Essays on Capital Budgeting

Alpha Group

Consolidated financial statement of financial position for the year ended 31st December, 2015. Items £ (000) £ (000) Long-assets 2014 2015 Investment property, fair value 2500 2500 Property, plant, $ equipment 4324 4818 Total long-term assets 6824 7318 Current assets Cash 200 140 Cash equivalent 30 20 Trade receivables 1900 1200 Inventory 1000 1950 Dividends 100 190 Non-controlling interest share 120 150 Inventory, fair value cost to complete and sell 180 150 Total current assets 3530 3800 Total assets 10354 11118 Equity and liabilities Share capital 1500 1250 Retained earnings 1910 1000 Profits for the year 1000 1250 Dividends payables 100 190 ...

Investment Proposal for Cengage Learning, Inc.

Executive Summary

Purpose of the Paper The main purpose of the paper is to prepare an effective investment appraisal for Cengage Learning by using various financial management tools.

Overview of the Paper

The paper comprises of following material that can be seen in the overall paper. Investment appraisal techniques for introducing new product line Selection of two most common techniques Importance of techniques through literature Testing of Feasibility of new project Interpretation and conclusion on the analysis Techniques Used Results It is found from the above two analysis that the project is viable for the company and has potential to provide high return ...

Product and Cost Allocation

“Luggage R Us” is a new luggage company that helps customers design, make and ship their own personalized travel luggage. The company offers four standard luggage sizes that can be used by individuals for business trips, couples on a romantic vacation, and even for a family of four. The four sizes are segregated into the carry-on, medium, large, and the extra-large (Samsonite, 2016). The standard size used for the carry-on is at 22”x14.5”x9.75”, which is within the maximum size limit for baggage for most airline companies (Samsonite, 2016). Figure 1. Luggage sizes offered However, most carry-on luggage ...

Introduction

Capital budgeting assists sports organisation in assessing the viability of their proposed long-term investments (Chandra, 2014). Sports organisations also need to invest in capital projects for expansion as well as to improve the efficiency of their operations. Extreme Sports Company operates a sports training complex with a fitness centre, motorsport cars for hire, among other services. The company has some money to invest in the expansion of either the fitness centre or the motorsport unit. This paper highlights how the company can use capital budgeting techniques to evaluate the two investment options.

Details of the two projects

The motorsport car will cost $200,000 ...

Introduction

Capital budget analysis refers to the process through which the way a firm invests capital in projects that result in cash flows over a period of more than one year. The analysis is built on the assumption that the firm depends on the specific project or projects under analysis in order to operate and consequently, it becomes important to test whether or not the projects being considered would be viable. Notably, capital budget analysis comes with several assumptions including the estimations of cash flows from the specific project as well as the assumption on the state of the economy ...

Introduction

The choice of capital budgeting methods to be applied by companies defers and at times both recommended and non-recommended methods are commonly utilized by some large corporations which rely more on capital budgeting. The choice of the method to be applied is also influenced by growth opportunities, foreign sales, characteristics of the Management, industry, leverage, dividend payout ratio and growth opportunities and so forth (Blackstaff, 2012). It's good to note that, there exist various methods used to determine investment decisions, the choice is, however, not arbitrary (Blackstaff, 2012). According to Fabozzi and Ake (2013), Many professions in the field ...

Abstract

Undeniably, the major objective of most organizations is to achieve business growth. Since the business environment has increasingly become competitive, the need to set strategic growth objectives has become essential. Thus, strategic management is needed in all business organizations to facilitate the setting and realization of their goals. The profitability of most companies coupled with the ease of market entry is one of the main causes of increased competition in the market for various products and services. Entrepreneurs identify the weaknesses of an organization in terms of production, delivery, and provision of essential services and improve on these areas ...

About the report

The objective of this report is to assist One-World Investment Consortium, who is planning to invest £150 million in Thomas Cook PLC, a British global travel company listed on the London Stock Exchange under the ticker sign of ‘TCG’. We duly understand the impact of our professional recommendation on Consortium’s final decision making related to investment, and therefore, we intend to be comprehensive in the approach our analysis. As for the structure of this report, it will be a two-part report. In the first section of the report, we will evaluate the past 5 year(2007-2011) financial performance ...

The capital budget, unlike the operating budget, is a plan for major purchases, and it covers the acquisition of land, buildings, and long-term equipment among others (Roussel et al., 2015; Dunham-Taylor & Pinczuk, 2009). Comprehension of the capital budgeting process is essential for nurse managers. Such an understanding assists nurse administrators to make decisions that are not only sound in a business sense but those that will allow the most efficient utilization of resources for the delivery of care (Dunham-Taylor, 2009). As the cost of medical services increase, healthcare resources are becoming scarce (Zismer et al., 2011). This necessitates a ...

About the report

The report is commissioned to ascertain the financial viability of the capital project being considered by North Sea Oil. As part of this project, we will calculate the Net Present Value(NPV) and Internal Rate of Return(IRR) of the projects under two different set of cost of capital, and will comment as how the change in capital structure will affect the shareholders accordingly. The eventual purpose here is to come up with a prudent recommendation for the company as which project will be more profitable for the company and what proportion of capital structure will be more viable ...

About the report

The report is based on our assistance given to Wheel Industries where we have analyzed the long term investment opportunities available with the company using the techniques of capital budgeting. To facilitate better understanding for our readers, we have included all the calculations within this report while every calculation is explained comprehensively.

Project Details

Wheel Industries is considering a three-year expansion project, Project A. The project requires an initial investment of $1.5 million. The project will use the straight-line depreciation method. The project has no salvage value. It is estimated that the project will generate additional revenues of $1.2 million per ...

Budget Development Project

The great depression in 1929 led to the emergence of organization some of which are meant to make profits while other run as non-profits (Penner, 2013). Indeed, these organizations are required to budget for their expenses in light of their operations. A budget refers to the overall estimation of how an organization, institution, individual or government aims to spend the resources for a specific period. These resources may include money, inventory, labour among other factors of production . Normally, top-level managers including CEOs do the formulation of a budget. However, there can be involvement of subordinate staff in decision-making. In ...

Introduction

Definition of Managerial Accounting Businesses must implement effective decisions at varying phases of growth through management accounting for a chance of a future. According to an article on the Harvard business Review, businesses mainly go through two main phases of growth: the start-up phase or the mature phase. According to Churchill and Lewis, each of these phases demand and rely on differing strategies that fulfill a need and/or takes the business to the next phase. The techniques used or applied to haul business through these phases are referred to as managerial accounting techniques. The parties responsible for reinforcing managerial ...

How has Aurora Textile performed over the past four years? Be prepared to provide financial ratios that present a clear picture of Aurora’s financial condition On the basis of financial statement overlook and the outcome of the financial ratios, we found that over the period of 1999-2002, the company’s financial performance was bearish. Moreover, just like the other companies in the industry, even the company had not considered the possible impact and consequently lost its financial standing. Beginning with the revenue figures, the amount has been decreasing consistently and plummeted from $245.90 million to $147.503 million by ...

Personal Reflection Essays

Personal experience in finance Finance is an exciting career that touches every bit of our daily life; the financial application is an important aspect of self-management and management of various projects that I would be interested in setting up in life. Life projects and economic independence is highly dependent on financial skills. Financial education skills are not only essential for application in the economic and fiscal markets career but also are used for personal management. Roberts, Dr, and R. Michael assess that capital budgeting is an important tool to plan projects and spending as an individual and a corporate ...

Question No. 1 - Statement of the Incremental Cash Flows over 8-Year Period

Based on the given information and data, the following statement is extracted to reflect incremental cash flows for each year accompanied by a table showing calculation of depreciation expense using straight line method:

Question No. 2 - Payback Period (PBP) and Net Present Value (NPV)

Payback Period (PBP) The period within which the initial investment in project could be recovered represents the Payback Period (PBP). The criteria of making investment decision in case of this capital budgeting technique is that any project that has a Payback Period (PBP) beyond the one “required” by the business is ignored. In the same manner, only those projects are accepted that help an organization recover ...

Capital budgets are instrumental in determining the merits which a business expects when investing in a project. Capital projects must have capital budget estimates to guide in decision-making based on the merits identified from the business case. When making accounting decisions, managers look at the rate of return on the investment that guides them to understand the viability of the project and its impact on the business (Arya, Glover & Radhakrishnan, 1998). The integration of capital budgets and managerial accounting is such that not all decisions made by the manager will take into account the details captured in the capital ...

Assignment : Essay based on Chapter 5 of “Beggar thy neighbour”.

Assignment number

Assignment –A (1238 words) Essay-1 Question: The economic consequences of lending at compound interest resulted in loss of productive yield of the society. How finance dominated over economics and politics by using this concept of interest (Geisst 193)?

Introduction

The question given above poses a mandatory evaluation of the harmful impact of the compound interest based lending and consequent ease of loans for the people of America. The author, Charles Geisst, used the viewpoint of John Maynard Keynes to explain that the American society was so possessed by the idea of easily availing the loans using compounded ...

Introduction

Graham and Harvey surveyed about 4,440 firms chief finance officers, and only 392 reviews came back. Large enterprises rely primarily on present value methods, capital structure and capital asset pricing models whereas small businesses likely use the payback period technique (Graham 12). Companies are more concerned about sustaining financial flexibility, healthy credit rating, stock appreciation, and EPS (earnings per share) dilution, especially when the entities are issuing equity. Little evidence was also found that organizational executives have a great concern about asymmetric information, personal taxes, free cash flows, and asset substitution. There is also some support for trade ...

Part One

Risk There is no standard way to define risks. However, one of the definitions of risk is the probability that the return on an investment will be lower than the expected return (Business Dictionary, n.d.). Examples of risk include business risk, transactional risks and exchange rate risk.

Beta

Beta is a measure of systematic risk of a stock. The value measures the volatility of the stock compared to the volatility of the market (Forbes, n.d.). The value of Beta can be either positive or negative while the beta value of the market is always one. As such, in interpreting the ...

Hanger Cleaners Company

Executive Summary This paper aims to analyze the competitive environment of a small company in the market. This is a case analysis in which a small business is taken into the consideration. The business is about the Hangers Cleaners Company. The company aims to provide the environment-friendly laundry service as its unique service; however, P&G stands as the major competitor for the business. So, this paper proceeds by identifying and analyzing the various critical success factors of the business. Various critical success factors are identified that are very essential for the business. Then, the paper supports the existence of ...

Business Finance Finals

The situation presented in the situation with client one is the for a business to survive a proper cash flow should be in place. The behavior of the person involve would also be barrier or a good mark on how they handle their financial management. As this is noted in the study of (Almeida, Campellow and Weisbach. 2004) in which they captured that “two important areas of research in corporate finance are the effects of financial constraints on firm behavior and the manner in which firms perform financial management”. In the line of the different of profits and cash ...

and Hurdle Rates in Nordic firms This article discussed the study conducted about the factors that affected the choice of capital budgeting methods among five Nordic countries. It was noted that the Net Present Value method has been considered as the best option in the evaluation of investment decisions. Some of the complexities associated with the use of NPV in terms of its application in capital budgeting and the setting of discount rates lead to this study, which concentrated on the administration of the survey from firms located in Nordic countries. The research revealed that the Discounted Cash Flow ...

Part A:

Importance of Capital Investment Decision The university has now reached a stage where it cannot procrastinate the decision to build a new building and replace the existing one, which has now turned expensive to run and is also imposing a poor environmental performance. Therefore, it has now turned crucial for the university to replace the old building with the new one not only because the existing facility impedes the profitability position of the organization, but is also harming the environment and is thus sending a negative signal amongst the community. Henceforth, the university should proceed with the appraisal of ...

Article Review

and Hurdle Rates in Nordic firms This article is a discussion of a study conducted about the factors that affects the choice of capital budgeting methods among five Nordic countries. It was noted that the Net Present Value method has been considered as the best option in the evaluation of investment decisions. However, some of the complexities associated with the use of NPV in terms of its application in capital budgeting and the setting of discount rates lead to this study, which concentrated on the administration of the survey from firms located in Nordic countries. The research revealed that ...