19 views

Uploaded by Jishan Numayer Zaman

FInance Relarted

FInance Relarted

© All Rights Reserved

- Mercury athletic footwear
- Phuket Beach Hotel
- Merck & Company
- Capital Budgeting
- What Mathematics Can Do For You
- Blank Tarquin Engineering Economy Selected Solutions 6th Ed Chapter 17
- Practise 2 Capital Budgeting
- Inter Science Note
- Time Value of Money
- Corporate Finance Lecture Notes 1
- 14
- Session5 Basics of Project Finance Depreciation
- Sfe Uf Feasibility Study Cua
- WORKING CAPITAL MANAGEMENT
- Economic viability: A bibliometric study in the Scopus database
- Chapter-01 an Overview of Corporate Finance notes
- Release Planning & Buffered MoSCoW Rules
- Question 1 Solution
- It Investments
- Lecture No30

You are on page 1of 4

Problem # 1

The Apex Manufacturing Company is considering a new investment.

Financial projections for the investment are tabulated below. Corporate

tax is 30%. (Cash flows are in tk. Thousands)

0

1

2

3

4

Investment

15,000

Sales Revenue

7000

7500

8000

6000

Operating cost

2000

2500

2800

2900

Depreciation

2500

2500

2500

2500

Net working

200

250

300

200

0

capital

Sunk Cost

Opportunity cost

100

50

50

50

50

Requirement:

(a) Compute NPV of the new investment of the company and give

your suggestion to the top management if the discount rate is

12%.

(b) What would be your suggestion if the discount rate is 24%.

(c) Calculate the payback period and discounted payback period of

the project.

(d) Calculate the profitability index of the project for discount rate

12%

Problem # 2

Alpha Corporation has the opportunity to invest in a machine that costs

$550,000. The revenue will be $ 250,000 and Expenses excluding

depreciation will be $ 50,000 per year. Tax rate will be 20%. The

company follows straight line depreciation method. Assume salvage

value is zero. If the economic life of the machine is 10 years and the

relevant discount rate is 10 %, what would be the NPV of the

Investment?

Problem # 3

Apex Corporation has the opportunity to invest in a project that

requires $600,000 for equipment and initial installation cost $40,000 to

implement the project. The revenue will be $ 300,000 and Expenses

excluding depreciation will be $ 25,000 per year. Tax rate will be 30%.

The initial cost and the installation cost will be depreciated using a

straight line method. Assume salvage value is $ 40,000. If the

economic life of the machine is 12 years and the relevant discount rate

is 12 %, what would be the NPV of the Investment?

Problem # 4

IIB Corporation wants to start a new project of water refining Project

that requires $500,000. The total cost of the project consists the cost

of equipment $ 300,000. The revenue will be $ 200,000 and Expenses

excluding depreciation will be $ 20,000 per year. Tax rate will be 20%.

The company follows straight line depreciation method. Assume

salvage value is zero. If the economic life of the machine is 6 years and

the relevant discount rate is 10 %, should the IIB Corporation starts the

project?

Problem # 5

Dhaka Corporation is considering investing a machine to produce

computer keyboards. The price of the machine will be tk. 400,000 and

its economic life five years. The machine will be fully depreciated by

the straight-line methods. The machine will produce 10,000 units of

key boards each year. The price of the keyboard will be tk. 40 in the

first year which will be increasing by 10% per year. The production cost

per unit of the keyboard in the beginning year will be tk. 20 that will be

increased by 5% in each year. The opportunity cost of the investment

is tk. 5,000 per year, and sunk cost of the company is tk. 13,000.The

corporate tax rate for the company is 30%. If the appropriate discount

rate is 15%, what is the NPV of the investment?

Problem # 6 (Scenario Analysis)

Consider the following Cash Flows of Argentina Ltd. and calculate the

expected NPV:

Scenario

0

1

2

3

4

5

Pessimist 50,000 50,000 50,000 100,00 100,00

ic

500,00

0

0

0

Expected 150,00 150,00 250,00 250,00 350,00

500,00 0

0

0

0

0

0

Optimisti 250,00 250,00 350,00 350,00 400,00

c

500,00 0

0

0

0

0

0

6

150,00

0

400,00

0

450,00

0

scenario are 25%, 50% and 25% respectively, and cost of capital

(discount rate) is 12%.

Problem # 7 (Cash Flow determination and Scenario Analysis)

Bengal Corporation has an opportunity to invest in a project that

requires $625,000 for equipment. The revenue will be $ 300,000 in the

first year which will be increased by 10%. Expenses excluding

depreciation will be $ 25,000 at the end of first year of the project (Year

1) will be increasing by 11% per annum respectively during the project

life. The economic life of the machine is 6 years. The initial cost will be

depreciated using a straight line method. Assume salvage value is $

25,000, and the equipment can be sold for tk. 40,000 at the end of the

project. The company needs to invest tk. 10,000 in the working capital

which will be recovered at the end of the project. If the company tax

rate will be 30%, and the relevant discount rate is 15 %, determine the

expected cash flow stream and NPV of the proposed project?

Assume that cash inflows in each year will be decreased by 30% for

pessimistic scenario, increased by 40% in optimistic situation. If the

probabilities of pessimistic, expected and optimistic scenario are 15%,

60% and 25% respectively, calculate the expected NPV of the project

considering the 15% cost of capital.

Problem # 8 (Sensitivity Analysis)

Consider the information of problem #7 (a) If the government

increases the tax rate from 30% to 40%, what will new cash flow, NPV

of expected, pessimistic and optimistic scenario, and expected NPV. (b)

If the government decreases the tax rate from 30% to 20%, what will

new cash flow, NPV of expected, pessimistic and optimistic scenario,

and expected NPV.

Problem # 9

Financial projections for the investment are tabulated below. Corporate

tax is 30%. (Cash flows are in tk. Thousands)

0

1

2

3

4

Investment

10,000

Sales Revenue

7000

8000

9000

7000

Operating cost

2000

2200

2400

2600

Depreciation

2500

2500

2500

2500

Sunk Cost

100

Opportunity cost

50

50

50

50

Requirement:

(a) Determine the cash flows of project for different years.

(b)The company has taken tk. 4000 loan from AB Ltd. at the rate of

9% interest, and issued 600 shares with tk. 10 per share in DSE

for financing the project. The average rate of return of DSE is

15% while interest rate for BD governments saving certificate is

6%. If the beta of the firm is 1.3, what is the cost of capital

(WACC) of the project?

(c) Calculate the NPV and evaluate the project based on the NPV.

Instruction: Please attempt to solve these problems based on project

evaluation concepts discussed in the class. Feel free to consult with

me or the GA for any further clarification.

Last Date of Submission: 20 February, 2013 (Not later than 5.50 pm)

- Mercury athletic footwearUploaded byandy1179
- Phuket Beach HotelUploaded byKarlo Prado
- Merck & CompanyUploaded bymehtaatul82
- Capital BudgetingUploaded byaramsiva
- What Mathematics Can Do For YouUploaded byJoshua Salazar
- Blank Tarquin Engineering Economy Selected Solutions 6th Ed Chapter 17Uploaded byLusash1
- Practise 2 Capital BudgetingUploaded byKelly Koh
- Inter Science NoteUploaded byprakhar singh
- Time Value of MoneyUploaded byvinodkothari
- Corporate Finance Lecture Notes 1Uploaded byzaijihun
- 14Uploaded bymjrf14
- Session5 Basics of Project Finance DepreciationUploaded bySaurabh Suman
- Sfe Uf Feasibility Study CuaUploaded byPaula Lavric
- WORKING CAPITAL MANAGEMENTUploaded byAli Kabalan
- Economic viability: A bibliometric study in the Scopus databaseUploaded byIJAERS JOURNAL
- Chapter-01 an Overview of Corporate Finance notesUploaded byShuvo Exception
- Release Planning & Buffered MoSCoW RulesUploaded byEsteban
- Question 1 SolutionUploaded byibrahim ibrahim
- It InvestmentsUploaded byWilliam J. Hill
- Lecture No30Uploaded byFeni Ayu Lestari
- Question Bank for biochemical engineeringUploaded bySudarshan Gopal
- Capital Expenditure DecisionUploaded byRakesh Gupta
- Hospitality.docxUploaded byRavi Kumawat
- National Railroad Passenger CorporationUploaded byAarti Gupta
- CAPITAL BUDGETINGUploaded byShielah
- Construction Management PV, Depriciation EtcUploaded byHasnain Bukhari
- MPWMD Exhibit 5-AUploaded byL. A. Paterson
- PM FinalUploaded byshaim mahamud
- PNAAR462Uploaded bySayed Wafi
- Financial ManagementUploaded byJatinChadha

- Course 12376Uploaded byJishan Numayer Zaman
- Business LetterUploaded byJishan Numayer Zaman
- POS Pizza 6 Manager DocsUploaded byJishan Numayer Zaman
- City BankUploaded byJishan Numayer Zaman
- Law CaseUploaded byJishan Numayer Zaman
- BusinesUploaded byJishan Numayer Zaman
- Surbvey is berryUploaded byJishan Numayer Zaman
- 440Uploaded bySamiul21
- Another TescoUploaded byJishan Numayer Zaman
- ECOUploaded byJishan Numayer Zaman
- LAWUploaded byJishan Numayer Zaman
- MGT 1283Uploaded byJishan Numayer Zaman
- MGT684Uploaded byJishan Numayer Zaman
- MGT 578Uploaded byJishan Numayer Zaman
- EDI 1829Uploaded byJishan Numayer Zaman
- Course 816Uploaded byJishan Numayer Zaman
- Course 136Uploaded byJishan Numayer Zaman
- Course 440Uploaded byJishan Numayer Zaman
- Sundarban CourierUploaded byJishan Numayer Zaman
- XBOX LogUploaded byJishan Numayer Zaman
- RecordingUploaded byJishan Numayer Zaman
- Project MeetingUploaded byJishan Numayer Zaman
- Sickness ProcedureUploaded byJishan Numayer Zaman
- MBAUploaded byJishan Numayer Zaman

- Dyson: Solving Customer Problems in Ways They Never ImaginedUploaded byAin Nabila
- Life Cycle CostingUploaded byElliot Morton
- Chapter 4Uploaded byClarisse Joyce Nava Abregoso
- LESSON 3 JA, JD , JSUploaded byyajur_nagi
- mba 2nd semUploaded byRavi Gupta
- Gfsi Fssc 22000 Audit ChecklistUploaded byJose Miguel de Guzman
- ValuationUploaded bySandro Febrino
- Inventory ManagementUploaded byNaman Chaudhary
- []HOLCIM IR 2013 Presentation FY2013Uploaded byShanti Eva Arfani
- Ecosystem Development FrameworkUploaded byana_ci
- Ethics in Public Sector of PakistanUploaded byXartasha Khan
- 7-star-purchasing-report.pdfUploaded bySaikumar Sela
- RFQ Reviewed Document.docxUploaded byAF Dowell Mirin
- 236515091-Ifrs-Guide.pdfUploaded bySaurabh Kaushik
- Green Marketing Strategies Adopted by HulUploaded byShubhangi Ghadge
- objectivesUploaded byapi-272055202
- TOR Prov Extender - North Sumatera Province Mar2016Uploaded bymiindonesia
- Sample Fund Development PlanUploaded byoxade21
- Strategic Management Project on Tata SteelUploaded byRonak Gosalia
- Employee Performance Evaluation FormUploaded bybhramani
- Guide to Canada and US Indirect taxes for SAP Implementations.Uploaded byculpable2
- Contoh Surat Ekspor BarangUploaded byReza
- ACI Study TextUploaded byHangoba Zulu
- Break Even (Economics)Uploaded byalberto michelini
- MethodologyUploaded byJoyce Tenorio
- Cover Letter SampleUploaded byKristie Tjandrapramono
- UAP Documents a9 - 2009.Newuapby-lawsUploaded byMarco Martinez
- 07 - Positive Accounting TheoryUploaded byMohammad Alfian
- Chapt 17Uploaded byDevilZaa
- Myer FY2018 resultsUploaded byToby Vue