Bill the Spender

The Company should maximize on cash management by capital rationing on the project accepted. NPV of the project should be implemented as it reflects the time value of money invested in the accepted project. Similarly this can be further elaborated by computation of IRR of both project proposal.

Finally, in order to complete a more accurate comparison between the two projects, we utilized the EANPV as the deciding factor. Under current accepted financial practice, NPV is generally considered the most accurate method of predicting the performance of a potential project. The duration of the projects is different, one lasts four years and one lasts six years. To account for the variation in time frames for the projects and to further refine our selection we calculated the EANPV to compare performance on a yearly basis.

John and Janet Baker are husband and wife and maintain a household of 7, including Janet and John. Calvin and Florence Carter are Janet’s parents, who are retired. During the year, they received $19,000 in nontaxable funds (disability income, interest on municipal bonds and Social Security benefits) from which $8,000 was equally spent between them on clothing, transportation, and recreation. The remaining $11,000 was invested in tax-exempt securities. Janet Baker paid $1,000 for her mother’s dental work and $1,200 premium on her father’s own life insurance policy. Janet’s father,

Billy should a diversified portfolio, but buy more health and technology stocks because they are at low prices and are more bullish. For example, IBM is at $149.25. The 52 week low is 116.9 and the 52 week high is 176.3. If Billy buys 10 shares, he should have at least a 2% (total purchase price ÷ money gained/loss x 100) expected return on the stocks. If Billy buys 10 shares of JNJ at $108.97, he would get at least 3% return. The 52 week low for JNJ is 81.79 and the 52 week high is 109.84. This shows that JNJ is closer to its high, so Billy would most likely make a dividend off of

John and Janet Baker are married and maintain their home where Janet’s parents Calvin and Florence Carter, their son Darin, and their daughters Andrea and Morgan also live. The Carters are retired and received $19,000 a year which is not taxed. The Carters equally spent $8,000 between them for cloths, transportation expenses, and a vacation. They invested the remaining $11,000 in tax-exempt securities. Janet Baker paid $1,000 on her mother’s dental work and also paid her father’s life insurance premiums of $1,200. Darin, the Baker’s 18-year old son is not a full-time student but earned $14,000 from a

Their monthly household expenses include $850 for their mortgage, which has nine years of payments remaining, $400 for property taxes, $300 for utilities, $250 for insurance, and $278 for their new car that still has 48 payments left. With their monthly income totaling $5,666, that leaves only $1,166 a month for various expenses that might pop up and for further investments into Bruce’s profit sharing plan. They do not have any cash assets, which is a negative about their financial situation. They also have numerous debts which include their $75,000 mortgage, $13,344 for a car loan,

I start off with analyzing Alex and Marty household’s current insurance and retirement program with the information that Alex gives me, using the needs approach. Alex and Marty Smith are married and file a joint tax return. Alex was 35 years old in September and works as a coach and high school teacher at a local school. Alex’s salary was $49,000 before taxes in 2014. Marty will be 34 years old in April and is a self-employed web designer and marketing consultant who works at home. Marty’s income fluctuated each year but in 2014, his earnings before taxes were $68,000 which was an average year. Their children are Olivia, who is 9, and Michael, who is 7. The Smith family is a two-income-earner with children family, which is a family with both

The Modified Internal Rate of Return is an underused measure for selection of projects that a company can choose because it is more effective at dealing effectively with periodic free cash flows that develop from the time that an asset is purchased through its life to the point where it is sold, ranking projects and variable rates of return through the project life. The Internal Rate of Return is an inefficient model to make decisions with because it lack the ability to account for the periodic free cash flows, proper ranking and variable returns from certain projects.

The savings account, $550 into their child's college fund. They also put $200 into the stock market and $500 into retirement savings. The remaining money is used saved for emergencies and for pocket money.

Suppose Sara and Sam are each making $40,000 the year they turn 25 and both start out saving 5% of their salaries. They receive annual raises of 6% for the next 6 years. Sara saves 75% of each raise;

2. Compute the NPV of both projects. Which would you recommend? What if they are not mutually exclusive?

As such, IRR can be used to rank several prospective projects a firm is considering. Assuming all other factors are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first ("Internal Rate Of Return - Irr", 2014).” When looking at both companies discount rates, they are within 1% of one another. The higher the discount rates the better the profit for that particular company. Corporation A has a discount rate of 10%, while Corporation B has a discount rate of 11%. Generally speaking, the higher the discount rate the more profitable that company will become.

This analysis will determine whether or not the project is worth pursuing using a net present value (NPV) approach.

The IRR of the incremental investment is 10.7%. The decision depends on whether this IRR is excess of the cost of capital. If the cost of capital is smaller than IRR of 10.7% (IRR > COC), then Project B should be taken. Otherwise (IRR < COC), Project A should be taken.

Mutually exclusive projects are another situation for which NPV must extend its approach. In such projects, the chosen project is usually one which results in the greatest positive NPV because this will produce the greatest addition to shareholders’ wealth. In the case of mutually exclusive investments, ranking becomes crucial as only