Fin Quiz4

1.1. Review principles of estimating project cash flows. Suggested reading: Ch. 9 “Capital Budgeting and Cash Flow Analysis” in “Contemporary Financial Management”, 11th ed. by Moyer, McGuigan, and Kretlow.

Define the term “incremental cash flow.” Since the project will be financed in part by debt, should the cash flow statement include interest expense? Explain.

2. Use the projections provided in the case to compute the incremental cash flows for the PCB project. Provide a reasonable estimate for cash flows after 2009 as well.

b) The decision to invest in projects increases the shareholders value of the company. This is consistent with the growth and from the NPV criteria, positive NPV of projects increases the shareholder's value.

3. What are the objectives (in measurable terms) of the project? Is the goal achievable in

Which statement concerning the net present value (NPV) of an investment or a financing project is correct?

For each of the scenarios that follow, define whether the project is a profit-enhancing, cost-control, or publicimprovement program. If possible, define the scenario further as an expansion, replacement, or abandonment

ii. The project should be accepted if the NPV is positive because such a project increases shareholder value.

The earned value analysis has led to see the project will control the actual budget, which is $18,000. The actual cost at the period 4 totaled to be $7,050, and total of earned value at period 4 is $7,750. The estimate at completion for typical is $22,550. These variances show that this project will exceed the original budget of $18,000, so we are still exceeding the project’s original budgets. The SPI is less than a value of 1, which means that the project will also over schedule and activity plans. The requests immediate actions from the third-party company.

2. In selecting an accounting method for a newly-contracted long-term construction project, the principal factor to be considered should be what? Page 933

5. If debt is used to finance this project, should the interest payments associated with this new debt be considered cash flows?

5. The project is assumed to end in year 4. Do you think that this is realistic? Can you estimate the value of the project’s operating cash flows beyond year 4? State any assumptions you made.

Such unforeseen benefits lead to a total return on IT investment that exceeds the sum of the return on investments of individual projects-a

5. How does the attractiveness of the project vary under different economic scenarios and financing arrangements?

* Capital Investment decisions: large sums, non routine, longer term, critical to the business like purchase of plant and machinery or factory