Essay about fin 600

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.

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.

What annual interest rate is needed to produce $200,000 after five years if only $100,000 is invested?

10. An investment of $1,000 today will grow to $1,100 in one year. What is the continuously compounded rate of return?

Which of the following is the actual rate of interest paid or earned over a year's time?

These large sums of cash outflow are spread out over long periods of time. Therefore, the present value of cash flow signifies the economic worth of a project for a company at a specific point in time. This, in turn, helps decision makers ascertain the time period that the company’s investments will be tied up. Also, it helps them establish the amount of time that it will take to begin receiving a return. Furthermore, decision-makers can better evaluate which projects have a higher chance of providing them with a return sooner since present value discounts future cash flows to their equivalent value today. Additionally, it aids them in establishing which projects should be invested in and those that should not. Moreover, it allows them to ascertain if and when a project will benefit them so they can evaluate their investment options and select the best alternative (Edmonds et al.,

What is the net present value of a project that contributes $10,000 at the end of the first year and $5,000 at the end of the second year? The initial cost is $8,000 and the appropriate interest rate is 10%.

If we were to use the example above with a 5% interest rate, and a present value of

21. What is the net present value of a project with the following cash flows if the discount rate is 15 percent?

11. (Q. 15 in B) What is the minimum number of years that an investment costing

When considering potential investments it is important to know the present value of the investment so the firm knows how much to invest in order to reach a predetermined profit. The first investment opportunity involves an eight point five percent return rate over six years with a predetermined payout of twenty four thousand dollars. The initial investment amount must be determined. In order to do so, the present value will need to be calculated. This is done by using the present value equation, future value/ (1+R)^n. When calculated the company should initially invest fourteen thousand seven hundred and eleven dollars. This initial investment predicts a return on investment of twenty four thousand

Introduction The purpose of this analysis is to make a determination about a project that the PowerCo is considering. The project runs for twelve years. The discount rate is 8%. There 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:

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

a) Enter relevant figures into the cash flows worksheet and justify any adjustments to the profit and

Step 1: Determine the free cash flow of the investment Step 2: Compute the WACC Step 3: Compute the value of the investment, including the tax benefit of leverage, by discounting the free cash flow of the investment using the WACC