Justification analysis using capital budgeting techniques

Assignment Help Financial Management

Reference no: EM131177971

Assume that you have received a capital expenditure request for $52,000 for plant equipment and that you are required to do a justification analysis using capital budgeting techniques. The company’s cost of capital is 12% and the equipment (investment) is expected to generate net cash inflows of $13,000 per year for 8 years and then $9,000 for one year.

Reference no: EM131177971

Questions Cloud

Should m company establish the distribution center : M Company is considering whether to establish a sale distribution center in China. Given the large Chinese consumer market, M company estimates that its net sales revenues will be 15 million yuans in the first year, 20 million yuans in the second yea..

Implemented the lockbox system : Hardin-Gehr Corporation (HGC) began operations 5 years ago as a small firm serving customers in the Detroit area. However, its reputation and market area grew quickly. Today HGC has customers all over the United States. How much free cash would HGC g..

Major global crisis-office to start the insolvency process : There has been a major global crisis, and your company’s board of directors has announced that the company is going bankrupt. No one could have seen this one coming. Your CEO has called you in to his office to start the insolvency process. As your co..

Cost of common stock equity-growth rate of dividends : Ross Textiles wishes to measure its cost of common stock equity. The firms stock is currently selling for $57.50. The firm expects to pay a $3.40 dividend at the end of the year (2016). Determine the growth rate of dividends from 2011 to 2015. Determ..

Justification analysis using capital budgeting techniques : Assume that you have received a capital expenditure request for $52,000 for plant equipment and that you are required to do a justification analysis using capital budgeting techniques. The company’s cost of capital is 12% and the equipment (investmen..

What is arithmetic average return-geometric average return : What is the arithmetic average return over the 10-year period? What is the geometric average return over the 10-year period? If you invested $100 at the beginning, how much would you have at the end?

Downward sloping yield curve generally indicates : If a project has more than one negative net cash-flow a problem with using the IRR method to evaluate the project is that. The periodic cash-flows from an investment in shares are called. A downward sloping yield curve generally indicates

Calculate the present value of the investment : Let $1000 be invested at the end of each year in perpetuity. The interest rate is 8% per year. (a) Calculate the present value (PV) of the investment to the nearest cent after : (i) 1 year (ii) 10 years (iii) 50 years (iv) 100 years

Creates retirement fund by depositing payments : A man creates a retirement fund by depositing payments at the end of each month for 20 years. For the first 10 years the deposits are 100 per month and for the last 10 years the deposits are 200 per month. The annuity earns a nominal rate of 9% conve..

User Account

All Pages