Consider how Root Valley River Park Lodge could use capital budgeting.pdf

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Consider how Root Valley River Park Lodge could use capital budgeting to decide whether the $11 , 500 , 000 River Park Lodge exparision would (Click the icon to view Present Value of \$1 table) be a good investment Assume Root Valley's managers developed the following estimates concerning the expansion (Click the icon to view Present Value of Ordinary Annuty of Click the icon to view the estimaten.) $1 table.) (CBek the icon to view additional information.) What is the projects NPV (round to nearest dollar)? is the investment attractive? Why or why not? What is the project's NPV (round to nearest dollar)? Is the investment attractive? Why o not? Data table Calculate the net present value of the expansion. (Enter any factor amounts to three decimal place More info Assume that Root Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $750.000 at the end of its ten-year life. They have already calculated the average annual net cash inflow per year to be $2 , 932 , 500 . Present Value of $1 Present Value of Ordinary Annuity of $1.

The document discusses capital budgeting techniques used to evaluate investment projects. It covers net present value (NPV), internal rate of return (IRR), and discounted cash flow analysis. NPV is calculated by taking the present value of future cash inflows and subtracting the present value of cash outflows. IRR is the discount rate at which NPV equals zero. When evaluating projects, firms seek to accept projects with positive NPV or IRR higher than the required rate of return or cost of capital. The examples demonstrate calculating NPV and IRR for sample projects at different discount rates to determine if the projects should be accepted or rejected.

Net Present Value A

Craig Brown

The document provides an explanation of net present value (NPV) calculations for project managers. It defines NPV as discounting all cash flows from a project back to their present value. Project managers use NPV to evaluate the value of projects, make investment decisions by comparing NPV across alternatives, and include NPV calculations in key project documents like business cases and plans. The document uses examples and explanations to demonstrate how to perform NPV calculations in Excel and interpret the results.

June Investor Presentation

Devon Energy Corporation

Chap007

Hang Dang

Discounted cash flow techniques are used to evaluate investment projects by estimating relevant cash flows over time and discounting them to calculate net present value (NPV). NPV is the primary criterion for accepting or rejecting projects and considers the timing of all cash flows. When capital is limited, mutually exclusive projects must be ranked according to NPV to allocate funds to the most valuable opportunities. Accurately determining relevant cash flows requires understanding how items like depreciation, working capital, taxes, and capacity utilization affect cash flows over time.

JP Morgan Energy Conference

Devon Energy Corporation

This document summarizes Devon Energy's presentation at the J.P.Morgan Energy Equity Conference on June 26, 2017. Devon has a premier portfolio of assets focused on the STACK and Delaware Basin plays, which provide multi-decade growth potential through large drilling inventories. Devon is accelerating its capital investment and rig activity to rapidly expand its high-margin production while maintaining a strong financial position and investment-grade credit ratings. The company is focused on operational excellence and technological innovation to improve capital efficiency and well productivity.

What Are NPV and IRR © 2021 Walden University, LLC. 1 .docx

troutmanboris

What Are NPV and IRR? © 2021 Walden University, LLC. 1 What Are NPV and IRR? Program Transcript [MUSIC PLAYING] NARRATOR: The language of business is accounting. It can help you know how to move assets, when is a good time to invest in a project, and more importantly, when the time is not right. In many organizations, the accounting department is responsible for assembling their reports. However, a manager will be tasked with understanding the information gathered in those reports and making decisions based on that information. It is crucial that you have a solid understanding of accounting terms and concepts, so you can communicate with the financial team effectively. When an organization is looking to invest in a project, leadership needs to know the project's profitability potential. This is measured with net present value, or NPV, and the internal rate of return, or IRR. While both of these calculations are used to assess profitability, they express this information in different ways. Let's examine net present value, or NPV. Its formula provides a calculation of how much an investment is worth in today's money by taking into consideration the timeline for the investment. In the formula, we note that NPV equals the net cash inflow over time. Time is represented by t and is divided by the interest or discount rate, or r. The process of calculating NPV requires four elements, all cash inflows, all cash outflows, the discount rate, and the number of periods for t. Once we have that information, we can calculate the present value of each cash flow. Adding the present values or PVs of all inflows and outflows identifies the NPV. Once we know the NPV, we can determine if an investment is worth taking. As a general rule, an investment is acceptable if it has a positive net present value and should be rejected if the NPV is negative. When we calculate the NPV of a project, we must take into consideration the opportunity cost of capital. The amount of money spent on one investment means an organization will not be able to spend that money on other projects. A company may evaluate multiple opportunities based on the NPV and choose the effort that will benefit the organization the most. What Are NPV and IRR? © 2021 Walden University, LLC. 2 For an example of NPV, consider a company building a new state of the art factory for manufacturing an electric vehicle. This innovative factory will save money over the long run by being more energy efficient and producing the existing product for less money. However, it will cost $150 million to build. Each year, the new factory will make $70 million. Let's see if the NPV is positive or negative. In one year, the company will have a cash outflow of 150 million to build the factory. However, in the same year the organization's cash flow will be $70 million, which is discounted by 9% or 0.09 to the power of 1 for the fir.

Making capital investment decisions

Rahmatia Azzindani

The document discusses several capital budgeting techniques: 1) Payback period measures the number of years to recover the initial investment. 2) Discounted payback period applies a discount rate to cash flows. 3) Net present value discounts future cash flows to determine if the present value exceeds the initial cost. 4) Internal rate of return is the discount rate that makes the NPV equal to zero. 5) Modified internal rate of return considers the cost of reinvested cash flows.

BackgroundAnne Schippel, business banker, is analyzing Dry Supply.pdf

pearlcoburnsanche303

Background: Anne Schippel, business banker, is analyzing Dry Supply\'s financial statements. When calclating ratios, many commercial lenders use a ratio summary. Figure 8.5 summarizes the key ratios as they might appear on her spreadsheet. In reviewing the Ratio Summary and Comparative Data for Dry Supply for 12/31/20xx through 12/31/20xz, Anne Schippel has developed some questions and observations regarding the ratios. It is now your turn to do the same. Figure 8.5 Ratio Summary: Dry Supply 12/31/20xx 12/31/20xy 12/31/20xz Liquidity Current Ratio Quick Ratio Working Capital 1.3x 0.8x $47,000 1.5x 1.0x $66,000 1.5x 1.0x $92,000 Leverage Debt to net worth Tangible leverage Tangible effective leverage 3.3x 3.3x 1.3x 2.7x 2.7x 1.0x 1.9x 1.9x 0.7x Profitability Gross profit margin Operating profit margin Pretax profit margin Net Profit margin Return-on-assets Return-on-equity 27.9% 2.3% 2.2% 1.0% 8.2% 35.1% 28.8% 3.0% 2.8% 1.5% 10.0% 36.6% 31.3% 5.0% 4.4% 2.5% 14.8% 42.6% Efficiency Accounts receivable turnover Inventory turnover Accounts payable turnover Sales to total assets 44.5d 41.3d 17.9d 3.4x 44.0d 39.4d 17.9d 3.4x 44.5d 38.8d 17.9d 3.4x Coverage Tradition cash flow coverage Interest Coverage Fixed charge coverage Dividend payout ratio n/a 4.3x 4.5x 0.0% n/a 4.7x 4.7x 0.0% n/a 4.6x 4.3x 0.0% Figure 8.6 Wholesale Dry-Cleaning Equipment Industry Quartiles 20xz Ration Higher Median Lower Current Quick Tangible Leverage Pretax profit margin Return-on-assets Interest coverage 2.4x 1.2x 0.9x n/a 10.7x 5.5x 1.5x 0.8x 2.5x 2.1x 3.2x 2.1x 1.2x 0.5x 5.1x n/a (0.3x) 1.0x Part 1 For each of the ratios listed below, perform your own ratio analysis by stating your observation and develop any necessary questions you would ask Dry Supply to complete your analysis. A. Liquidity Ratios B. Financial Leverage Ratios C. Profitability Ratios D. Efficiency Ratios E. Coverage Ratios Part 2 Using the commercial lending decision tree, Schippel deteremined that Dry Supply, as a wholesaler, would likely show certain financial characteristics when she began to analyze the financial statements. What are some examples of these characteristics within the ratios for 20xx through 20 xz? Figure 8.5 Ratio Summary: Dry Supply 12/31/20xx 12/31/20xy 12/31/20xz Liquidity Current Ratio Quick Ratio Working Capital 1.3x 0.8x $47,000 1.5x 1.0x $66,000 1.5x 1.0x $92,000 Leverage Debt to net worth Tangible leverage Tangible effective leverage 3.3x 3.3x 1.3x 2.7x 2.7x 1.0x 1.9x 1.9x 0.7x Profitability Gross profit margin Operating profit margin Pretax profit margin Net Profit margin Return-on-assets Return-on-equity 27.9% 2.3% 2.2% 1.0% 8.2% 35.1% 28.8% 3.0% 2.8% 1.5% 10.0% 36.6% 31.3% 5.0% 4.4% 2.5% 14.8% 42.6% Efficiency Accounts receivable turnover Inventory turnover Accounts payable turnover Sales to total assets 44.5d 41.3d 17.9d 3.4x 44.0d 39.4d 17.9d 3.4x 44.5d 38.8d 17.9d 3.4x Coverage Tradition cash flow coverage Interest Coverage Fixed charge coverage Dividend payout ratio n/.

14.6 The director of capital budgeting for Big Sky Health Systems Inc. has estimated the following cash flows in thousands of dollars for a proposed new service: Year Expected Net Cash Flow 0 ($100) 1 $70 2 $50 3 $20 The project’s cost of capital is 10%. a. What is the project’s payback period? b. What is the project’s NPV? c. What is the project’s IRR? d. What is the project’s MIRR? 14.5. Assume that you are the chief financial officer at Porter Memorial Hospital. The CEO has asked you to analyze two proposed capital investments – Project X and Project Y. Each project requires a net investment outlay of $10,000 and the cost of capital for each project is 12%. The project’s expected net cash flows are as follows: Year Project X Project Y 0 ($10,000) ($10,000) 1 $6,500 $3,000 2 $3,000 $3,000 3 $3,000 $3,000 4 $1,000 $3,000 a. Calculate each project’s payback period? b. Calculate net present value (NPV)? c. Calculate internal rate of return (IRR)? d. Which project (or projects is financially acceptable? e. Explain your answer. Can these calculation be put on an excel spreadsheet? I need this by 5:00pm Anchorage, Alaska time. Is this possible??? .

Farm Investment Analysis

Paul Dietmann

This presentation helps farmers learn how to make better capital investment decisions by taking into account the time value of money. It explains how to calculate the Net Present Value (NPV) of a stream of cash flows over time, and how to determine the Internal Rate of Return (IRR) from a given investment. If we know the cash required upfront, an estimate of the annual cash flow resulting from the investment, and the remaining value of the investment at a given time in the future, we can calculate the IRR. The presentation includes several "real world" farm examples.

ChapterTool KitChapter 10112018 The Basics of Capital Budgeting

JinElias52

- The document discusses various capital budgeting techniques for evaluating projects, including net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), profitability index (PI), and payback period. - It provides examples of calculating each measure for Projects S and L, and discusses situations where conflicts can occur between methods when ranking mutually exclusive projects. - The modified internal rate of return (MIRR) discounts negative cash flows and compounds positive cash flows to determine the rate that sets the present value and terminal value equal.

Capital budgeting

shagun jain

DIS Initiation 2015

Laurie Logsdon, CFA

JBL Advisors initiates coverage on The Walt Disney Company (DIS) with an Outperform rating and $124 price target. Key points: - Disney has a portfolio of uniquely profitable brands and franchises that make it a core holding for growth investors. - Theme parks are benefiting from economic recovery and profitable expansion that will boost operating margins. - ESPN and Disney's cable networks will continue to drive strong earnings growth over the next two years. - Acquisitions of Lucasfilm and Marvel enhance Disney's creative resources across its businesses. - The analyst forecasts double-digit earnings growth from 2015-2017 driven by contributions from most business segments.

Understanding Capitalization Rates or Cap Rates

Ploutus Advisors

Savi chapter8

Mohamed Abada

The document discusses financial evaluation methods for analyzing decision alternatives. It defines key terms like investment costs, cost of capital, discounted cash flow analysis, and presents examples. The objectives of financial evaluation are to array and quantify expected results by comparing investment costs to financial benefits. Common metrics used are net present value, benefit-cost ratio, payback period, and internal rate of return.

Chapter 7 an introduction to risk and return

Chang Keng Kai Kent

The document discusses the concepts of realized return, expected return, risk, and the efficient market hypothesis. It provides examples of calculating realized returns from investments in stocks and defines expected return as the average of possible future returns weighted by their probabilities. Risk is measured using variance and standard deviation, with higher values indicating greater risk. The efficient market hypothesis suggests that market prices reflect all available information.

Brad Simon - Finance Lecture - Project Valuation

bradhapa

This lecture discusses project valuation and capital budgeting. It introduces estimating a company's weighted average cost of capital (WACC) as the hurdle rate for projects. It also covers estimating incremental free cash flows from projects and using time-weighted tools like net present value (NPV) and internal rate of return (IRR) to evaluate whether projects will create or destroy shareholder value based on exceeding the WACC. The key steps are determining the WACC, estimating cash flows, and using tools like NPV and IRR to analyze project value.

Project Valuation Lecture

bradhapa

Discounted measures

Huma Ilyas

The document discusses several discounted measures used to evaluate project worth: net present value (NPV), net benefit investment ratio (NBIR), benefit-cost ratio (BCR), and internal rate of return (IRR). It provides the formulas and decision rules for each measure. It notes that while NPV, NBIR, BCR, and IRR are commonly used, IRR can be unreliable in situations with non-conventional cash flows or mutually exclusive projects, and that NPV should be used to resolve conflicts between decision rules.

Internal Rate of Return

Hamza saeed Khan

Capital budgeting

Michael Alonzo

This document discusses various capital budgeting decision rules for evaluating investment projects, including net present value (NPV), internal rate of return (IRR), payback period, and profitability index. It explains that NPV compares the present value of a project's cash inflows to its cost to determine if it increases firm value. IRR is the discount rate that results in an NPV of zero. Payback period is the number of years to recover the initial investment. The profitability index shows the present value of benefits per dollar of cost. Projects with positive NPV, IRR exceeding the cost of capital, payback periods under the maximum, and profitability indexes over one should be accepted.

Discounted cash flow applications

Yinka Daramola

This document discusses key concepts in discounted cash flow analysis including net present value (NPV) and internal rate of return (IRR). It provides examples of how to calculate NPV and IRR for investment projects and explains how to use NPV and IRR to evaluate whether projects will benefit shareholders. It also discusses limitations of IRR for ranking mutually exclusive projects and introduces the concept of portfolio return measurement using holding period return and money-weighted rate of return.

The driving force behind profitability at Wells Fargo, Citi, and B of A

Jay Jenkins

Wells Fargo has significantly outperformed Bank of America and Citigroup in terms of profitability metrics like return on equity and return on assets. Wells Fargo's higher profitability is driven by better profit margins and asset utilization compared to its competitors. Specifically, Wells Fargo has a net interest margin around 100 basis points higher and an efficiency ratio around 20 percentage points lower, indicating it is more effective at generating interest income and controlling non-interest expenses. While Citigroup has also outperformed Bank of America due to lower non-interest expenses as evidenced by a better efficiency ratio.

FIN534 Week 6 Scenario Script How to use the Different Capital Bu.docx

mydrynan

FIN534 Week 6 Scenario Script: How to use the Different Capital Budgeting Methods, and Identifying Relevant Cash Flows Slide # Scene/Interaction Narration Slide 1 Intro Slide Slide 2 Scene 2 · In Don’s office · Maybe Fitness Olympic banner · Situation room · End of scene Don: Hi Linda, how was your workout? I knew I would see you exercising before work. Linda: That is right Don. Our annual Fitness Olympics challenge is coming up and I want to be in shape for it. Don: I forgot about the company Fitness Olympics. Linda: Well, I did not forget. Last year our department just missed out on the top honors. This year we are planning on being the winning department. I may even try to recruit our intern! Don: Great attitude, Linda. Don: Before the Fitness Olympics, we still have a lot of work to do concerning this expansion project and whether or not we should go with it. Things are starting to move quickly. Recently, I heard from Joe and he wants us to do some capital budgeting analyses on the project. This analysis may be our make or break analysis for the project so we really need to be detailed. Linda: Okay Don. The intern and I are right on it. I plan on meeting the intern in the “Situation Room”. We dubbed the conference room that name as we are constantly making informed decisions. Slide 3 Scene 3 · Linda in conference room · · Go to next slide Linda: We have our hands full. The project is getting close to decision making time. Joe and Don want us to analyze the proposed expansion project from a capital budgeting standpoint. Currently, we have completed many internal analyses on TFC. Now, we must look at the viability of the expansion project. Capital budgeting does just that. At the end of it, we should have a better idea of what our recommendation would be. Linda: Capital budgeting can be done whenever there is an initiative to invest in assets for the long term. Our project is doing just that. We want to be confident in our decision as this project is for the long term and is costly. Don is going to be joining us with the expected cost of the project. Slide 4 Scene 4 · Don in conference room with papers in hand? · Show on the papers - seven hundred fifty million dollars · Go to next slide Don: Hello all. With this expansion project we will double in asset size. But it comes with a price. The Accounting Department told us that the projected price to expand out West is seven hundred fifty million dollars. I also have the projected cash flow numbers. Now, I need the both of you to determine if we should proceed with the expansion. To do so you will need to use many capital budgeting techniques to arrive at a highly confident decision. Good luck! The faith of this expansion and the future success of TFC depend on your analysis. Linda: Don, the Intern and I will begin working on this now! Slide 5 Scene 5 · Linda In conference room (Don not in room) · Net Present Value · WACC =10.92% · G ...

FIN534 Week 6 Scenario Script How to use the Different Capital Bu.docx

ssuser454af01

Capital budgeting

bradhapa

Companies use capital budgeting tools to evaluate long-term investment projects. The document discusses several tools: net present value (NPV) calculates the present value of cash flows to determine if a project is worth more today; internal rate of return (IRR) finds the discount rate that produces an NPV of zero; modified IRR (MIRR) adjusts for more realistic reinvestment assumptions; profitability index (PI) measures risk-adjusted return; and payback period finds how long until the initial investment is recouped. No single tool is perfect, so analysts typically use a combination for capital budgeting decisions.

Ch12 cost

Mahii

The document discusses various capital budgeting techniques used to evaluate investment projects, including: 1) The cash payback period method which calculates the years to recover initial costs from annual cash flows. 2) The net present value method which discounts future cash flows to determine if a project's present value exceeds costs. 3) The internal rate of return method which calculates the discount rate that sets a project's present value of cash flows equal to its costs. 4) The annual rate of return and profitability index methods which evaluate profitability as a percentage of investment size. Post-audits of actual results are recommended to improve future investment analyses.

Planning beyond 2020 - Russell Investments

netwealthInvest

Consider the following bonds Which of the bonds A to D is most sensiti.pdf

Consider how Root Valley River Park Lodge could use capital budgeting.pdf

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