The Net Value Calculation
The discount rate. This is the company's cost of capital, usually. This is the rate at which the future cash flows will be discounted to present dollars.
The sales and price of the current racquetballs. These are important to project how the company will perform in the future if it does nothing. The sales will be quite a bit lower than the new option will provide, because the selling price is going to be much higher. The demand will change depending on the selling price as well, so that needs to be taken into account when figuring out the sales and price levels sales is dependent on price. For this example, competitors are not expected to change their prices.
The sales volume of the new process. The selling price of $0.65 has been selected for this example, and we just need to know how many racquetballs…

Financial Ratio And Net Working Capital Calculations
1295 Words  6 PagesQuick Ratio Similar to the current ratio and net working capital calculations, the quick ratio measures a firm’s ability to pay its current liabilities with only quick assets (“Financial Ratio Analysis,” n.d.). Quick assets can be converted to cash within 90 days (“Financial Ratio Analysis,” n.d.). A stock is an example of a quick asset as it can be sold for cash when the market opens. To calculate the quick ratio, first we add cash, cash equivalents, short term investments and accounts receivables;…

Net Present Value and Question
5593 Words  23 Pagesof capital. C) If you are unsure of your cost of capital estimate, it is important to determine how sensitive your analysis is to errors in this estimate. D) If the cost of capital estimate is more than the internal rate of return (IRR), the net present value (NPV) will be positive. Question 2 If it is feasible to undertake a project irrespective of the decision concerning the acceptance of another, the two projects are said to be: A) independent. B) dependent. C) mutually exclusive. D) none of…

Net Present Value
1875 Words  8 Pagesexam consists of 33 multiplechoice questions. Enter your answers on the Answer tab of the Excel spreadsheet that has been provided. (The worksheet tabs are located at the bottom of your worksheet.) Put your calculations on the Calculations tab as evidence of your work. Your calculations will be used as evidence of your independent work only and will not be used for partial credit for incorrect answers. Change the Excel file name to include your name (i.e. “SmithJMidtermExam”) and submit it in…

Net Present Value ( Npv )
1530 Words  7 PagesNet present value (NPV) is a discounted cash flow technique used to determine the overall value of a project or a succession of cash flows (Blocher et al, 2008). See Appendix 1 for a simplified calculation. Belli (2001) argues that NPV is more suitably applied to mutually exclusive projects; these types of projects are those that if accepted, prevent other contending projects to be approved (Mowen et al, 2009). NPV is understood to be an absolute measure, therefore when selecting between mutually…

Net Present Value Essay
603 Words  3 Pages1. Basic present value calculations Calculate the present value of the following cash flows, rounding to the nearest dollar: a. A single cash inflow of $12,000 in five years, discounted at a 12% rate of return. b. An annual receipt of $16,000 over the next 12 years, discounted at a 14% rate of return. c. A single receipt of $15,000 at the end of Year 1 followed by a single receipt of $10,000 at the end of Year 3. The company has a 10% rate of return. d. An annual receipt of $8,000 for three…

Net Present Value Calculation: A Questionnaire
364 Words  1 Pages1. This first question is a net present value calculation. The future cash flows must be discounted, because of the effects of interest and inflation. Those two factors reduce the value of cash flows in the future, so that money received or paid in the future is not worth as much as the same dollar amount paid today. In this example, there is a project, and the cash flows associated with the project need to be discounted. If the final value, the net present value (NPV) is greater than zero, the company…

Net Present Value Calculation for PowerCo Project
490 Words  2 PagesThere are costs for the first two years and then there are net positive cash flows for the subsequent ten years. A net present value calculation will be used in order to determine if the company should undertake this project or not. The present value calculations will be done according to this formula: INCLUDEPICTURE "http://i.investopedia.com/inv/dictionary/terms/NPV.gif" * MERGEFORMATINET Source: Investopedia (2012) The present value of the costs is as follows: Year 1 2 Cash Flow 25…

The Caledonia Project: An Analysis of Net Present Value Calculation
494 Words  2 Pagesbe 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 that is being added…

Net Present Value and Project
3264 Words  14 Pagesbe 13.487% and a Weighted Average Cost of Capital (WACC) to be at a value of 9.70%. Factoring in the WACC into our projections we found that if the demand maintains at an average rate the project will be at a positive Net Present Value of $5,997,505.31 with an IRR of 13.21%, a profitability index of 8.84, and an approximate payback period of 6.84 years. Please see Exhibits below for a snapshot of the capital budget and NPV values. This information seemed to be very promising for the project in…

Net Present Value
1157 Words  5 Pagesobtained and that authorised capital spending was not exceeded. Investment appraisal method; There are four methods which we can use to evaluate the investments. 1) The Payback period 2) The accounting rate of return 3) The net present value method 4) The internal rate of return method A. The Payback period; The payback period is the number of years it takes to recover its initial investment. This method assists with the project risk and liquidity. The projects with the…
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