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
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:
MCI current capital structure is x% debt and y% equity. Their key ratios are a, b, and c. Comparing to other firms in the utilities industry they appear to be underutilizing (debt/equity). (See exhibit D). Referencing the forecast there is expected to b...
DuPont has been known for its low reliance on borrowings. In the 1970’s, the company had to assume a substantial portion of debt of Conoco, a newly acquired company. In 1983, the managers have to decide about the future optimal target debt ratio. Should the company continue to keep about 40% of its assets financed via debt or should it strive to lower its borrowings to 25%?
In assessing Du Pont’s capital structure after the Conoco merger that significantly increased the company’s debt to equity ratio, an analyst must look at all benefits and drawbacks of a high debt ratio. The main reason why Du Pont ended up with a high debt to equity ratio after acquiring Conoco was due to the timing and price at which they bought Conoco. Du Pont ended up buying the firm at its peak, just before coal and oil prices started to fall and at a time when economic recession hurt the chemical industry of Du Pont. The additional response from analysts and Du Pont stockholders also forced Du Pont to think twice about their new expansion. The thought of bringing the debt ratio back to 25% was brought on by the fact that the company saw that high levels of capital spending were vital to the success of the firm and that high debt levels may put them at higher risk for defaulting.
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.
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
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 $83.11 dollars. I figured out that I needed to make sure I didn't buy too much ice, or it would melt and I'd be wasting money on ice. I ended the game with a 100% in satisfaction, and popularity. I figured out the temperature had a correlation with the demand of lemonade. If it was hot, people wanted more ice, and were willing to pay more money for a cup of lemonade. If it was cold, people did not want much ice in their lemonade, and didn't want to pay much for a cup. The customers were more willing to buy a cup of lemonade if it had a good balance
Net Present Value (NPV), Internal Rate of Return (IRR) and payback time for each cases have been calculated and the case with highest value for NPV and IRR and earliest payback time chosen as the most attractive option to be presented to senior managers. The best economic one was drilling 28 horizontal wells and utilising FPP while transporting oil with shuttle tanker and delivering produced gas via pipeline to available pipeline on Forties filed. This case resulted in NPV of 1,134 US$MM, IPR of 17.94% with payback time of 7 years.
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.
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.
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.
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.