67,000.
Niesen Company has two major business segments-consumer and commercial. Information for the segment and for the corporation for August appear below:
Explain and discuss a common investment fraud scheme and describe the controls that may be put in place to prevent the fraud.
prepare Trading and Profit and Loss Account and the Balance Sheet for the year ended Dec 31, 2008.
Suppose you wish to purchase a home, and a mortgage corporation will borrow you $150,000. The loan would be fully amortized over fifteen years, and the nominal interest rate is 7.75% each month.
Determine the correct statement: The maturity premiums embedded in the interest rates on United State Treasury securities are due.
Suppose that the consensus required rate of return on common stocks is 14%. In addition, you read in Fortune that expected rate of inflation is 5% & estimated long-term real growth rate is 3%.
Karl believes that he could invest his redundancy lump sum at 5% per annum and therefore suggests that you use 5% as the after tax discount rate for a discounted cash flow analysis.
Use the SUMIFS function to estimate the value of sales for every type of inventory for a prticular function. Please note that length of your different ranges must be identical.
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