Reference no: EM131625791

Assignment: Capital Budgeting, Project Cash Flows, and Firm Leverage

Please answer questions from each chapter (professor will assign the # of which one you will do) each question must be 50+ words.

Ch. 9: Questions 7 & 8 (Questions and Problems section)

1. Calculating IRR- A firm evaluates all of its projects by applying the IRR rule. If the required return is 14 percent, should the firm accept the following project?

Year	Cash Flow
0	-$26,000
1	11,000
2	14,000
3	10,000

2. Calculating NPV- For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 11 percent, should the firm accept this project? What if the required return is 24 percent?

3. Calculating Projected Net Income- A proposed new investment has projected sales of $635,000. Variable costs are 44 percent of sales, and fixed costs are $193,000; depreciation is $54,000. Prepare a pro forma income statement assuming a tax rate of 35 percent. What is the projected net income?

4. Calculating OCF- Consider the following income statement:Fill in the missing numbers and then calculate the OCF. What is the depreciation tax shield?

Sales	$713,500
Costs	497,300
Depreciation	87,400
EBIT	?
Taxes (34%)	?
Net Income	?

5. Calculating Costs and Break-Even- Night Shades, Inc. (NSI), manufactures biotech sunglasses. The variable material cost is $9.64 per unit, and the variable labor cost is $8.63 per unit.

a. What is the variable cost per unit?

b. Suppose NSI incurs fixed costs of $915,000 during a year in which total production is 215,000 units. What are the total costs for the year?

c. If the selling price is $39.99 per unit, does NSI break even on a cash basis? If depreciation is $465,000 per year, what is the accounting break-even point?

6. Calculating Break-Even- In each of the following cases, calculate the accounting break-even and the cash break-even points. Ignore any tax effects in calculating the cash break-even.

Unit Price	Unit Variable Cost	Fixed Costs	Depreciation
$2,980	$2,135	$9,000,000	$3,100,000
46	41	135,000	183,000
9	3	1,900	930

Please answer each question with 100+ words and if source used must cite. Please remember to fully answer the question with 100+ or it will not be graded.

7. Analyzing Short Term Credit- Provide some examples of sources of short-term credit? How can use these examples to evaluate the cost of financing as a key determinant of a company's use of current liabilities? Why is it so important for companies to analyze which type of short-term credit they should use?

8. What are the differences in the calculation of net present value and internal rate of return?

9. How are investments in net working capital used in the preparation of a firm's net cash flow?

10. For a company that has been in business for many years they have had the benefit of learning over time on how to be more efficient. But, for a new company starting out is there one thing you would suggest that they can do to be more effective at generating cash flow?

11. There are a lot of things that a company has to account for when considering a new project, and generating incremental cash flow can be important to the success of that project. Of course, when a project is just getting started it will be a drain on cash flow so the company has to make sure the rest of the business is strong enough to support it. How do you think a company can support a new project when the rest of the business is slowing down?

12. Importance of Risk Analysis - Risk analysis in the capital budgeting decision making process is so important. There are many possible cash flow outcomes for any risky project, describe one that can be used to better understand the uncertainty of future cash flow.

13. What is the acceptance or rejection criterion when using the net present value of cash flow analysis?

Please answer each question with 200+ words and if source used must cite

14. What is Inventory turnover? Calculate and analyze the Inventory turnover ratio for Apple Inc., From the last years (2015 and 2016) using their Sec form 10-K (annual financial report found on their website). Compare and contrast your company's ratios to industry and competitor standard ratios obtained from Yahoo Finance, Morningstar, MotleyFool, Macroaxis or other Internet sources, and provide a detailed answer and analysis as to why your company's ratios are different than the industry/competitor standard.