Mensa
9/27/2014
By Jason Griffitts
Executive Summary
Please note all financial figures are from the source provided by the case study. The total investments that I recommend is $1,050,000,000 for the Financial sector and Florida Pipeline projects (Case Study). I suggest we sell the following assets - Packaging arm of the company for $1,200,000,000, the paperboard operations for $600,000,000, and the timber for $300,000,000 (Case Study). The total assets sold would be $2,100,000,000 but 40% required to go to the debt holders (Case Study). Therefore $840,000,000 would go to the debt holders and $1,260,000,000 would be used for investments (Case Study). I do not recommend the Exploration and Production assets be invested in nor sold at
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I would not sell it but invest in the business. The consultants have the detailed data. As you can see from my chart year 1 PV cash flow would be negative 238, then year 2 PV cash flow would be negative 227, and year 3 PV cash flow would be negative 43, and year 4 the cash flow would be negative 41 and year 5 we hit a positive 157 and years going forward we see positive growth. The project pays for itself by year 9 or year 10 when you look at the cumulative PV. Florida Pipeline
The 200,000,000 Florida pipe line investment would pay for itself by year 5 or 6 (Case Study). I suggest we start investing the pipeline as soon as possible. Year 1 you will see negative 48, year 2 negative 45 and year 3 negative 43 and year 4 positive 82 and Cumulative you see the project pass for itself. Exploration and Production
I do not recommend we spend 4 billion and not recoup the investment for many years. Divide 4 billion by 150 million it would take us 26 years to make back what you invested. I disagree with the consultants on this project. Whether you look at PV cash flow or Cumulative PV the numbers don't go into the positive for PV until year 9 and never go into the positive for the Cumulative for many
Fixed costs of $100,000 plus the variable costs of $60,000 will give us $160,000 in total expenses. The gross ticket sales of $660,000 minus the total expenses of $160,000 give us a yearly net income of $500,000. The new lift has an economic life of 20 years and we would like to make 14% on our investment. The NPV factor of 14% at 20 years is 6.6231. By multiplying our net yearly income or our annuity of $500,000 times the NPV factor of 6.6231 we will have a NPV of $3,311,550.
Star Appliance is looking to expand their product line and is considering three different projects: dishwashers, garbage disposals, and trash compactors. We want to determine which project would be worth doing by determining if they will add value to Star. Thus, the project(s) that will add the most value to Star Appliance will be worth pursuing. The current hurdle rate of 10% should be re-evaluated by finding the weighted average cost of capital (WACC). Then by forecasting the cash flows of each project and discounting them by the WACC to find the net present value, or by solving for the internal rate of return, we should be able to see which projects Star should undertake.
The following table demonstrates the PV of costs, the PV of benefits and the NPV respectively, over 5-year period for the investment:
In this project I ran a lemonade stand for 30 days. I had a rough beginning, but as the game went on I began to learn about what the customers wanted. I made a net profit of $83.11 dollars. I figured out that I needed to make sure I didn't buy too much ice, or it would melt and I'd be wasting money on ice. I ended the game with a 100% in satisfaction, and popularity. I figured out the temperature had a correlation with the demand of lemonade. If it was hot, people wanted more ice, and were willing to pay more money for a cup of lemonade. If it was cold, people did not want much ice in their lemonade, and didn't want to pay much for a cup. The customers were more willing to buy a cup of lemonade if it had a good balance
Joe operates a successful commercial landscaping and tree trimming business, and client's keeps his operation extremely busy. Although Joe employees at least 50 workers, with landscaping being seasonal, he experiences a high turnover. In addition to landscaping and tree trimming, equipment rental is also available to the clients, which adds an additional division to the business. With $250,000 of capital, and past year's revenues of $500,000, Joe is looking for guidance to take his business to the next level.
Net Present Value (NPV), Internal Rate of Return (IRR) and payback time for each cases have been calculated and the case with highest value for NPV and IRR and earliest payback time chosen as the most attractive option to be presented to senior managers. The best economic one was drilling 28 horizontal wells and utilising FPP while transporting oil with shuttle tanker and delivering produced gas via pipeline to available pipeline on Forties filed. This case resulted in NPV of 1,134 US$MM, IPR of 17.94% with payback time of 7 years.
The high-risk, cyclical nature of our business demands a strong financial base. We must retain the capital resources to meet our current commitments and make substantial investments to develop new products and new technology for the future. This objective also requires contingency planning and
Making an investment towards a new project/product/company is hardly a simple process. Numerous factors including costs, benefits, time, and resources need to be taken into account before a decision to pursue a new project should be ventured into. At the end of the day prioritising projects and investing funds into projects that have the most potential towards favourable return on investment should be considered. Investment appraisal should not only be used for projects with a monetary return, it is also pertinent to use the tools where the return may not be easy to quantify such as training or development programs. Investment
There is a range of criteria relevant for a decision of financing a new venture. To construct my list for the evaluation of a new company as an opportunity I have selected to refer to t...
The expectation of what will come in the form of future revenue in relation to the dollars spent today on the project will determine the viability and profitability of the project or expenditure which is presented before the company. By using the NPV calculation a company can reasonably conclude whether or not to go forward with an investment with cash they have on hand today. The positive of this calculation method and approach is the projected return will give a better idea of the project’s feasibility and probability of coming to fruition. (Gallo,
In this case study, Shrieves Casting Company carried out a capital budgeting analysis on a project to add a new production line. In the report, key concepts of sunk cost, opportunity cost, and cannibalization are discussed in relation to whether they should be included in the calculation of incremental cash flow. Also, the net cash flow of the new project is produced, together with the project evaluation measures such as NPV, IRR, and MIRR. In addition, the concept is risk is discussed, and sensitivity analysis as well as scenario analysis are performed to access the impact on NPV under different conditions. Based on the outcome of these analysis, a decision is made as to whether the new project should be accepted.
Once the capital has been raised, Mensa, Inc. should invest in the Florida pipeline. Timing is crucial since a delay could induce potential customers to find an alternative source of energy and thus decrease demand along with both profitability and cash flow.
Net present value of a project has to be calculated which requires an initial investment of €245,000 and it is expected to produce a cash inflow of €60,000 each month for 12 months. Assumed that the salvage value of the project is zero. The target rate of return is 12% per annum.
As per the Net Present Value (NPV) derived, I recommend Strategy 2, which is positive by value, as it ensures that the firm has reached an optimal scale of investment with this project. It means that the firm is paying less than what the asset is worth, which is good for the company.
For this report, the publicly-listed company that will be featured for financial analysis in order to aid investment decisions is the ExxonMobil (XOM). Using the calculation of horizontal analysis and financial ratios, the financial positioning and stability of the business will be probed at, including its competitiveness, favorable and unfavorable circumstances, liquidity and solvency problems, corporate issues / challenges, and positive and negative terms of investment. Upon thorough analysis of the relative factors, recommendations will be discussed, especially from the standpoint and favorability of potential investors of the business.