Investment Analysis and Tri Star Lockheed

($372 + $135 + 500) / ($2.21 - ($0.83 + .40)) = 1,028 [+/- 31]

The NPV of an investment proposal is found by adding the present values of all of its estimated

Free cash flows of the project for next five years can be calculated by adding depreciation values and subtracting changes in working capital from net income. In 2010, there will be a cash outflow of $2.2 million as capital expenditure. In 2011, there will be an additional one time cash outflow of $300,000 as an advertising expense. Using net free cash flow values for next five years and discount rate for discounting, NPV for the project comes out to be $2907, 100. The rate of return at which net present value becomes zero i.e.

After evaluating the Super Project for General Foods, the two main things that management needed to address were the relevant incremental and non-incremental cash flows discussed below and incorporate the NPV and the net cash flows (yearly) to make a decision on whether to accept or reject the project. The start-up costs were determined by splitting up the costs of $160,000 in 1967 and $40,000 in 1968. To calculate the yearly cash flows, I used year 1 through 10, and the gross profit was calculated by subtracting out relative cash flows and the before tax depreciation. The NPV of $169,530 is positive for the 10% discount rate, which is less than the IRR of 11.4%.

Given that the total profit over 8 years is $1.2375B (or $155M per year for 8 years), we will now compute the Present Value of this amount using the following formula:

FVN = FV1= PV × (1 +I)N = $500 x (1 + 0.08) = $500 x 1.08 = $540

See Table 1: Expected non-operating cash flow when the project is terminated at year 4 = 165,880$

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.

2. The current NPV is negative. One way to save money would be to reduce consulting costs. Please set the average consulting cost per month in cell b33 to $5000. At what discount rate is the NPV for the project 0?_____0.026____

The Conch Republic is an organization which produces reputable electronics is seeking to advance one of their current production lines to stay abreast to changing technology. The company is seeking to introduce a new smart phone with the hopes of boosting the company’s revenue and reputation as a smart phone producer. As a person hired to assess the financial undertaking of Conch Republic an overview of the projects planned expense must be generated. However, in order to accomplish this task a capital investment analysis must be conducted in order to determine the projects viability. This will be done by analyzing several things. Those things that must be understood are the projects payback period, the net present value (NPV), internal

So, the NPV can be calculated by taking the sum of present values of all the cash flows. This NPV comes out to be 3,703,176 Pesos. This NPV value can be converted into Euros by dividing the NPV value by the spot exchange rate. The spot exchange rate is 15.99 MXN/EURO. Hence, by dividing 3,703,176 by 15.99, NPV value in terms of Euro comes out to be 231,593 Euros.

So, the NPV can be calculated by taking the sum of present values of all the cash flows. This NPV comes out to be 3,703,176 Pesos. This NPV value can be converted into Euros by dividing the NPV value by the spot exchange rate. The spot exchange rate is 15.99 MXN/EURO. Hence, by dividing 3,703,176 by 15.99, NPV value in terms of Euro comes out to be 231,593 Euros.

The ARR for the project is 12.8% this is less than required 15%. Therefore the project should be rejected.

4. Based on the information provided in the case, our group calculated the NPV for the project under both tax environment and tax-free condition, respectively, by using the excel spreadsheet and the NPV function. (For a detailed calculation of NPV, please refer to Appendix Under 15-yr.) According to our calculation, we have the following results: In the first case scenario, which the firm is in a tax environment (35% income tax), the NPV of the project equals to -$6,366,054.53

Each of these products can be produced in either of two plants. For administrative reasons, management has imposed a second restriction in this regard. Just one of the two plants should be chosen to be sole producer of the new products. The production cost per unit of each product would be essentially the same in the two plants. However, because of differences in their production facilities, the number of the hours of production time needed per unit of each product might differ between the two plants. These data are given in the table below, including marketing estimate of the number of units of each product that could be sold per week. The objective is to choose the products, the plant and the production rates so as to maximize the profit. Production Time Used for each unit Product 1 Product 2 3h 4h 4h 6h 5 7 7 5 Product 3 2h 2h 3 9 Production Time Available per week 30h 40h Thousands of dollars Units per week