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About capital budgeting
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a) Based on payback period, the payback period for Project (A) is 2.66 years and the payback period for Project (B) is 2.02 years. That means Project (A) will recoup its initial investment in 2.66 years and Project (B) will recoup its initial investment in 2.02 years. The company should choose Project (B) because the payback period for Project (B) is shorter than the payback period for Project (A) and is less than the 4 years maximum payback requires by the company. The shorter and quickest the payback period of a project and with a payback period less than a specified number of years should be accepted (Kaplan Higher Education Study Guide, 2015, p. 74). In addition, the project with a shortest payback period has less threat than with the project with longer payback period. They allow the company to regain the investment more rapidly so that the company can reinvest the money somewhere else. The payback period represents the total of time that it takes for a Capital Budgeting project to recover its primary cost.
b) Based on Net Present Value (NPV), The NPV for Project (A) is $21,152.94 and the NPV for Project (B) is $7,783.10. The company should choose Project (A) because Project (A) has the larger NPV compared to Project (B). The general rule is that when NPV is positive, the project should be accepted because projects with a positive NPV are expected to increase the value of the firm or shareholder wealth, on the other hand, when the NPV is negative, the project should not be undertaken because the investment will not add value to the firm (Kaplan Higher Education Study Guide, 2015, p. 71); in the case of mutually exclusive projects, the project with the highest Net Present Value should be accepted. Thus, NPV makes the decisio...
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...of money and the value of cash flows in future periods. In addition, the NPV approach has no significant flaws (Kaplan Higher Education Study Guide, 2015, p. 94) and is the desired method for appraising projects because it considers risk and the time value of money, and has no random cut-off. NPV is easy to use, easily comparable, and customizable. Only if all alternatives are discounted to the same point in time, NPV allows for simple comparison between investment alternatives. It provides clear-cut decision suggestion for investments. The NPV rule also effortlessly handles both mutually exclusive and independent projects compared to IRR which can’t be used for exclusive projects or those of different period of time, IRR may exaggerate the rate of return and also profitability index which may not give the right choice when used to compare mutually exclusive projects.
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.
After calculating the Net Present Value (NPV) and the Internal Rate of Return (IRR) for each project, I have determined that both the dishwasher and the trash compactor projects should be pursued. Both of them have shown positive NPVs at the new discount rate of 11.58% (WACC). Another indicator that told me that these two projects should be pursued by Star was that they both yielded IRRs greater than the given hurdle rate. The disposal did not meet these requirements and therefore should not be undertaken.
There were three main factors used for choosing this project. First, its low initial investment that makes
...eting tool that show the differences between the present value of revenues and the present value of expenses. The project can be profitable when the net present value is positive. In other words, the present value of revenues is greater than the present value of expenses. Profitability index is another tool for evaluating investment projects, which is the ratio of the PV of benefits on the PV of costs. A project can be beneficial if the profitability index is greater than 1. Also, it has the same idea as NPV that In other words, the present value of benefits is greater than the present value of costs. However, these two methods (NPV and Profitability Index) have been used to evaluate the proposal of implementing EHR.
The two main issues in this case are the project analysis and financial forecasting. The project should be analyzed before doing the forecasting, because any recommendations on the project will affect financial forecasting for the next two years.
This object is one of the financial goals to invest properly. Marriott used discounted cash flow techniques to evaluate potential investment. It is beneficial because it is considered present time value. Projects which increase shareholder value could be formed with benchmark hurdle rates, the company can ensure a return on projects which results in profitable and competitive advantage.
This analysis shows that the projects NPV as 13.37 million dollar. Our result is slightly different than the presenting team because of rounding. But both of our teams had positive NPV which suggest that the project should be accepted.
This project belongs in the engineering-efficiency category; therefore, it has to fit at least 3 of 4 performance hurdles, which are 1. Impact on EPS; 2.Payback; 3.Discounted cash flow and 4. Internal rate of return.
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
Discounted cash flow is a valuation technique that discounts projected cash inflows and outflows to evaluate the potential value of an investment. There are three discounted cash flow methods: Net Present Value (NPV), Profitability Index (PI) and Internal Rate of Return (IRR). The net present value discounts all cash inflows and outflows at a minimum rate of return, which is usually the cost of capital. The profitability index refers to the ratio of the present value of cash inflow to the present value of cash outflows. The internal rate of return refers to the interest rate that discounts cash inflow projections to the present to ensure that the present value of cash inflows is equivalent to the present value of cash outflows (Brown, 1992).
The purpose of this paper is to give a clear understanding of discounted cash flow valuation. The paper will explain what a discounted cash flow valuation is and its importance in financial business decisions regarding investment strategies. This paper will give a detailed discussion about discounted valuations for both present and future multiple cash flows with respect to even and uneven schedules using clear step-by-step examples. Also included will be some advantages and disadvantages in using the discounted cash flow valuation method for corporate business. Finally, the paper will give a summary of important highlights discussed in the body of the paper.
It is important to clarify some key assumptions that were made in valuing the properties to this NPV. First, the project yields a high IRR of 73 %, due largely in part to the sale of each building upon lease up. For the cash flow projections, it was assumed that all buildings are sold 18 months after construction completion. Therefore, with the exception of the last building to be sold, Heron Quay, the buildings are sold toward the end of their free-rent periods and no rent is collected.
A corrective helmet, my innovation for the appraisal and treatment of pediatric head trauma will be utilized on both inpatient and outpatient premise. According to a doled out textbook, Inpatient implies when a patient is expected for a hospital stay of 24 hours or an increasingly or an overnight remain. While outpatient implies regularly patients released around the same time of admission. Be that as it may, as of recent CMS has posted “two-midnight rule” i.e. patient ought to be dealt with as an outpatient until three calendar days of hospital stay. In this way, contingent upon the severity of head injury, the basis as either in/out-patient for utilization of my innovative
The project scope statement identified in the initiation phase, serves as the main input when estimating the time and duration for a project. Concerning TM it is important to allocate appropriate time to the projects scope, project duration so that cost overruns can be avoided together with penalty clauses and reputation damage.
Project management involves all activities that encompass scheduling, planning, and controlling projects. A successful project manager ensure that an organization’s resources are being used both efficiently and effectively. Most projects need to be uniquely developed require a sense of customization and the ability to adapt to any posed challenges. The scope of effective project management includes defining what the project is and what is being expected to be accomplished. Projects are imposed to fulfill a certain need and project managers must have the ability to create the proper definition. Goals and the means used to attain those goals have to be clearly stated. Project Managers must also have the ability to plan