This document discusses rate of return (ROR) and break-even rate (B/R) and provides examples of calculating ROR for investment projects. It begins with examples of calculating ROR for art investments and investments in Walmart stock. It then discusses the concept of minimum attractive rate of return (MARR) and provides examples of calculating internal rate of return (IRR). The document discusses methods for calculating IRR including direct calculation, trial and error, and graphical methods. It addresses issues that can arise with projects that have multiple rates of return and provides rules for evaluating mutually exclusive projects and incremental investments.
This chapter provides multiple choice questions and solutions related to franchise accounting. It addresses topics like recognizing revenue from initial franchise fees, calculating deferred revenue and costs, and determining earned revenue over time. The solutions show the accounting entries for various scenarios involving franchise agreements and calculating related revenues and expenses.
1) The joint venture purchased computer equipment for 105,000 using contributions from Ella (60,000) and Fabia (45,000).
2) Purchases and supplies cost 82,000 which was contributed by Diaz.
3) Expenses of 39,000 were paid using Diaz's contribution.
4) Sales generated 150,000 which was received in cash.
5) Expenses of 30,000 were paid in cash.
6) Ella withdrew her remaining contribution of 20,000 in merchandise inventory.
7) Fabia withdrew her remaining contribution of 10,000 in cash.
The document provides multiple choice answers and solutions to problems related to corporate liquidation. It includes:
1) Multiple choice questions and answers related to estimating amounts recovered by different classes of creditors in a bankruptcy proceeding.
2) Detailed solutions to sample liquidation problems showing calculations to estimate amounts recovered by secured, priority, and unsecured creditors.
3) Statements of affairs, realization and liquidation, and balance sheets to illustrate the accounting entries for a company going through bankruptcy liquidation.
The document provides relevant information and step-by-step workings for understanding corporate bankruptcy proceedings and estimating creditor recoveries.
The document provides multiple choice answers and solutions to problems related to reorganization and troubled debt restructuring. It includes answers to questions about accounting for gains and losses from debt discharge, fresh start accounting adjustments, and journal entries to record debt settlements as part of a reorganization.
1) The document provides examples and solutions to multiple choice questions about changes in partnership ownership, including admissions, retirements, and dissolutions.
2) It includes calculations of goodwill, capital account balances, cash distributions, and partnership interests in various scenarios.
3) The questions and answers cover topics like implied capital value, capital transfers on admission, bonus allocations, and adjusting capital balances.
This document contains multiple choice answers and solutions for questions about accounting for long-term construction contracts. It includes 16 questions with answers that apply the percentage of completion and zero profit methods. Key details provided in the solutions include contract prices, total estimated costs, cost incurred to date, estimated costs to complete, percentages of completion, and gross profits recognized or earned in each period.
This document provides answers to end of chapter questions from chapters 1-3 of a personal finance textbook. The answers cover topics such as calculating rates of return and interest, determining financial ratios like debt ratios and current ratios, preparing personal budgets, and calculating taxable income and tax refund amounts. Formulas and tables from the textbook are referenced in some of the calculations.
1) The document contains 14 multiple choice questions regarding the consolidation of financial statements and accounting for minority interests.
2) The questions cover topics such as calculating minority interest, unrealized gains and losses, and the equity method of accounting for investments in subsidiaries.
3) The correct answer is provided for each question, along with financial information used to arrive at the answer such as income statements, balance sheets, and calculations of adjustments.
This chapter provides multiple choice questions and solutions related to franchise accounting. It addresses topics like recognizing revenue from initial franchise fees, calculating deferred revenue and costs, and determining earned revenue over time. The solutions show the accounting entries for various scenarios involving franchise agreements and calculating related revenues and expenses.
1) The joint venture purchased computer equipment for 105,000 using contributions from Ella (60,000) and Fabia (45,000).
2) Purchases and supplies cost 82,000 which was contributed by Diaz.
3) Expenses of 39,000 were paid using Diaz's contribution.
4) Sales generated 150,000 which was received in cash.
5) Expenses of 30,000 were paid in cash.
6) Ella withdrew her remaining contribution of 20,000 in merchandise inventory.
7) Fabia withdrew her remaining contribution of 10,000 in cash.
The document provides multiple choice answers and solutions to problems related to corporate liquidation. It includes:
1) Multiple choice questions and answers related to estimating amounts recovered by different classes of creditors in a bankruptcy proceeding.
2) Detailed solutions to sample liquidation problems showing calculations to estimate amounts recovered by secured, priority, and unsecured creditors.
3) Statements of affairs, realization and liquidation, and balance sheets to illustrate the accounting entries for a company going through bankruptcy liquidation.
The document provides relevant information and step-by-step workings for understanding corporate bankruptcy proceedings and estimating creditor recoveries.
The document provides multiple choice answers and solutions to problems related to reorganization and troubled debt restructuring. It includes answers to questions about accounting for gains and losses from debt discharge, fresh start accounting adjustments, and journal entries to record debt settlements as part of a reorganization.
1) The document provides examples and solutions to multiple choice questions about changes in partnership ownership, including admissions, retirements, and dissolutions.
2) It includes calculations of goodwill, capital account balances, cash distributions, and partnership interests in various scenarios.
3) The questions and answers cover topics like implied capital value, capital transfers on admission, bonus allocations, and adjusting capital balances.
This document contains multiple choice answers and solutions for questions about accounting for long-term construction contracts. It includes 16 questions with answers that apply the percentage of completion and zero profit methods. Key details provided in the solutions include contract prices, total estimated costs, cost incurred to date, estimated costs to complete, percentages of completion, and gross profits recognized or earned in each period.
This document provides answers to end of chapter questions from chapters 1-3 of a personal finance textbook. The answers cover topics such as calculating rates of return and interest, determining financial ratios like debt ratios and current ratios, preparing personal budgets, and calculating taxable income and tax refund amounts. Formulas and tables from the textbook are referenced in some of the calculations.
1) The document contains 14 multiple choice questions regarding the consolidation of financial statements and accounting for minority interests.
2) The questions cover topics such as calculating minority interest, unrealized gains and losses, and the equity method of accounting for investments in subsidiaries.
3) The correct answer is provided for each question, along with financial information used to arrive at the answer such as income statements, balance sheets, and calculations of adjustments.
1. The gold mine is expected to be exhausted within 20 years. With annual costs of $750,000 and $120/ton, it earns $450/ton and has annual output of 25,000 tons. The property valuation is $53,745,535.
2. The timber land was bought for $8,000,000 and sold for $200,000 after 14 years of $1,400,000 average annual profits. The investment rate is 13.2%.
3. For a company with 4 machines, the total annual straight-line depreciation charge is $49,600 by group depreciation and $47,666.67 by composite depreciation.
This document provides sample questions and answers related to time value of money concepts. It includes multiple choice, true/false, and essay questions covering topics such as future and present value, compound interest, annuities, and bond valuation. The answers provided demonstrate calculations using time value of money formulas and tables to determine amounts such as future values, present values, interest rates, and investment amounts.
The document contains multiple choice and problem questions related to business combinations and accounting for acquisitions.
The first problem involves Big Corporation acquiring the net assets of Small Corporation for $505,000. Big Corporation records the identifiable assets acquired and income from the acquisition of $5,000. Small Corporation records the sale of its net assets for $500,000 and subsequent liquidation.
The second problem involves computing goodwill of $100,000 for an acquisition where the fair value of net assets was $670,000 and acquisition cost was $570,000.
The third problem involves computing goodwill of $65,000 for an acquisition where the fair value of net assets was $500,000 and acquisition
The document contains multiple choice questions and problems related to accounting for not-for-profit organizations. It includes questions about proper accounting treatments for revenues, expenses, contributions and donations. It also includes practice problems demonstrating journal entries for various not-for-profit transactions such as recording patient revenues, donations, and transfers between funds.
Net income from own operations - Patton: P300,000
Unrealized profit in ending inventory of DS (25% of P200,000): P-50,000
Realized income: P250,000
Net loss of Solis: P-150,000
Consolidated net income: P100,000
This chapter provides solutions to multiple choice questions about accounting for installment sales. Question 9-1 is answered by calculating realized gross profit for 2008 as either $675,000 based on the ending installment account receivable balance and gross profit rate, or based on collections and gross profit rate. Question 9-2 is answered by calculating the realized gross profit for 2008 as $61,650 based on deferred gross profit balances from 2006 to 2008.
The document provides solutions to multiple choice and problems related to reorganization and troubled debt restructuring. It includes journal entries for fresh start accounting, computations of gains and losses from debt discharge and restructuring, and an example balance sheet after applying fresh start accounting. Key information includes adjusting assets and liabilities to fair value, recognizing reorganization value in excess of amounts assigned to assets, and eliminating retained earnings deficits.
This document provides the answers and solutions to multiple choice questions about partnership liquidation. It includes examples of calculations for distributing cash and absorbing losses for partnerships being liquidated based on partners' capital balances, loan balances, profit and loss ratios, and priority rules. The examples show the step-by-step workings and distributions to each partner.
Silver Construction Ltd recognizes gross profit of P80,000 in 2013 and P120,000 in 2014 using the percentage-of-completion method based on costs incurred. GPC Ltd recognizes gross profit of P150,000 in 2009 on contract #3814 using the percentage-of-completion method based on costs incurred and estimated costs to complete. Masikap Construction Co recognizes gross profit of P600,000 in 2010 and P840,000 in 2011 on a fixed-price construction contract using the percentage-of-completion method based on percentage of completion and estimated total costs.
1) The document contains multiple choice questions and problems related to accounting for branches.
2) It provides income statements, balance sheets, and journal entries for the home office and branch locations of a company to illustrate the accounting process.
3) The problems demonstrate how to prepare individual financial statements for the home office and branch, combined financial statements, and reconcile the branch and home office accounts.
The document outlines capital budgeting decision criteria such as net present value, internal rate of return, payback period, and profitability index. It provides examples of how to calculate and apply these criteria, including setting up cash flows, computing NPV and IRR, and using pro forma financial statements for project evaluation. The document also discusses key concepts in capital budgeting such as incremental cash flows, multiple rates of return, and mutually exclusive projects.
working capital ch solution financial management ....mohsin mumtazmianmohsinmumtazshb
The document discusses solutions to problems related to working capital and current asset management. It addresses topics such as cash conversion cycle, economic order quantity, accounts receivable management, and cash management techniques. The problems calculate financial metrics and evaluate strategies for reducing costs and improving profitability within the constraints of various assumptions provided in the questions.
1) The document provides multiple choice answers and solutions to questions about distributing partnership profits and calculating average capital amounts.
2) It includes examples of distributing total profits between partners based on profit sharing ratios, interest earned on capital amounts, salaries, and balancing distributions.
3) The questions cover topics like calculating average capital over time, determining bonus amounts, distributing net income between partners.
This document analyzes the costs, benefits, and net present value of a project over 4 years using a 9% discount rate. It finds that the cumulative discounted benefits do not exceed the cumulative discounted costs, resulting in a negative NPV and a payback period longer than 4 years. Therefore, the financial analysis shows this project is not a worthwhile investment and the plan should not be advanced.
This problem involves the allocation of differences arising from the acquisition of a subsidiary at a price different than the fair value of its net assets. The differences are allocated to non-current assets and goodwill/negative goodwill depending on whether the acquisition price is higher or lower than fair value. The allocated differences are then amortized over the useful lives of the assets.
The document contains multiple choice questions and solutions regarding partnerships. It begins with 20 multiple choice questions testing concepts related to partnership formation, capital accounts, and capital contributions. The questions provide scenarios and ask the reader to select the correct answer. This is followed by solutions that show the accounting entries and calculations for each question.
This document contains multiple choice answers and solutions to problems related to partnership dissolution and changes in ownership. It includes 20 multiple choice questions with explanations of the answers. It also includes solutions to 4 word problems involving calculations related to admission of new partners, retirement of old partners, and distributions of capital balances and goodwill.
This document provides an overview of financial analysis for planners and discusses how to conduct a pro forma analysis of development projects. It defines key terms like gross income, effective income, operating expenses, net operating income, debt service coverage ratio, and internal rate of return. It then walks through an example pro forma for a mixed-use development project, showing how to calculate items like income, expenses, debt service, cash flows, debt service coverage ratio, and internal rate of return. The document stresses that financial analysis is important to determine if a project is financially feasible and discusses what to do if a project does not work from a numbers perspective.
1) The branch records various transactions including purchases of equipment, shipments from the home office, sales to customers, and various expenses.
2) The home office records investments in the branch for assets provided and cash transfers.
3) Eliminating entries are made to remove reciprocal accounts and adjust inventory balances between the home office and branch books.
4) The branch prepares closing entries to transfer profit and update balance sheet accounts.
The cash flow statement summarizes the inflows and outflows of cash and cash equivalents over a period of time. It has three sections - operating, investing, and financing activities. The operating section deals with cash from core business operations. The investing section includes cash from the purchase and sale of long-term assets. The financing section includes cash from activities related to changes in a company's capital structure and borrowing arrangements.
This document provides an overview and advice for starting a new company from concept to generating revenue. It discusses forming a founding team, deciding where to locate the business, when to launch, generating buzz, finding early customers, fundraising, hiring considerations, product development processes, pricing strategies, partnerships, and ultimately creating a successful company.
1. The gold mine is expected to be exhausted within 20 years. With annual costs of $750,000 and $120/ton, it earns $450/ton and has annual output of 25,000 tons. The property valuation is $53,745,535.
2. The timber land was bought for $8,000,000 and sold for $200,000 after 14 years of $1,400,000 average annual profits. The investment rate is 13.2%.
3. For a company with 4 machines, the total annual straight-line depreciation charge is $49,600 by group depreciation and $47,666.67 by composite depreciation.
This document provides sample questions and answers related to time value of money concepts. It includes multiple choice, true/false, and essay questions covering topics such as future and present value, compound interest, annuities, and bond valuation. The answers provided demonstrate calculations using time value of money formulas and tables to determine amounts such as future values, present values, interest rates, and investment amounts.
The document contains multiple choice and problem questions related to business combinations and accounting for acquisitions.
The first problem involves Big Corporation acquiring the net assets of Small Corporation for $505,000. Big Corporation records the identifiable assets acquired and income from the acquisition of $5,000. Small Corporation records the sale of its net assets for $500,000 and subsequent liquidation.
The second problem involves computing goodwill of $100,000 for an acquisition where the fair value of net assets was $670,000 and acquisition cost was $570,000.
The third problem involves computing goodwill of $65,000 for an acquisition where the fair value of net assets was $500,000 and acquisition
The document contains multiple choice questions and problems related to accounting for not-for-profit organizations. It includes questions about proper accounting treatments for revenues, expenses, contributions and donations. It also includes practice problems demonstrating journal entries for various not-for-profit transactions such as recording patient revenues, donations, and transfers between funds.
Net income from own operations - Patton: P300,000
Unrealized profit in ending inventory of DS (25% of P200,000): P-50,000
Realized income: P250,000
Net loss of Solis: P-150,000
Consolidated net income: P100,000
This chapter provides solutions to multiple choice questions about accounting for installment sales. Question 9-1 is answered by calculating realized gross profit for 2008 as either $675,000 based on the ending installment account receivable balance and gross profit rate, or based on collections and gross profit rate. Question 9-2 is answered by calculating the realized gross profit for 2008 as $61,650 based on deferred gross profit balances from 2006 to 2008.
The document provides solutions to multiple choice and problems related to reorganization and troubled debt restructuring. It includes journal entries for fresh start accounting, computations of gains and losses from debt discharge and restructuring, and an example balance sheet after applying fresh start accounting. Key information includes adjusting assets and liabilities to fair value, recognizing reorganization value in excess of amounts assigned to assets, and eliminating retained earnings deficits.
This document provides the answers and solutions to multiple choice questions about partnership liquidation. It includes examples of calculations for distributing cash and absorbing losses for partnerships being liquidated based on partners' capital balances, loan balances, profit and loss ratios, and priority rules. The examples show the step-by-step workings and distributions to each partner.
Silver Construction Ltd recognizes gross profit of P80,000 in 2013 and P120,000 in 2014 using the percentage-of-completion method based on costs incurred. GPC Ltd recognizes gross profit of P150,000 in 2009 on contract #3814 using the percentage-of-completion method based on costs incurred and estimated costs to complete. Masikap Construction Co recognizes gross profit of P600,000 in 2010 and P840,000 in 2011 on a fixed-price construction contract using the percentage-of-completion method based on percentage of completion and estimated total costs.
1) The document contains multiple choice questions and problems related to accounting for branches.
2) It provides income statements, balance sheets, and journal entries for the home office and branch locations of a company to illustrate the accounting process.
3) The problems demonstrate how to prepare individual financial statements for the home office and branch, combined financial statements, and reconcile the branch and home office accounts.
The document outlines capital budgeting decision criteria such as net present value, internal rate of return, payback period, and profitability index. It provides examples of how to calculate and apply these criteria, including setting up cash flows, computing NPV and IRR, and using pro forma financial statements for project evaluation. The document also discusses key concepts in capital budgeting such as incremental cash flows, multiple rates of return, and mutually exclusive projects.
working capital ch solution financial management ....mohsin mumtazmianmohsinmumtazshb
The document discusses solutions to problems related to working capital and current asset management. It addresses topics such as cash conversion cycle, economic order quantity, accounts receivable management, and cash management techniques. The problems calculate financial metrics and evaluate strategies for reducing costs and improving profitability within the constraints of various assumptions provided in the questions.
1) The document provides multiple choice answers and solutions to questions about distributing partnership profits and calculating average capital amounts.
2) It includes examples of distributing total profits between partners based on profit sharing ratios, interest earned on capital amounts, salaries, and balancing distributions.
3) The questions cover topics like calculating average capital over time, determining bonus amounts, distributing net income between partners.
This document analyzes the costs, benefits, and net present value of a project over 4 years using a 9% discount rate. It finds that the cumulative discounted benefits do not exceed the cumulative discounted costs, resulting in a negative NPV and a payback period longer than 4 years. Therefore, the financial analysis shows this project is not a worthwhile investment and the plan should not be advanced.
This problem involves the allocation of differences arising from the acquisition of a subsidiary at a price different than the fair value of its net assets. The differences are allocated to non-current assets and goodwill/negative goodwill depending on whether the acquisition price is higher or lower than fair value. The allocated differences are then amortized over the useful lives of the assets.
The document contains multiple choice questions and solutions regarding partnerships. It begins with 20 multiple choice questions testing concepts related to partnership formation, capital accounts, and capital contributions. The questions provide scenarios and ask the reader to select the correct answer. This is followed by solutions that show the accounting entries and calculations for each question.
This document contains multiple choice answers and solutions to problems related to partnership dissolution and changes in ownership. It includes 20 multiple choice questions with explanations of the answers. It also includes solutions to 4 word problems involving calculations related to admission of new partners, retirement of old partners, and distributions of capital balances and goodwill.
This document provides an overview of financial analysis for planners and discusses how to conduct a pro forma analysis of development projects. It defines key terms like gross income, effective income, operating expenses, net operating income, debt service coverage ratio, and internal rate of return. It then walks through an example pro forma for a mixed-use development project, showing how to calculate items like income, expenses, debt service, cash flows, debt service coverage ratio, and internal rate of return. The document stresses that financial analysis is important to determine if a project is financially feasible and discusses what to do if a project does not work from a numbers perspective.
1) The branch records various transactions including purchases of equipment, shipments from the home office, sales to customers, and various expenses.
2) The home office records investments in the branch for assets provided and cash transfers.
3) Eliminating entries are made to remove reciprocal accounts and adjust inventory balances between the home office and branch books.
4) The branch prepares closing entries to transfer profit and update balance sheet accounts.
The cash flow statement summarizes the inflows and outflows of cash and cash equivalents over a period of time. It has three sections - operating, investing, and financing activities. The operating section deals with cash from core business operations. The investing section includes cash from the purchase and sale of long-term assets. The financing section includes cash from activities related to changes in a company's capital structure and borrowing arrangements.
This document provides an overview and advice for starting a new company from concept to generating revenue. It discusses forming a founding team, deciding where to locate the business, when to launch, generating buzz, finding early customers, fundraising, hiring considerations, product development processes, pricing strategies, partnerships, and ultimately creating a successful company.
Simple ideas on Cashflow management for beginnersYC Lim
This document provides an overview of cashflow management and its importance for financial freedom. It discusses budgeting income and expenses, paying oneself first through savings, managing loans and credit cards, and starting the process through reviewing finances, prioritizing spending, and increasing financial knowledge over time. The goal of cashflow management is to live below one's means in order to achieve financial independence and security for retirement as costs rise over the decades.
The document provides information about the State Bank of Pakistan (SBP), which is Pakistan's central bank. SBP has two subsidiaries - SBP Banking Services Corporation and the National Institute of Banking and Finance. SBP-BSC acts as the operational arm of SBP for currency management, inter-bank settlements, and other services. The document then discusses various departments within SBP, including Human Resources, Finance, and others. It provides details on the functions, units, and processes within the HR department such as recruitment, compensation, and training. A SWOT analysis of SBP-BSC is also presented, focusing on its strengths, weaknesses, opportunities, and threats.
Bba 2204 fin mgt week 4 cashflow & financial planningStephen Ong
This document provides an overview of cash flow and financial planning. It discusses key concepts like depreciation, statements of cash flows, operating cash flow, free cash flow, and financial planning processes. The learning goals are to understand tax depreciation, statements of cash flows, and financial planning, including long-term strategic plans and short-term operating plans like cash budgets and pro forma financial statements. Examples are provided to illustrate concepts like depreciation calculations and developing statements of cash flows. Ethics examples consider appropriate CEO compensation and ways accountants could portray favorable earnings.
The document discusses cashflow management and provides an outline of topics to be covered in a cashflow management workshop, including the cash cycle, timing of cash inflows and outflows, budgeting, financing options, managing debtors and creditors, and cashflow improvement strategies. The workshop aims to help organizations better understand and proactively manage their cashflows to support stability and growth.
Business depend on their supply chains to provide necessary products and services. A supply chain consists of all organizations involved in fulfilling customer needs, including manufacturers, suppliers, transporters, warehouses, retailers, and customers. Supply chain management involves coordinating these participants to deliver products to market efficiently and effectively. The goals of supply chain management are to improve customer service, increase internal efficiencies, and boost returns for all members of the supply chain. Key areas of focus include information sharing, production planning, inventory management, facility location selection, and transportation coordination.
This document is a report submitted by Waseem Ahmed Sandeelo for his Business Communication course at Shah Abdul Latif University Khairpur. It discusses the history and functions of the State Bank of Pakistan. The State Bank was established in 1948 and serves as Pakistan's central bank. It is responsible for monetary policy, banking regulation, and other functions like managing currency and the government's finances. The report provides details on the State Bank's departments, leadership structure including the Governor and Central Board of Directors, and its roles in maintaining price stability, conducting monetary policy, and supporting banking and economic development in Pakistan.
AQA AS Business Unit 2 Cash Flow Managementtutor2u
This document discusses managing cash flow, including:
1) A quick quiz on cash flow management topics like which events could lead to problems and ways to improve short-term cash flow.
2) Identifying two ways a business could slow down cash outflows or speed up cash inflows, such as delaying supplier payments, reducing costs, or reducing customer payment periods.
3) Two mini case studies presenting cash flow problems and potential solutions to choose from and justify.
Working Capital Management And Cash Flow Analysis 06.07Ketoki
Working capital management and cash flow analysis are important for business success. Working capital is the time between investing in business assets and receiving payment, and measures current assets versus current liabilities. Managing working capital efficiently balances inflows and outflows to maximize liquidity. Cash flow looks at the timing of money in and out of the business from operations, investing and financing activities. Monitoring cash flows helps ensure solvency and adequate cash levels through analyzing components like receivables, payables and inventory levels.
The document provides tips for small businesses to improve cash flow management. It recommends extending payment terms and improving cash collection. It also suggests analyzing expenditures and forecasting cash flow regularly. Some key tips include keeping only key suppliers, paying suppliers on time, offering discounts for early payment, pursuing outstanding debts weekly, and ending relationships with customers with poor payment histories. The document stresses the importance of forecasting cash flow at least weekly and reviewing forecasts against bank statements to improve over time.
This document provides a concise guide to cash flow management for small businesses. It discusses the importance of cash flow and outlines key principles for managing cash flow, including actively monitoring cash inflows and outflows. The document also covers accelerating cash inflows through streamlining processes like customer ordering, credit decisions, fulfillment and invoicing. It emphasizes the importance of establishing a clear credit policy and checking customer creditworthiness to minimize risks.
This document discusses cash flow management for businesses. It provides an overview of basic financial reports like the balance sheet, income statement, and statement of cash flows. It emphasizes the importance of cash flow planning and analysis, as many small businesses fail due to cash flow issues rather than lack of profitability. The key aspects of cash management covered are forecasting cash receipts and disbursements to create a cash budget, managing accounts receivable, accounts payable, and inventory levels to optimize cash flow. Strategies are provided for accelerating cash collection, negotiating payment terms, and avoiding cash shortages.
This document discusses supply chain management and key concepts related to SCM. It provides examples of how Dell optimized its supply chain to reduce inventory levels. The document also summarizes the basics of SCM including the key links in the supply chain and how information technology can help manage SCM more effectively through increased visibility, responsiveness to consumer demands, and competitive advantages.
Cash Flow Statement is a basic concept which every young manager must learn. This presentation excellently explains what you should know about this topic!
This document discusses the time value of money concept. It defines key terms like present value, future value, interest rates, and annuities. It provides formulas to calculate future value, present value, and annuities. Examples are given to demonstrate calculating simple and compound interest, present and future value of cash flows over single and multiple periods, and ordinary and due annuities. The document also covers topics like finding interest rates, time periods, and loan amortization.
Capital Budgeting And Investment Decisions In Financial Management 11 Nov.Dr. Trilok Kumar Jain
The document discusses capital budgeting and investment decisions. It provides examples of calculating net present value (NPV), internal rate of return (IRR), payback period, and modified internal rate of return (MIRR) for projects. It also discusses types of capital budgeting decisions, criteria for evaluation, and traditional vs discounted cash flow methods.
The document contains examples and explanations of various capital budgeting techniques including payback period, discounted payback, net present value, internal rate of return, and profitability index. It analyzes two hypothetical investment projects (A and B) using each method and determines that while some criteria favor project A and others favor project B, the net present value method is preferred and indicates that project A should be accepted.
This document discusses investment theories and concepts. It defines investment as expenditures on capital goods that can be used for future production. There are two main types of investment: real investment in durable capital goods used for production, and financial investment in securities. The key factors determining investment levels are expected profits, interest rates, economic forecasts, technology advances, and income levels. Investment projects are evaluated using criteria like payback period, benefit-cost ratio, net present value, and internal rate of return. Discounted cash flow techniques are used to determine if a project's future cash flows justify the initial capital costs.
This document discusses investment theories and concepts. It defines investment as expenditures on capital goods that can be used for future production. There are two main types of investment: real investment in durable capital goods used for production, and financial investment in securities. The key factors determining investment levels are expected profits, interest rates, economic forecasts, technology advances, and income levels. Investment projects are evaluated using criteria like payback period, benefit-cost ratio, net present value, and internal rate of return. Discounted cash flow techniques are used to determine if a project's future cash flows justify the initial capital costs.
This document provides sample questions, answers, and examples related to capital budgeting techniques. It includes calculations of net present value and internal rate of return for projects with cash inflows and outflows occurring over several years. It also discusses incorporating risk into capital budgeting analysis using methods like discount rates and coefficient of variation.
CFA LEVEL 1- Time Value of Money_compressed (1).pdfAlison Tutors
This document focuses on End of Chapter questions and commonly asked questions under Quantitative methods (Time Value of Money ) . The mainly asked questions include :
-calculation and interpretation of Future Value and Present Value of a single sum of money , an ordinary annuity, annuity due, a perpetuity (PV only) and a series of unequal cash flows.
-demonstration of the use of timelines in modeling and solving time value of money
This is a very interesting topic!
Rate of Return and Incremental Analysis.pptAthar739197
- The document discusses incremental analysis for competing projects when capital is limited.
- It provides an example where Project A requires $50,000 with an IRR of 35% while Project B requires $85,000 with an IRR of 29%.
- Incremental analysis involves calculating the cash flows from investing the difference between the projects' costs and determining if the incremental IRR is above the minimum acceptable rate of return. If so, the project with the higher investment (Project B in this case) should be selected.
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.
The document discusses methods for evaluating capital investment decisions in healthcare organizations. It introduces the payback period method, which calculates the number of years to recover an initial investment without considering the time value of money. The net present value (NPV) method is presented, which discounts future cash flows to account for the cost of capital and calculates the difference between the initial investment and discounted cash flows. The internal rate of return (IRR) method is also covered, which is the discount rate that makes the NPV equal to zero. Decision rules for accepting or rejecting projects using NPV and IRR are provided.
The document discusses capital budgeting and investment project evaluation. It states that when projects deliver discounted cash flows exceeding investment costs, shareholder value increases through stock price appreciation. Several capital budgeting techniques are described like net present value, internal rate of return, payback period. Risk analysis methods in capital budgeting are also covered like sensitivity analysis, scenario analysis and Monte Carlo simulation to incorporate risk.
The document discusses capital budgeting and investment project evaluation. It states that when projects are undertaken that are expected to generate discounted cash flows exceeding the initial investment, it increases the economic value of the company and benefits shareholders through stock price appreciation. It also briefly describes several capital budgeting techniques used to evaluate projects, such as payback period, net present value, internal rate of return, and discounted payback period.
The document discusses capital budgeting and investment project evaluation. It states that when projects deliver discounted cash flows exceeding investment costs, shareholder value increases through stock price appreciation. Several capital budgeting techniques are described like net present value, internal rate of return, payback period. Risk analysis methods in capital budgeting like sensitivity analysis and scenario analysis are also covered.
From the given information, calculate the profitability index of the project:
- Initial investment required is Rs. 50 lacs
- Present value of future cash flows are:
Year 1: Rs. 9,09,000
Year 2: Rs. 9,91,680
Year 3: Rs. 11,25,950
Year 4: Rs. 12,29,460
Year 5: Rs. 15,52,250
Total present value of future cash flows = Rs. 58,09,340
Profitability Index = Present value of future cash flows / Initial investment
= Rs. 58,09,340 / Rs. 50,00,000
= 1.1618
Therefore, the
The document provides financial projections for a proposed amusement park over 5 years, including revenue from entrance fees, leasing space, and sponsorships. Operating costs such as employee salaries, utilities, and rent are also projected. The startup requires an $8 billion investment and loan. Key financial metrics like net revenue, operating costs, and loan details are presented for capital budgeting analysis.
The document summarizes steps for capital budgeting analysis. It discusses evaluating cash flows, including initial outlay, annual cash flows over the project life, and terminal cash flow. It then provides an example of applying the steps to analyze a potential $127,000 machine purchase. The analysis estimates the net initial outlay, calculates annual cash flows and terminal cash flow, and determines the project NPV is $27,721, so the project would be accepted. It also briefly discusses capital rationing when budget is limited and problems that can arise with ranking projects solely by IRR or PI.
This document discusses key financial concepts used to evaluate business investment decisions, including cash flow, net present value (NPV), internal rate of return (IRR), payback period, and discount rate. It provides examples of how to calculate NPV, IRR, payback period using cash flows with different time periods and discount rates. The document also presents a sample exercise calculating these metrics to analyze the potential costs savings and profitability of a $10 million investment proposal aimed at reducing water and energy consumption for a food company.
This document discusses capital expenditure and capital budgeting. It defines capital expenditure as long-term investment that increases revenues or decreases costs over time. Examples include purchasing fixed assets, expanding existing assets, and replacing assets. Capital budgeting involves planning and evaluating capital expenditures and returns over future periods. The document then discusses various capital budgeting techniques like payback period, accounting rate of return, net present value, and internal rate of return to evaluate projects. It provides examples of calculating each method and their respective merits and demerits.
The document discusses various investment criteria for capital budgeting decisions, with a focus on net present value (NPV). It defines NPV as the difference between the present value of a project's expected future cash flows and the initial investment cost. The document also discusses other criteria like payback period, accounting rate of return, and internal rate of return. It provides examples to demonstrate how to calculate NPV and compares it to other criteria. It emphasizes that NPV is preferable because it considers the time value of money and risk, and indicates whether a project will increase firm value.
This presentation by Juraj Čorba, Chair of OECD Working Party on Artificial Intelligence Governance (AIGO), was made during the discussion “Artificial Intelligence, Data and Competition” held at the 143rd meeting of the OECD Competition Committee on 12 June 2024. More papers and presentations on the topic can be found at oe.cd/aicomp.
This presentation was uploaded with the author’s consent.
This presentation by Yong Lim, Professor of Economic Law at Seoul National University School of Law, was made during the discussion “Artificial Intelligence, Data and Competition” held at the 143rd meeting of the OECD Competition Committee on 12 June 2024. More papers and presentations on the topic can be found at oe.cd/aicomp.
This presentation was uploaded with the author’s consent.
This presentation by Professor Alex Robson, Deputy Chair of Australia’s Productivity Commission, was made during the discussion “Competition and Regulation in Professions and Occupations” held at the 77th meeting of the OECD Working Party No. 2 on Competition and Regulation on 10 June 2024. More papers and presentations on the topic can be found at oe.cd/crps.
This presentation was uploaded with the author’s consent.
This presentation by Thibault Schrepel, Associate Professor of Law at Vrije Universiteit Amsterdam University, was made during the discussion “Artificial Intelligence, Data and Competition” held at the 143rd meeting of the OECD Competition Committee on 12 June 2024. More papers and presentations on the topic can be found at oe.cd/aicomp.
This presentation was uploaded with the author’s consent.
This presentation by OECD, OECD Secretariat, was made during the discussion “Competition and Regulation in Professions and Occupations” held at the 77th meeting of the OECD Working Party No. 2 on Competition and Regulation on 10 June 2024. More papers and presentations on the topic can be found at oe.cd/crps.
This presentation was uploaded with the author’s consent.
Mastering the Concepts Tested in the Databricks Certified Data Engineer Assoc...SkillCertProExams
• For a full set of 760+ questions. Go to
https://skillcertpro.com/product/databricks-certified-data-engineer-associate-exam-questions/
• SkillCertPro offers detailed explanations to each question which helps to understand the concepts better.
• It is recommended to score above 85% in SkillCertPro exams before attempting a real exam.
• SkillCertPro updates exam questions every 2 weeks.
• You will get life time access and life time free updates
• SkillCertPro assures 100% pass guarantee in first attempt.
This presentation by OECD, OECD Secretariat, was made during the discussion “Artificial Intelligence, Data and Competition” held at the 143rd meeting of the OECD Competition Committee on 12 June 2024. More papers and presentations on the topic can be found at oe.cd/aicomp.
This presentation was uploaded with the author’s consent.
Carrer goals.pptx and their importance in real lifeartemacademy2
Career goals serve as a roadmap for individuals, guiding them toward achieving long-term professional aspirations and personal fulfillment. Establishing clear career goals enables professionals to focus their efforts on developing specific skills, gaining relevant experience, and making strategic decisions that align with their desired career trajectory. By setting both short-term and long-term objectives, individuals can systematically track their progress, make necessary adjustments, and stay motivated. Short-term goals often include acquiring new qualifications, mastering particular competencies, or securing a specific role, while long-term goals might encompass reaching executive positions, becoming industry experts, or launching entrepreneurial ventures.
Moreover, having well-defined career goals fosters a sense of purpose and direction, enhancing job satisfaction and overall productivity. It encourages continuous learning and adaptation, as professionals remain attuned to industry trends and evolving job market demands. Career goals also facilitate better time management and resource allocation, as individuals prioritize tasks and opportunities that advance their professional growth. In addition, articulating career goals can aid in networking and mentorship, as it allows individuals to communicate their aspirations clearly to potential mentors, colleagues, and employers, thereby opening doors to valuable guidance and support. Ultimately, career goals are integral to personal and professional development, driving individuals toward sustained success and fulfillment in their chosen fields.
XP 2024 presentation: A New Look to Leadershipsamililja
Presentation slides from XP2024 conference, Bolzano IT. The slides describe a new view to leadership and combines it with anthro-complexity (aka cynefin).
Collapsing Narratives: Exploring Non-Linearity • a micro report by Rosie WellsRosie Wells
Insight: In a landscape where traditional narrative structures are giving way to fragmented and non-linear forms of storytelling, there lies immense potential for creativity and exploration.
'Collapsing Narratives: Exploring Non-Linearity' is a micro report from Rosie Wells.
Rosie Wells is an Arts & Cultural Strategist uniquely positioned at the intersection of grassroots and mainstream storytelling.
Their work is focused on developing meaningful and lasting connections that can drive social change.
Please download this presentation to enjoy the hyperlinks!
Suzanne Lagerweij - Influence Without Power - Why Empathy is Your Best Friend...Suzanne Lagerweij
This is a workshop about communication and collaboration. We will experience how we can analyze the reasons for resistance to change (exercise 1) and practice how to improve our conversation style and be more in control and effective in the way we communicate (exercise 2).
This session will use Dave Gray’s Empathy Mapping, Argyris’ Ladder of Inference and The Four Rs from Agile Conversations (Squirrel and Fredrick).
Abstract:
Let’s talk about powerful conversations! We all know how to lead a constructive conversation, right? Then why is it so difficult to have those conversations with people at work, especially those in powerful positions that show resistance to change?
Learning to control and direct conversations takes understanding and practice.
We can combine our innate empathy with our analytical skills to gain a deeper understanding of complex situations at work. Join this session to learn how to prepare for difficult conversations and how to improve our agile conversations in order to be more influential without power. We will use Dave Gray’s Empathy Mapping, Argyris’ Ladder of Inference and The Four Rs from Agile Conversations (Squirrel and Fredrick).
In the session you will experience how preparing and reflecting on your conversation can help you be more influential at work. You will learn how to communicate more effectively with the people needed to achieve positive change. You will leave with a self-revised version of a difficult conversation and a practical model to use when you get back to work.
Come learn more on how to become a real influencer!
This presentation by OECD, OECD Secretariat, was made during the discussion “Pro-competitive Industrial Policy” held at the 143rd meeting of the OECD Competition Committee on 12 June 2024. More papers and presentations on the topic can be found at oe.cd/pcip.
This presentation was uploaded with the author’s consent.
Mẫu PPT kế hoạch làm việc sáng tạo cho nửa cuối năm PowerPoint
D009452333
1. Penggunaan ROR dan B/R
Pertemuan 17 dan 18
Matakuliah : D 0094 Ekonomi Teknik
Tahun : 2007
2. Bina Nusantara
Contoh Soal Rate of Return:
Contoh :
Vincent Gogh’s painting “Irises”
• John Whitney Payson membeli barang seni ini
seharga $80,000.
• John menjual kembali seharga $53.9 juta 40
tahun kemudian.
• Berapa rate of return dari investasi John ?
3. Bina Nusantara
Rate of Return
• Diketahui: P =$80,000, F =
$53.9juta, and N = 40 tahun
• Cari : i
• Solusi:
$80,000
$53.9 Juta
( )
%69.17
1000.90$9.53$
40
=
+=
i
ijuta
0
40
4. Bina Nusantara
Pada 1970, ketika Wal-Mart Stores, Inc.
menjadi Perusahaan terbuka (go public),
suatu investasi dari 100 saham seharga
$1,650. Investasi tersebut akan menjadi
$13,312,000 pada 31 January 2000.
Berapa rate of return pada investasi
tersebut ?
Arti Rate of ReturnArti Rate of Return
6. Bina Nusantara
Seandainya anda menginvestasikan senilai ($1,650)
dalam rekening tabungan 6% per tahun. Kemudian
anda hanya memperoleh $9,477 pada January,
2000.
Apa arti dari 6% interest disini?
Ini adalah opportunity cost jika menyimpan uang
pada rekening tabungan, dan merupakan suatu
tindakan yang terbaik yang dapat dilakukan saat itu.
7. Bina Nusantara
Kemudian, pada tahun 1970, anda memperoleh tawaran
untuk investasi lain dengan interest lebih dari 6% untuk
investasi lain, anda akan mengambil investasi tersebut.
Oleh karena itu, 6% dipandang sebagai minimum
attractive rate of return (rate of return yang dibutuhkan).
Maka, anda dapat menetapkan aturan keputusan berikut
untuk memperoleh investasi yang diusulkan adalah
yang terbaik :
ROR > MARR
8. Bina Nusantara
Rate of Return
• Definisi 1: Rate of return (ROR) merupakan
interest rate yang diperoleh pada
unpaid balance dari angsuran suatu
pinjaman.
• Contoh: Sebuah bank meminjamkan $10,000
dan menerima pembayaran pertahun
sebesar of $4,021 selama 3 tahun.
Bank dikatakan memperoleh
penghasilan kembali (return of) 10%
dari pinjaman sebesar $10,000.
9. Bina Nusantara
Loan Balance Calculation:
A = $10,000 (A/P, 10%, 3)
= $4,021
Unpaid Return on Unpaid
balance unpaid balance
at beg. balance Payment at the end
Year of year (10%) received of year
0
1
2
3
-$10,000
-$10,000
-$6,979
-$3,656
-$1,000
-$698
-$366
+$4,021
+$4,021
+$4,021
-$10,000
-$6,979
-$3,656
0
A return of 10% on the amount still outstanding at the
beginning of each year
10. Bina Nusantara
Rate of Return:
• Definition 2: Rate of return (ROR) is defined
as break-even interest rate, i*
, which equates the
present worth of a project’s cash outflows to the
present worth of its cash inflows.
• Mathematical Relation:
PW i PW i PW i( ) ( ) ( )* * *
= −
=
cash inflows cash outflows
0
11. Bina Nusantara
Return on Invested Capital
• Definition 3: Return on invested capital is
defined as the interest rate earned on the
unrecovered project balance of an investment
project. It is commonly known as internal rate
of return (IRR).
• Example: A company invests $10,000 in a
computer and results in equivalent annual labor
savings of $4,021 over 3 years. The company is
said to earn a return of 10% on its investment of
$10,000.
12. Project Balance Calculation:
0 1 2 3
Beginning
project balance
Return on
invested capital
Payment
received
Ending project
balance
-$10,000 -$6,979 -$3,656
-$1,000 -$697 -$365
-$10,000 +$4,021 +$4,021 +$4,021
-$10,000 -$6,979 -$3,656 0
The firm earns a 10% rate of return on funds that remain internally
invested in the project. Since the return is internal to the project, we
call it internal rate of return.
13. Bina Nusantara
Period
(N)
Project A Project B Project C
0 -$1,000 -$1,000 +$1,000
1 -500 3,900 -450
2 800 -5,030 -450
3 1,500 2,145 -450
4 2,000
Project A is a simple investment.
Project B is a nonsimple investment.
Project C is a simple borrowing.
15. Bina Nusantara
Direct Solution Methods
• Project A • Project B
PW i
i i
x
i
PW i x x
x
x
i
i
i
i
i
i i
( ) $2,
$1,
( )
$1,
( )
,
( ) , , ,
:
.
. .
, *
= − +
+
+
+
=
=
+
= − + +
=
=
+
→ = − =
+
→ = −
− < < ∞ =
000
300
1
500
1
0
1
1
2 000 1300 1500
08
08
1
1
25%, 1667
1
1
160%
100% 25%.
2
2
Let then
Solve for
or -1.667
Solving for yields
Since the project's
$1, $1, ( / , , )
$1, $1, ( )
. ( )
ln .
ln( )
. ln( )
.
.
000 500 4
000 500 1
0 6667 1
0 6667
4
1
0101365 1
1
1
4
4
0 101365
0 101365
=
= +
= +
−
= +
= +
= +
= −
=
−
−
P F i
i
i
i
i
e i
i e
10.67%
16. Bina Nusantara
Trial and Error Method – Project C
• Step 1: Guess an interest
rate, say, i = 15%
• Step 2: Compute PW(i)
at the guessed i value.
PW (15%) = $3,553
• Step 3: If PW(i) > 0, then
increase i. If PW(i) <
0,
then decrease i.
PW(18%) = -$749
• Step 4: If you bracket the
solution, you use a linear
interpolation to
approximate
the solution
3,553
0
-749
15% i 18%
+
+=
749553,3
553,3
%3%15i
%45.17=
17. Bina Nusantara
Graphical Solution – Project D
• Step 1: Create a NPW plot
using Excel.
• Step 2: Identify the point at
which the curve crosses the
horizontal axis closely
approximates the i*.
• Note: This method is
particularly useful for
projects with multiple rates
of return, as most financial
softwares would fail to find
all the multiple i*s.
18. Bina Nusantara
Aturan Keputusan Dasar
If ROR > MARR, terima
Aturan ini tidak berlaku untuk situasi dimana
invesrasi mempunyai ‘multiple rates of
return’
19. Problem Multiple Rates of Return
• Cari rate(s) of return:
PW i
i i
( ) $1,
$2, $1,
( )
= − +
+
−
−
+
=
000
300
1
320
1
0
2
$1,000
$2,300
$1,320
20. Bina Nusantara
Let Then,
Solving for yields,
or
Solving for yields
or 20%
x
i
PW i
i i
x x
x
x x
i
i
=
+
=− +
+
−
+
=− + −
=
= =
=
1
1
000
300
1
320
1
000 300 320
0
10 11 10 12
10%
2
2
.
( ) $1,
$2,
( )
$1,
( )
$1, $2, $1,
/ /
22. Kalkulasi Kesetimbangan Proyek
n = 0 n = 1 n = 2
Beg. Balance
Interest
Payment -$1,000
-$1,000
-$200
+$2,300
+$1,100
+$220
-$1,320
Ending Balance -$1,000 +$1,100 $0
i* =20%
Cash borrowed (released) from the project is assumed
to
earn the same interest rate through external investment
as money that remains internally invested.
23. Bina Nusantara
Critical Issue: Can the company be able to invest the money
released from the project at 20% externally in
Period 1?
If your MARR is exactly 20%, the answer is “yes”, because it
represents the rate at which the firm can always invest
the money in its investment pool. Then, the 20% is also true
IRR for the project.
.
Suppose your MARR is 15% instead of 20%. The assumption
used in calculating i* is no longer valid.
Therefore, neither 10% nor 20% is a true IRR.
24. Bina Nusantara
• If NPW criterion is used at MARR = 15%
PW(15%) = -$1,000
+ $2,300 (P/F, 15%, 1)
- $1,320 (P/F, 15%, 2 )
= $1.89 > 0
Investasi diterima
How to Proceed: If you encounter multiple
rates of return, abandon the IRR analysis
and use the NPW criterion (or use the procedures
outlined in Appendix A).
25. Bina Nusantara
Aturan Keputusan Untuk Nonsimple Investment
• Kemungkinan multiple RORs.
• Jika PW (i) plot looks seperti
berikut, maka, IRR = ROR.
If IRR > MARR, Terima
• Jika PW(i) plot seperti berikut,
maka, IRR ≠ ROR (i*).
• Dapatkan IRR sebenarnya
atau
• Gunakan method PW
PW(i)
i*
i
i
i*
i*
PW(i)
26.
27. Membandingkan Mutually Exclusive
Alternatives Berdasarkan IRR
• Issue: Dapatkah membuat ranking
‘mutually exclusive projects’ dengan
besaran dari IRR?n A1 A2
0
1
IRR
-$1,000 -$5,000
$2,000 $7,000
100% > 40%
$818 < $1,364PW (10%)
28. Incremental Investment
• Assuming MARR of 10%, you can always earn that rate from other
investment source, i.e., $4,400 at the end of one year for $4,000
investment.
• By investing the additional $4,000 in A2, you would make additional
$5,000, which is equivalent to earning at the rate of 25%. Therefore,
the incremental investment in A2 is justified.
n Project A1 Project A2
Incremental
Investment
(A2 – A1)
0
1
-$1,000
$2,000
-$5,000
$7,000
-$4,000
$5,000
ROR
PW(10%)
100%
$818
40%
$1,364
25%
$546
29. Bina Nusantara
Incremental Analysis (Procedure)
Step 1: Compute the cash flows for the difference
between the projects (A,B) by subtracting
the cash flows for the lower investment
cost project (A) from those of the higher
investment cost project (B).
Step 2: Compute the IRR on this incremental
investment (IRR ).
Step 3: Accept the investment B if and only if
IRR B-A > MARR
B-A
30. Bina Nusantara
Contoh - Incremental Rate of Return
n B1 B2 B2 - B1
0
1
2
3
-$3,000
1,350
1,800
1,500
-$12,000
4,200
6,225
6,330
-$9,000
2,850
4,425
4,830
IRR 25% 17.43% 15%
Diketahui MARR = 10%, project mana pilihan terbaik?
Bila IRRB2-B1=15% > 10%, dan juga IRRB2 > 10%, pilih B2.
31. Bina Nusantara
IRR pada Increment Investment:
Tiga Alternatif
n D1 D2 D3
0 -$2,000 -$1,000 -$3,000
1 1,500 800 1,500
2 1,000 500 2,000
3 800 500 1,000
IRR 34.37% 40.76% 24.81%
Step 1: Tetapkan IRR untuk tiap
proyek untuk mngeliminasi tiap
project yang gagal memenuhi
MARR
Step 2: Bandingkan D1 dan D2 berpasangan.
IRRD1-D2=27.61% > 15%,
pilih D1.
Step 3: Bandingkan D1 dan D3.
IRRD3-D1= 8.8% < 15%,
pilih D1.
Kesimpulannya D1 adalah alternatif terbaik.
32. Bina Nusantara
Incremental Borrowing Analysis
Decision Rule:
• If BRR B-A < MARR, select B.
• If BRR B-A = MARR, select
either one.
• If BRR B-A > MARR, select A.
Principle:
• If the difference in flow (B-A)
represents an increment of
investment, then (A-B) is an
increment of borrowing.
• When considering an
increment of borrowing, the
rate i*
A-B is the rate we paid to
borrow money from the
increment.
i*
A B A BBRR− −=
33. Bina Nusantara
Borrowing Rate of Return
n B1 B2 B1-B2
0 -$3,000 -$12,000 +$9,000
1 1,350 4,200 -2,850
2 1,800 6,225 -4,425
3 1,500 6,330 -4,830
34. Bina Nusantara
Incremental Analysis for Cost-Only Projects
Items CMS Option FMS Option
Annual O&M costs:
Annual labor cost $1,169,600 $707,200
Annual material cost 832,320 598,400
Annual overhead cost 3,150,000 1,950,000
Annual tooling cost 470,000 300,000
Annual inventory cost 141,000 31,500
Annual income taxes 1,650,000 1,917,000
Total annual costs $7,412,920 $5,504,100
Investment $4,500,000 $12,500,000
Net salvage value $500,000 $1,000,000
36. Bina Nusantara
Solution:
PW i
P A i
P F i
IRR
FMS CMS
FMS CMS
( ) $8, ,
$1,908, ( / , , )
$2, , ( / , , )
.43%
−
−
= −
+
+
=
= <
000 000
820 5
408 820 6
0
12 15%,
select CMS.
37. Bina Nusantara
Ultimate Decision Rule:
If IRR > MARR, Accept
• Aturan berlaku untuk setiap situasi investasi.
• Dalam beberapa situasi,
IRR = ROR
tapi hubungan ini tidak dapat digunakan untuk
investasi dengan multiple RORs.
38. Bina Nusantara
Predicting Multiple RORs
- 100% < i *
< infinity
• Net Cash Flow Rule of Signs
No. of real RORs (i*s)
<
No. of sign changes in the project
cash flows
39. Bina Nusantara
Example
n Net Cash flowSign Change
0
1
2
3
4
5
6
-$100
-$20
$50
0
$60
-$30
$100
1
1
1
• No. of real i*s ≤ 3
• This implies that the project could have
(0, 1, 2, or 3) i*s but NOT more than 3.
40. Bina Nusantara
Accumulated Cash Flow Sign Test
Find the accounting sum of net cash flows at
the end of each period over the life of the
project
Period Cash Flow Sum
(n) (An ) Sn
If the series S starts negatively and changes sign
ONLY ONCE, there exists a unique positive i*.
S A
S S A
S S A
S S AN N N
0 0
1 0 1
2 1 2
1
=
= +
= +
= +−
A
A
A
AN
0
1
2
0
1
2
N
41. Bina Nusantara
Contoh
n An Sn Perubanhan
tanda
0
1
2
3
4
5
6
-$100
-$20
$50
0
$60
-$30
$100
-$100
-$120
-$70
-$70
-$10
-$40
$60 1
• Jumlah tanda berubah = 1, indicating a unique i*.
• i* = 10.46%
42. Bina Nusantara
Contoh: $2,145
$3,900
$5,030
$1,000
0 1
2
3
• Apakah ini simple investment?
• Berapa RORs (i*s) dapat diharapkan dari menguji
cash flows?
• Apakah Investasi ini mempunyai rate of return yang unik ?
46. Bina Nusantara
General Procedure for Cost-Effectiveness
Studies
Step 1: Establish the goals to be achieved by the analysis.
Step 2: Identify the imposed restrictions on achieving the goals, such
as budget or weight.
Step 3: Identify all the feasible alternatives to achieve the goals.
Step 4: Identify the social interest rate to use in the analysis.
Step 5: Determine the equivalent life-cycle cost of each alternative,
including research and development, testing, capital investment,
annual operating and maintenance costs, and salvage value.
47. Bina Nusantara
• Step 6: Determine the basis for developing the cost-effectiveness
index. Two approaches may be used;
– (1) the fixed-cost approach and
– (2) the fixed-effectiveness approach.
– If the fixed-cost approach is used, determine the amount of
effectiveness obtained at a given cost.
– If the fixed-effectiveness approach is used, determine the cost to
obtain the predetermined level of effectiveness.
• Step 7: Compute the cost-effectiveness ratio for each alternative based
on the selected criterion in Step 6.
• Step 8: Select the alternative with the maximum cost-effective index.
48. Bina Nusantara
Cost-Effectiveness Decision Criterion
• Fixed Effectiveness
Approach
• Fixed Cost Approach
Maximize Effectiveness
Subject to:
Budget Constraint
Minimize Cost
Subject to:
Must meet the minimum
effectiveness