2. How should a company prioritize all of its capital project opportunities? In responding invoke the various methodologies learned this week and how to use them for ranking projects. At least 400 words
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- This homework submission should include all calculations for part (a), completed on the designated tab of the Homework Student Workbook, and a document explaining the implications of your findings for the business or business transaction. After reading this week’s resources, respond to the following:You are a financial analyst for the Brittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments: Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12%. The projects' expected net cash flows are shown in the table below. Expected Net Cash Flows Year Project X Project Y 0 – $10,000 – $10,000 1 6,500 3,500 2 3,000 3,500 3 3,000 3,500 4 1,000 3,500 Use the Workbook to calculate each project's net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI). Which project or projects should…1. Why does WACC increase and IRR decrease as the capital budget increases? Are there any steps management can take to reverse these trends? 2. How should a company prioritize all of its capital project opportunities? In responding invoke the various methodologies learned this week and how to use them for ranking projects.You are chairperson of the investment committee at your firm. Five projects have been submitted to your committee for approval this month. The investment required and the project profitability index for each of these projects are presented in the following table: Project Investment PI A $20,400 2.500 B 51,000 2.000 C 71,400 1.750 D 10,200 1.000 E 81,600 0.800 If you have $510,000 available for investments, which of these projects would you approve? Assume that you do not have to worry about having enough resources for future investments when making this decision. Definitely Accept: - Projects A,B and E - Porjects C,D, and E - Projects B, C, and E - Projects A, B, and C - Projects A, D, and E - Projects A, B, and D
- The company is in search of resources for a new investment of TL 3,000,000. As a financial manager,a) Find the current weighted average cost of capital according to the resource distribution below.b) Discuss, what kind of financing strategy would you propose for the investment project in question.Andrew Oxnard, chief financial officer, has been asked by Harry Pendel, chief executive officer and co-founder of Pendel & Braithwaite, Ltd. (P&B), to analyze two capital investment projects (projects A and B), which are expected to generate the following profit (p)streams: Profit Streams for Projects A and B period ?? ($) ?? ($) 1 100,000 350,000 2 200,000 300,000 3 250,000 200,000 4 300,000 100,000 5 325,000 100,000 Total 1,175,000 1,050,000 Profits are realized at the end of each period. Assuming that P&B is a profit maximizer if the discount rate for both projects is 12%, which of the two projects should be adopted?The company is in search of resources for a new investment of TL 3,000,000. As a financial manager, a) What kind of financing strategy would you suggest for the investment project in question?
- The company is in search of resources for a new investment of TL 3,000,000. As a financial manager, a) Find the current weighted average cost of capital according to the resource distribution below. b) What kind of financing strategy would you suggest for the investment project in question?Explain to boards members what is meant by capital budgeting and elaborate on five reasons why capital budgeting is of great importance to Bella company Ltd?Graham, Harvey, and Puri (2015) conducted a survey on how financial executives (i.e., 1,000 CEOs and CFOs) around the world make decisions about capital allocation and how they delegate capital to particular projects. They find that over nearly 79% of CEOs make investment decisions based on a project's NPV and about 66% state that cash flow timing is an important consideration that they evaluate when making capital allocation decisions. These findings pair nicely with the material that we are covering this week, which include understanding valuation techniques such as the calculation of the Net Present Value (NPV), Internal Rate of Return (IRR), Payback, and Profitability Index for a particular project. However, the results of the survey also indicate that managerial reputation and rank of the person that is responsible for the project are also important considerations that CEOs and CFOs take into consideration when making capital allocation decisions. The questions that you should…
- Suppose you are the financial manager of a firm considering the following five projects. Show formulas and work, without the use of excel or a financial calculator. Project A Project B Project C Project D Project E Initial Investment -$10,000 -$15,000 -$14,000 -$6,000 -$1,500 Year 1 $5,000 $5,000 $6,000 $4,000 $1,000 Year 2 $4,000 $5,000 $4,000 $2,000 $250 Year 3 $2,000 $5,000 $3,500 $2,000 $100 Year 4 $1,000 $5,000 $2,500 $2,000 $100 Year 5 $5,000 $2,000 $100 Year 6 $2,000 $100 Calculate the Payback Period for each project. Calculate the NPV for each project, assuming a discount rate of 11%. Calculate the IRR for each project. Which projects should the firm implement based on your analysis If the projects are mutually exclusive? What if they are independent? Write an email to your CFO explaining your rationale proving the choices based on the considerations…Suppose you are the financial manager of a firm considering the following five projects. Show formulas and work, without the use of excel or a financial calculator. Project A Project B Project C Project D Project E Initial Investment -$10,000 -$15,000 -$14,000 -$6,000 -$1,500 Year 1 $5,000 $5,000 $6,000 $4,000 $1,000 Year 2 $4,000 $5,000 $4,000 $2,000 $250 Year 3 $2,000 $5,000 $3,500 $2,000 $100 Year 4 $1,000 $5,000 $2,500 $2,000 $100 Year 5 $5,000 $2,000 $100 Year 6 $2,000 $100 Calculate the NPV for each project, assuming a discount rate of 11%.Company A has provided figures for two investment projects, only one of which may be chosen. These are the calculations based on the figures: Payback Period The Accounting Rate of Return / Return on Capital Employed Net Present Value Project A 2 years 4 months 27.08% £63,705 Project B 2 years 7 months 39.47% £74.971 Analyse and provide recommendations as to what project needs to be chosen based on the calculations above.