Week 4 Capstone

Budget management analysis is used by mangers as a tool and helps determine that all resources available are being used efficiently. The budgets are determined yearly and are based upon the previous year’s budget and variances. This paper will discuss specific strategies to manage budgets within forecast, compare five to seven expense results with budget expectations, describe possible reasons for variances, give strategies to keep results aligned with expectations, recommend three benchmarking techniques, and identify those that might improve budget accuracy, and justify the choices made.

| Calculate the present value of the payments, if you can borrow or lend funds at a 7% interest rate. Assume the product sells for $100. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

6. Virginia should invest in selling smoked hams on the internet. The present value of the future cash flows is $3,207,547.17 and the required investment is less ($2,500,000). The investment would yield a positive NPV of $707,547.17, so the project would be worth investing in. Since Virginia does not want to use internal cash to finance the investment, she would have to sell more shares of

a) Discounted cash flows from the projects by the suitable division of a hurdle rate to get the net present value which financially makes sense since risks among different divisions do vary.

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:

An investment project should be accepted only if the NPV is equal to the initial cash flow.

The present value of an outlay in perpetuity for a particular project can be calculated as follows:

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

Abacus Corp. will pay dividends of $2.25, $2.95 and $3.15 for the next three years. After three years, the firm will grow at a constant rate of 4 percent. If the required rate of return is 14.5 percent, what is the current value of the stock?

d. Give two reasons why a business can be profitable for many years and still have a cash shortage?

3. Assume that 11% is the market rate of interest in on January 1, 1975. Compute the present value at January 1, 1975 of all payments that will be made on

This project’s initial outlay includes the necessary capital needed to purchase fixed assets and ensure they are in operating order to start the project.

Compute the future value of $1,580 if the appropriate rate is 5.4% and you invest the money for four years? What is the future value if you invest for eight years?

In this case, to get the present value (PV), we can use the formula of growing annuity.