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Imagine you are a representative of management in the company you have selected for your Week Six assignment (my paper is on CVS pharmacy/retail store) and you must make a capital budgeting decision. The decision is to implement a new computer network system to decrease the time between customer order and delivery. The cost will be 10% of last year’s profits. You are charged with describing the important considerations in the decision-making process to upper management. In your response, be sure to include the following:
A description of the important factors, in addition to quantitative factors, that were considered when making this capital budgeting decision.
An explanation of how these factors are significant to the company.
A summary of how you will determine the criteria to rank capital budgeting decisions and whether some criteria are more important than others.
A calculation of the proposed return on investment based on criteria you select and justification for that ROI.
Suppose a stock had an initial price of $62 per share, paid a dividend of $2.50 per share during the year, and had an ending share price of $49. Compute the percentage total return. also what was the dividend yield and the capital gains yield?
You have just completed the first year of operation for your business and have the following information: sales, $200,000; cost of goods, $140,000; rent, $18,000; utilities, $8,400; insurance, $2,000; equipment, $3,500; and interest, $10,000. Using t..
In recent years, Haverhill Corporation has averaged a net income of $10 million per year on net sales of $100 million per year. It currently has no long-term debt, but is considering a debt issue of $5million. The interest rate on the debt would be 6..
Systematic risk evaluates the probability and extent of negative consequences to the larger body. For example, the government has a record of intervening in the event of a probable bank failure; the government’s larger concern is the negative impact ..
Johnny Cake Ltd. has 8 million share of stock outstanding selling at $22 per share and an issue of $40 million in 10 percent annual coupon bonds with an maturity of 17 years selling at 94.0 percent of per. Assume Johnny Cake's weighted-average tax ra..
What is the expected return for asset X if it has a beta of 1.5, the expected market return is 15 percent, and the expected risk-free rate is 5 percent?
ABC Inc.'s stock has a 50% chance of producing a 21% return, a 30% chance of producing a 10% return, and a 20% chance of producing a -30% return. What is the firm's expected rate of return? 1. 9.72% 2. 9.88% 3. 7.82% 4. 7.50% 5. 8.37%
Company "A" has a beta of 1.5 and a cost of capital of 25%. Company "B" has a beta of 0.8 and a cost of capital of 15%. When evaluated at a rate of 15%, the project shows an NPV of +$5 million, and when evaluated at a rate of 25%, the project shows a..
Bambino Sporting Goods makes baseball gloves that are very popular in the spring and early summer season. Units sold are anticipated as follows: March 3,250 April 7,250 May 11,500 June 9,500 total 31,500. What is the ending inventory at the end of ea..
You are thinking of investing in a stock that is selling for $60 and that you think will go up in price over the next six months. The six-month call option with exercise price = $60 sells for a premium of $5. The risk-free rate is 1% annually. Consid..
You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into their systems and is offering to pay you $485,0..
Why is it possible for investments to have a higher net present value than a competing investment but still have a lower internal rate of return and profitability index than that competitor?
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