International Paper: Longwood Woodyard Plant

I do not think it is proper. Since hurdle rate is the key factor to determine whether we should accept a project, it is concerned with a specific investment opportunity belonging to a division. As we can see in Table 1, each of Midland`s divisions had its own target debt ratio. Those

Empathy is having the ability to understand the feelings of others often through connecting our own experiences to those around us. “Wildwood” by Junot Diaz follows the journey of the main character, Lola. Lola is a rebellious teenager living with her mother and younger brother in New Jersey. Lola's mother who is battling breast cancer, must deal with Lola and her defiant ways. Lola’s mother sends her away to live in the Dominican Republic to learn how to be a mature young woman. Every kid can relate to wanting to go against their parents rules and Lola is no different. The reader can relate to Lola through her common experiences that many deal with. Diaz uses first person to allow the reader to experience the perspective of Lola through her narration. He makes it easy to relate to as the story follows something that everyone has been through, growing up. Rebellion is a natural characteristic of maturation, although difficult for the parents it allows children to learn from their mistakes. Junot Diaz’s short story, “Wildwood” uses teenage rebellion and common feelings, to challenge stereotypes which allows the reader to easily sympathize with the story.

In December 2006, Bob Prescott, the controller for the Blue Ridge Mill, was considering the addition of a new on-site longwood woodyard. Two primary benefits for this new addition include eliminating the need to purchase shortwood from an outside supplier and creating an opportunity to sell shortwood on the open market. Also, the new woodward would reduce operating costs and increase revenues. Blue Ridge Mill currently purchased

This decision may be the result of a conservative policy pursued by a firm. Restriction may be imposed on divisional heads on the total amount that they can commit on new projects.Another internal restriction for capital budgeting decision may be imposed by a firm based on the need to generate a minimum rate of return. Under this criterion only projects capable of generating the management’s expectation on the rate of return will be cleared.

At the new WACC of 19%, the home appliance and agricultural machinery projects are valued based on their inherent levels of risk. The beta of the industry average home appliance project is 0.95, whereas the beta for the industry average agricultural machine project is calculated as 0.88. CAPM was then employed to find the cost of capital of each project. The cost of capital for the home appliance and agricultural machinery projects were found to be 10.4% and 9.92%, respectively (Appendix B). This analysis allows Star Company to allocate funds to projects that create returns greater than the industry cost of capital for each specific project.

Another weakness is seen on the limited space for expansion that is in the infrastructure. The current infrastructure can only accommodate 30 employees and even if there is the plan of growth by 20%, the space might not be adequate as growth normally necessitates a lot of space (Gupta & Jayaraman, 2010). This is because, there might be a need for a few offices and the current architecture might not be enough for the expansion and thus could delay the expansion.

EEC calculated the amount of time involved the anticipation of its cost ($3 million). The timeline in recovering their cost of investment ($2 million) initially for the foundation of this investment any profit made in the future of this investment will be justified as a profit for the company. If EEC can anticipate a fast return on its investment it is a profitable wise decision in making the investment financial, it is considered to be an easier way of formulating investments financially. On the basis of one year all cash flows is added together equal to the sum of $2 million originally invested, then it is divided by the annual cash flow of $500,000. The calculation of the payback period would equal four years. After this time frame any financial proceeds will be considered profitable for the company. I conclude that the timeframe is adequate in comparison of the investment in this worthwhile investment financial venture for the company.

The company can afford to invest more fixed costs and variable costs (shifting assets from “A” to “C”) for additional “C” capacity thereby maximizing capacity utilization.

Star Appliance is looking to expand their product line and is considering three different projects: dishwashers, garbage disposals, and trash compactors. We want to determine which project would be worth doing by determining if they will add value to Star. Thus, the project(s) that will add the most value to Star Appliance will be worth pursuing. The current hurdle rate of 10% should be re-evaluated by finding the weighted average cost of capital (WACC). Then by forecasting the cash flows of each project and discounting them by the WACC to find the net present value, or by solving for the internal rate of return, we should be able to see which projects Star should undertake.

Target Corporation uses an interesting capital-budgeting system. Projects are proposed using Capital Project Requests (CPRs) and must be approved before money can be spent. The level of approval needed depends on the amount being requested. For projects requiring less than $100K, lower management can approve, but anything above this amount goes to the Capital Expenditure Committee (CEC) which is comprised of 5 executive officers. For projects requiring greater than $50 million, the Board of Directors must approve.

This haevily disguised case is set in the “nature “woodstoves business in 1986. It is not based on The Vermont Castings Company. The issue is product line strategy based on product line profitability.

The senior management of Company A employ you to advise them on the cost of capital the company should use to calculate net present value and decide whether or not to undertake a new investment project. You may assume that the new project is comparable to the average of the company’s existing projects in all respects.

This case study analyzed five different projects Target Corporation had to decide on capital spent for which project created the most value and the most growth for the company and its shareholders. By analyzing the financial statements and exhibits of each project, I was able to determine the positives and negatives of each of these alternatives. The alternatives were Gopher Place, Whalen Court, The Barn, Goldie’s Square, or Stadium Remodel.

Blue Ridge Mill currently purchases shortwood from a nearby competing mill for pulp production. Bob Prescott, the controller for Blue Ridge Mill, is considering the addition of a new on-site longwood woodyard. The new woodyard would have two main benefits including the ability to eliminate the need to buy shortwood from an outside source and the opportunity to sell shortwood on the open market as a new market for Worldwide Paper Company.

This article mainly discusses the cost of capital, the required return necessary to make a capital budgeting project worthwhile. Cost of capital includes the cost of debt and the cost of equity. Theorist conclude that the cost of capital to the owners of a firm is simply the rate of interest on bonds.