Caledonia Project
Team A
James Kochiel, Erik Nutt, Lynnell Smothers, Derek Wright
January 21, 2014
John Dewey
1. Why should Caledonia focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project?
Caledonia should focus on cash flows, because free cash flows can be reinvested when received, unlike accounting profits which are shown when earned, and not at the time cash is received. The company should focus on incremental aftertax cash flows. This enables it to analyze the profits or losses after comparing cash flows with or without the project on an after tax basis. …show more content…
For Project B, at Year 0 the PV would remain $100,000 since that is the initial investment. At Years 14, the PV would be $0 since the cash flow is $0. At Year 5, the PV would increase to $118,690. You would then add that number to the initial investment to find the NPV which would be $18,690. PV would be $28,828.80; Year 2, $25,971.84; Year 3, $23,398.08; Year 4, $21,079.36; and at Year 5, $18,990.40. The sum of the figures for Year 1 through Year 5 would give you the Present Value of Projected Cash Inflow, and once you add that number to the initial investment, the Net Present Value would be $18,268.48.
For Project B, at Year 0 the PV would remain $100,000 since that is the initial investment. At Years 14, the PV would be $0 since the cash flow is $0. At Year 5, the

Caledonia Products Integrative Program
946 Words  4 PagesCaledonia Products Integrative Program FIN 370  Finance for Business Operating Cash Flow Year One Year Two Year Three Year Four Year Five  Project Revenue $21,000,000 $36,000,000 $42,000,000 $24,000,000 $15,600,000  Cost of Goods Sold ($12,600,000)…

Caledonia Products Integrative Problem
1529 Words  7 PagesCaledonia Products Integrative Problem FIN/370 February 11, 2014 Caledonia Products Integrative Problem It has been two months since team B has been hired as an assistant financial analyst at Caledonia Products; the company has been pleased with our work. They are still a little hesitant to give us work without supervision. Caledonia Products Company is introducing a new product, we have been given the assignment that involves both the calculation of the cash flows associated with a…

Caledonia Products Integrative Problem
1039 Words  5 PagesCaledonia Products Integrative Problem Charles Fletcher FIN/370 March 25, 2013 Daneene Barton Caledonia Products is determining a new business proposal. The organization is planning a free cash flow investment and evaluating a project to determine…

Caledonia Products Essay
1187 Words  5 PagesCaledonia Products Company is introducing a new product. With previous fallouts from the company and ranging a 34% marginal tax bracket with a 15% required rate of return or cost of capital the change of direction is to initiate the new plan. Mr. V. Morrison, CEO, Caledonia products is asking for professional guidance to analyze his current cash flow statement to determine if the project of adding two mutually exclusive projects is profitable. Therefore, as an Assistant Financial Analyst, is take…

Caledonia Project
1269 Words  6 PagesCaledonia Project Caledonia Project FIN/370 Julie Vogt January 9, 2012 Week 4 Team project was to answer question 12 ae on page 363, Chapter 10 of Financial Management: Principles and Applications. 12. Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows: YEAR  PROJECT A  PROJECT B  0  $100,000  $100,000  1  32,000  0  2  32,000  0  3  32,000  0  4  32,000  0  5  32,000  $200,000…

Caledonia Products
1380 Words  6 PagesCaledonia Products Company is introducing a new product. With previous fallouts from the company and ranging a 34% marginal tax bracket with a 15% required rate of return or cost of capital the change of direction is to initiate the new plan. Mr. V. Morrison, CEO, Caledonia products is asking for professional guidance to analyze his current cash flow statement to determine if the project of adding two mutually exclusive projects is profitable. Therefore, as an Assistant Financial Analyst, is take…

Caledonia Products Integrative Problem
1107 Words  5 Pages1 Caledonia Products Integrative Problem Christina Smith, Patricia Bryant, Kelley Randall, Ashley Irizarry FIN 370 Jan. 27th, 2014 Tarak Patel 2 Caledonia Products Integrative Problem 1. Caledonia should focus on project free cash flows because it is able to measure the company’s cash flows minus its capital expenditures. This can help a company determine the cash it is able to generate and see what cash is available to use for projects and expansion, pay dividends, or…

Caledonia Problem
1126 Words  5 PagesCaledonia Products Integrative Problem July 31, 2013 Yvette “Betsy” Stewart 1. Why should Caledonia focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project? It is important that Caledonia Company should focus on the free cash flows instead of the accounting profits. With the free cash flows that the company receives they can reinvest. To accurately analyze the timing of the benefit or cost we can…

Caledonia Products Integrative Problem
1309 Words  6 PagesCaledonia Products Integrative Problem As a newly assigned assistant financial analyst at Caledonia Products, Team B has been charged with calculating the cash flows associated with the production of a new fad product which is expected to last for a five year period, provide a recommendation and respond to a number of questions on the capitalbudgeting process. They must also factor in whether it should lease versus buying the equipment. Cash Flows versus Accounting Profits Caledonia should…

The Caledonia Project: An Analysis of Net Present Value Calculation
494 Words  2 PagesThe project will be analyzed with a net present value calculation. The future cash flows will be calculated and then discounted to present day, then tabulated so that the net present value of the project is determined. This NPV will allow management to make a decision with respect to whether or not the project should be undertaken or not. Caledonia should focus on free cash flows for the project rather than accounting profit. The reason for this is that the free cash flows are the actual value…
More about Caledonia Project

Caledonia Products Integrative Program
946 Words  4 Pages 
Caledonia Products Integrative Problem
1529 Words  7 Pages 
Caledonia Products Integrative Problem
1039 Words  5 Pages 
Caledonia Products Essay
1187 Words  5 Pages 
Caledonia Project
1269 Words  6 Pages 
Caledonia Products
1380 Words  6 Pages 
Caledonia Products Integrative Problem
1107 Words  5 Pages 
Caledonia Problem
1126 Words  5 Pages 
Caledonia Products Integrative Problem
1309 Words  6 Pages 
The Caledonia Project: An Analysis of Net Present Value Calculation
494 Words  2 Pages