Net present value examples and solutions

    • [DOC File]Chapter 7: Net Present Value and Capital Budgeting

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      The net present value (NPV) of selling the old machine and purchasing the new machine now is-$1,606,950. Option 2. Sell old machine in five years and purchase new machine in five years. The company will have to make the scheduled maintenance costs for the old machine. Use a five-year annuity, discounted at 12 percent to find the present value ...

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    • [DOC File]Financial Statement Analysis-Sample Midterm Exam

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      Abco Incorporated issued stock to merge with Bluth International. The stock had a market value of $100,000. Bluth’s assets had a market value of $75,000 and a book value of $55,000. Bluth’s net book value was $30,000. Abco reported $125,000 in assets before the merger. I. a.

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    • [DOC File]Business Case and Alternatives Analysis (BCAA) - Template

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      Net Present Value (NPV) This is the year in which the project's investment costs are recovered. Return on Investment (ROI) % Recommended Solution & Justification Intangible Weighting Justification of Solution (from CBA tool) Specify the Recommended Solution selected as a result of the analysis.

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    • [DOC File]Problems and Solutions

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      The reason is that the future dollars are worth less in present value as the discount rate increases requiring more future dollars to recover the present value of the outlay. Discounted Payback Period – Graham Incorporated uses discounted payback period for projects under $25,000 and has a cut off period of 4 years for these small value projects.

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    • [DOC File]End of Chapter Exercises: Solutions

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      A firm has a capital budget of $30,000 and is considering three possible independent projects. Project A has a present outlay of $12,000 and yields $4, 281 per annum for 5 years. Project B has a present outlay of $10,000 and yields $4,184 per annum for 5 years. Project C has a present outlay of $17,000 and yields $5,802 per annum for 10 years.

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    • [DOC File]Solutions to Chapter 9 Problems

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      The present value of the interest payments is $105,000 x 7.360 = $772,800. The cost of the loan, however, includes both the total present value of the interest payments and the $200,000 underwriting fee, a total of $972,800. c. Preferred stock: $2,000,000 x 5% = $100,000. The present value of the dividend payments is $100,000 x 7.360 = $736,000.

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    • [DOC File]SOLUTIONS TO RELEVANT COST PROBLEMS:

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      (a) (b) (c) (a) × (c) (a) × (b) Quantity Unit Contri-bution Margin Welding Time per Unit Total Welding Time Balance of Welding Time Total Contri-bution Total hours available 2,000 WVD Drums—make 5,000 TL91.20 0.4 2,000 0 TL456,000 Bike frames produced 0 TL107.60 0.5 0 0 0 WVD Drums—buy 1,000 TL10.25 10,250 Total contribution margin ...

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    • [DOCX File]Cost benefit analysis guidance note

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      Net present value examples Net present value examples for various costs and benefits and discount rates. Box 1: Calculating net present values To determine the net present value (NPV) of an option, the costs and benefits need to be quantified for the expected duration of the proposal.

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    • [DOC File]CHAPTER 13

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      Zst = present value of cash flow for state s and time t. The following steps are involved in solving this equation: Expected cash flows and prices of money are formulated for different possible states of the economy (i.e., boom, normal, or recession).

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