Tree Value-Excel

The concern is mainly on recognition of the value of standing timberlands. Under US GAAP, standing timber is accounted for on a historical cost basis. On the other hand, the relevant accounting

The third scenario was ignoring the option to invest in the second-generation project and selling the equipment in year 2. We evaluated this option as a put option. First, we calculated the probabilities for going up and down based on the assumption of a risk neutral word. As a result, the probability of going upward is calculated as 0.3375 and downward probability is 0.6625. In order to determine the present value of all the sequence cash flow at the end of year 2, we calculated the upside change rate and downside change rate as 64.87% and -39.35%, respectfully. The next step is to analyze the option value by using the “Binomial Tree” method. In order to determine the present value of all the subsequence cash flow at the end of year 2, we calculated the cash flow at each node on the tree, until 2006. We discounted all the cash flow at the risk free rate at 10%. The End of Year NPV of all the subsequence cash flow at Year 2 is calculated as $7,571,752, and the selling price of the equipment at end of 2 is $4,000,000, which is the salvage value. We found the NPV of selling the machine at end of Year 2 to be -$2,951,861 as of Year 0, which is negative. The APV of the project after adding the option turned out to be -$6,321,932. This negative APV suggest that the

Grappling with the potential purchase of Olive Hill Farm, we decided to conduct a financial analysis to determine whether the project should be taken or not. Our financial analysis include scenarios for the best, worse, and most likely outcomes of purchasing the farm. For each scenario a Net Present Worth (NPW) and an Internal Rate of Return (IRR) was calculated and compared. This revealed that there was little gain for the worst case scenario and large gains for the other two scenarios. A sensitivity analysis and a break-even analysis was also conducted. The sensitivity analysis identified the most influential factors on the NPW. In the end, the analysis favored buying Olive Hill Farm because it would be a low risk, high reward investment.

13. What is the formula for the Present Value (PV) for a finite stream of cash flows (1 per year) that lasts for 10 years?

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:

for the next three years and 3% per year thereafter. Calculate the value of EverGrow

c) The present value of $500 to be received in one year when the opportunity cost rate is 8 percent (discounting):

If the present is Year 0 and rates compound annually, in what year does the first outlay of $45,000 occur? Hint, you’re using the perpetuity approach to valuation.

financial gain but is not best for the long-term or the trees. It is the

General Foods is a large corporation organized by product lines. They are evaluating Super Project, the manufacture of a new powdered dessert. Crosby Sanberg, a financial analysis manager, must determine the value in accepting the proposal, along with J.C. Kresslin, the Corporate Controller. The Super Project will increase profit with a payback period of less than ten years. The proposed capital investment for the project is $200,000 ($80,000 for building modifications and $120,000 for machinery and equipment) and production would take place

Our approach to valuing the processing plant can easily be decomposed into three distinct steps first, find the value of the foreseeable free cash flows. Next, calculate the terminal value of the project. Finally, take the present value of those flows. The next few paragraphs walk through each of these steps in order of progression.

In question four, Janet was asked to solve a question that deals with annuity payments, specifically, ordinary annuities. It starts by asking of how much you will make if you add $2,000 every year and it is compounded by 10% interest every year. These, for the most part, are future value problems. The first one comes out to be a future value of $12,210.20, which does not satisfy the need for $20,000. The next part asks what the value would be if the interest was compounded semiannually. You have to do an equation in order to find out what the effective annual interest rate. Through this equation you come out with a value of 10.25% and after the calculator calculations you come out with a future value of $12,271.11, also not meeting the demand for that first year of college. The next part asks what payment will you need in order to get to that $20,000 number and the present value comes to be $3,275.95. Next, the case asks what original payment you would need in order

There are several traditional methods that can be used in appraising investment decisions. For instance, the net present value method (NPV) which entails estimating the costs and revenues of a project and discounting these figures to get their present values. Projects with the biggest positive net present value are the ones chosen as they represent the best stream of benefits of investing in the project over and above recovering the cost of initiating the projects. The discount rate is another method which is similar to the net present value method but reflects more on the time preference. This approach may focus on the opportunity cost of

Identifying the costs and benefits of a project is the first step; the next step is to identifying the value of these components. Monetary values such as income and lost income can be assessed with current values. However to place a value on environmental benefits and costs is more difficult. Harris et al (2006) describes four categories of values they are direct use value which can use market price valuation. Indirect use value is the category used to describe how the project can benefit the environment such as carbon sequestration. Option value takes into account the benefits lost due to irreversibility

Choosing the most realistic option of the sales prices is conditional. For instance, if the useful life was determined based upon the actual usage of the airplanes and the usage differed, then it is safe to assume that the sales prices would differ. If that were the case, then sales price I would be the most realistic option. If the usage were the same or nearly the same for each plane, the planes should be equal in value and sales price II would be the most reasonable option. Based upon the limited information given in this example, it would be prudent to assume that all the planes are equal in value; therefore, sales price II should be used.