Case 12 - Working Computers

We recommend based on economical analysis determines that accepting processing plant project is not viable to meet the minimum required rate of return set by the Harris Seafood Inc. for shareholder’s equity. Your concerned about accepting this project would reduce the company’s high rate of return on invested capital is absolutely correct after this analysis. The Free Cash Flow provides a possible scenario of receiving certain principle and interest payments that Harris may receive. Please be advised that our Cash Flow projects and forecast provides great uncertainty, consequently we compensate that uncertainty with the discount rate of 15%, the higher discount rate resulted in lower present value which

Now we want to examine the analysis business report concerning the cost of capital that has been increased at 28% in accordance with the Net Present Value which is $500,000 the question being would still be worth it to make the investment to the company (Needles, 2010). While at the same time the internal rate of return is still at 21% which is lower than the 25% in the expenditures. In reflection of these calculations the investment would not

Seeing the current debt in the business, the current demographic data, market trend and the required investment to develop from now, it can only be expected to break even in the next 5 years. Investing more money whilst staying in debt seems a risky way to take (profit 506.32% of the monthly average in 2009), with investment of $850,000.

The chair in Annette’s office is no longer available, there is a grey ergonomic chair in cubicle 104 that is available, you can try to see if that is better for you.

All these PCs and Server need to interconnect to via Routers and Switches. We recommend Cisco 800 series routers and Cisco 2960 48X 7 Switches need to completely implement the system.

Yes, I think that this company should build a new plant that allows them to grow in the industry, even if they are unable to use the Industrial Revenue Bond, they will have other financing alternatives.

when the market share changes from 25% to 22%, and the cash flow and NPV will be as the flowing:

The management of BBBY is worried about how to use the excess cash and their capital structure policy. With their 400 million excess cash and the idea of issuing debt their options are to either use the excess cash and 40% debt, or use the excess cash and 80% debt. BBBY is contemplating these options in order to repurchase some of its shares to increase the EPS, the market value, stock price, ownership as well as the return on equity to help with the loss of confidence coming from their shareholders. BBBY’s current cost of financial distress is very low, as they only have 2 lines of credit amounting to $125 million on which they don’t have any outstanding borrowing. BBBY are also banking their money in order to generate interest income instead

It appears, barring some sort of internal management conflict, that this is a good investment for

It is proved what Jonathan Schrader said is right. Due to the large investment, the company will decrease the cash in hand for next coming years. The table 1.3 shown the NPV and discount cash flow in the next 10 years.

After year 5, they cash flow will pick up where it left off and increase even higher until they sell the company. The IRR will be around 429%. And the value created from the small investment will be just under $45 million in only a 7 year period.

The use of an accounting rate of return also underscores a project 's true future profitability because returns are calculated from accounting statements that list items at book or historical values and are, thus, backward-looking. According to the ARR, cash flows are positive due to the way the return has been tabulated with regard to returns on funds employed. The Payback Period technique also reflects that the project is positive and that initial expenses will be retrieved in approximately 7 years. However, the Payback method treats all cash flows as if they are received in the same period, i.e. cash flows in period 2 are treated the same as cash flows received in period 8. Clearly, it ignores the time value of money and is not the best method employed. Conversely, the IRR and NPV methods reflect that The Super Project is unattractive. IRR calculated is less then the 10% cost of capital (tax tabulated was 48%). NPV calculations were also negative. We accept the NPV method as the optimal capital budgeting technique and use its outcome to provide the overall evidence for our final decision on The Super Project. In this case IRR provided the same rejection result; therefore, it too proved its usefulness. Despite that, IRR is not the most favorable method because it can provide false results in the case where multiple negative

Atlantic Computer developed a product, the “Atlantic Bundle”, to meet an emerging basic server market. The Atlantic Bundle is a Tronn server coupled with the Performance Enhancing Server Accelerator software tool “PESA”. Atlantic Computer must decide on the pricing strategy.

2. What do you think of the way the team set out to find a market for the Kittyhawk? What correct turns and what wrong turns did they make?

Overall, the ranking lists shown that the project of Strategic Acquisition should be accept by the board directors, because it has a highest IRR and NPV, the second high Profitability Index and 5 years payback, although the initial investment is really big but still the return is worse to do. The total investment of this project will be EUR55 million. The second recommend project will be the project of Southward Expansion. This project has a high IRR and NPV, the initial investment is EUR30 million, it is the 3rd in the ranking list of Project Spending and it is the 2nd in the ranking list of Project Net Cash Flow about EUR56.25 million, The payback is 5 years too. Because the project of Effuent-Water Treatment at Four Plants is highly recommend so right now we have total capital budget EUR91 million. Based on all the ranking list, the project of the Artificial Sweetener will be the last recommendation for the new year capital budget. This project has the 3rd highest IRR and NPV, the return is the 4th in the list about EUR42.75 million and payback is also 5 years. They expenditure for this project is EUR27 million. So the total budget will be EUR118 million include Strategic Acquisition, Southward Expansion, Artificial Sweetener and Effuent-Water Treatment at Four Plants.