Reference no: EM131056737
Garmen Technologies Ltd operates a small chain of specialty retail shops throughout Victoria and Tasmania. The company markets technology-based consumer products both in its stores and over the Internet, with sales split roughly equally between the two channels of distribution. The company's products range from radar-detection devices and GPS mapping systems used in cars to home-based weather monitoring stations. The company recently began investigating the possible acquisition of a regional warehousing facility that could be used both to stock its retail shops and to make direct shipments to the firm's online customers. The warehouse facility would require an expenditure of $250,000 for a rented space in Port Melbourne, and would provide a source of cash flow spanning the next 10 years. The estimated cash flows are as follows:
|
Year
|
Cash Flow
|
Year
|
Cash Flow
|
|
0
|
$(250,000)
|
6
|
$65,000
|
|
1
|
60,000
|
7
|
65,000
|
|
2
|
60,000
|
8
|
65,000
|
|
3
|
60,000
|
9
|
65,000
|
|
4
|
60,000
|
10
|
90,000
|
|
5
|
(45,000)
|
|
|
Then negative cash flow in year 5 reflects the cost of a planned renovation and expansion of the facility. Finally, in year 10, Garmen estimates some recovery of its investment at the close of the lease, and consequently a higher-than-usual cash flow. Garmen uses a 12% discount rate in evaluating its investments.
(a) As a preliminary step in analysing the new investment, Garmen's management has decided to evaluate the project's anticipated payback period. What is the project's expected payback period? Jim Garmen, CEO, questioned the analyst performing the analysis about the meaning of the payback period because it seems to ignore the fact that the project will provide cash flows over many years beyond the end of the payback period. Specifically, he wanted to know what useful information the payback provides. If you were the analyst, how would you respond to Mr Garmen?
(b) In the past, Garmen's management has relied almost exclusively on the IRR to make its investment choices. However in this instance, the lead financial analyst on the project suggested there may be a problem with the IRR because the sign on the cash flows changes three times over its life. Calculate the IRR for the project. Evaluate the NPV profile of the project for discount rates of 0%, 20%, 50% and 100%. Does there appear to be a problem of multiple IRRs in this range of discount rates? To demonstrate your explanation, draw a graph of the discount rate versus the NPV using the 4 given discount rates.
(c) Calculate the project's NPV. What does the NPV indicate about the potential value created by the project? Describe to Mr Garmen what NPV means, recognising that he was trained as an engineer and has no formal business education.
Please provide the answer with the calculation of financial calculator and the formula.
|
The failurerate increases or decreases with age
: Turbine disk. Table 2.2 shows turbine disk data (rounded to 100 hours) (a) Do the hazard calculations.
|
|
Show the initial general equilibrium situation
: Based only on this information, use a 2-country, open economy IS - LM diagram to clearly and accurately show The initial general equilibrium situation in both countries (in black),
|
|
Adjustable rate mortgages
: An explanation of your understanding of what loans really cost to consumers, and How you feel about adjustable rate mortgages (ARMs) and borrowing practices
|
|
Determine the rules on that implementation
: Are locks granted in FIFO order? c) If you have access to some other UNIX implementation that provides flock(), try to determine the rules on that implementation.
|
|
Cost of a planned renovation and expansion of facility
: Then negative cash flow in year 5 reflects the cost of a planned renovation and expansion of the facility. Finally, in year 10, Garmen estimates some recovery of its investment at the close of the lease, and consequently a higher-than-usual cash f..
|
|
Estimate a regression of salary on firm sales
: Estimate a regression of salary on firm sales and market value in constant elasticity (log-log) form. Interpret the e?ects of sales and market value on salaries of CEOs
|
|
Compare the times required for the two programs
: Write two programs (one for each semaphore type) to verify this. Each program should simply increment and decrement a semaphore a specified number of times. Compare the times required for the two programs.
|
|
What are the correctional standards for function
: How will you fulfill the requirements for each function as required by the American Corrections Association - Provide a brief overview of your selected existing correctional facility.
|
|
Review the rustyrim case study
: Listed are three compliance issues. Choose one and discuss how it might affect the information systems at RustyRim. Review the RustyRim Case Study and identify which current or planned system(s) may be affected by your chosen issue. Write a shor..
|