Essays on Rate Of Return

BUSINESS DECISION MAKING

Business Decision-Making Question 1

Another key feature that may hinder effective launch of the project within a period of 12 weeks is that some of the activities are considered as being critical for the project leading to a situation where the management may opt to focus more on such activities. It would be important for the management to ensure that it takes caution as a way of promoting overall success when dealing with critical activities. From the list of activities, the earliest activity will be activity D, which focuses on the assembly of all the key items that would ...

The Relationship between Risks and Rate of Returns

The risk and rate of return, as discussed in business, are directly proportional. It means that as the risk increases, the rate of return increases while as the risk declines, the rate of return decreases as well (Christoffersen, 2012). Therefore, an individual willing to invest must take a decision based on both the risk and rate of return analysis to achieve a high return at a lower risk. Investors are likely to prefer investment decisions that yield high rates of return at minimal risks. The term risk defines the capability of acquiring loss below a person’s investigations. On ...

Galaxy Skis has a tough time ahead of itself when it comes to using the international financial market. This is because it is looking at building a plant in China, where the government frequently supports manipulating its currency in order to maintain a competitive edge over other countries in terms of resource and labor cost (Catalan, 2010). This can be problematic for a company that seeks to do continuous business in the country due to the fluctuating market system and exchange rate, though analysts claim that China’s actions will not have long term effects on the flow of ...

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 ...

Abstract

When an organization has cash inflows and outflows of foreign nature, the cash forecast for every currency will help during the identification of the currency exposures. The format of the estimation should allow the users to determine the balance for every currency and whether there is a growing shortage or extra money over time based on reasonable cash flows. The increasing gaps between the cash inflows and outflows may need hedging, and the cash flows that offset over time represents the issue of timing effectively. The management of foreign exchange transaction can be achieved through the offsetting transactions to ...

Value Chain

The objective of analyzing Monster’s value chain is to make a product that will become popular to its customers, which includes not only the production segment but also marketing and distribution (Horngren and Data, 2015). This is because products will eventually need to be discontinued due to changing customer preferences and product innovation from competitors. This means that the company’s core operations and its products must continuously evolve and this could be done using the value chain analysis tool. For an energy drink company like Monster, one of its main goals is to continuously adapt to the ...

The chapter under consideration is the Chapter 5, Financial Services: Savings Plans and Payment Accounts. The chapter gives to the reader five important aspects that contribute to the understanding of the personal finances. 1. The first aspect is the selection and use of the available financial services in the market and the factors that influence the decision to select a specific financial service. The selection of the financial service depends on of the needs of the client and the convenience of fees and conditions. One of the financial services is the availability of cash. The cash is the most ...

Question 1

The Verizon’s IT-project approval process is being done under the Capital Program Planning section of the telecommunication company. It is the main component responsible of the planning process, in which it includes the company’s strategic initiatives in order to create a long-term plan for the maintenance of the resources and other important things which are needed by the information system. Generally, the Capital Program Planning is divided into three sections: the project identification, approval, and funding (Capital and Maintenance Planning, n.d). Though it seems that the second part covers the approval part, the other two sections are ...

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 ...

The evaluation of the company’s project or product can be carried out using Net Present Value (NPV) analysis. The NPV analysis involves forecasting of future cash flows that the business expects to generate from the new project or its product. The cash flows are discounted using an appropriate discount rate that is the cost of capital of the company. The cost of capital is the cost of funds acquired by the company from different sources including equity and debt. The sum of present value (discounted value) is deducted from the initial investment cost to determine the net present ...

Fed fund return is the term used in the United States of America. Fed fund return is the rate of return or the interest rate at which the financial institutions especially the depository institutions like credit union and bank lend the excess of its balance, often known as reserve balance, to the other similar kind of depository institutions without having the collateral. The fund that is deposited in the Federal Reserve to maintain the reserve requirement as specified by the regulatory body is called reserve fund. Bear Stearns and Lehman Brothers did not collapse in a single day. The ...

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 ...

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 ...

Management

It is important to know the internal rate of return because the percentage figure gives the speed of reinvestment that adds up to the break even value. Additionally, the Hurdle Rate is vital since it displays the financially attractive level of the investment. Further, the difference between cash flow and profit is that the amount recorded is the immediate cash in the firm’s account while the profit includes the amounts that will be paid in future. It is, however, important to get the NPV for any decision which flows into multi-periods because investment takes place over time and ...

Investment decisions for personal finance are made according to the profile of an investor. It relates to the conditions of investors and external factors that put a direct impact on the decisions for investment. The investor profile of Marilyn and David is short and simple, but there are some facts that need to consider while making an investment such as longevity risks. The scheme or investment plan provided by investment advisor is effective, but the rate of interest offered is above estimations as indicated by the US Stock index. The calculation of the investment plan prepared is. $160,000* ...

“Diversification eliminates unique risk. But there is some risk that diversification cannot eliminate”

Diversification of portfolios is one of the effective ways to minimize the risks and increase the returns. However, it is acclaimed that there are certain risks that cannot be eliminated. These risks are called market risks that cannot be overcome through diversification of the portfolio. There are several theories that stress that the diversification of portfolios should be used to bring stability in its returns and lessen the risks. Systematic risks or market risk emerged because of the changes in the economic cycles of the market that are influenced by various factors and activities taken place in the economy ( ...

Abstract

A patient survey at a community hospital in which I serve as the chief financial officer indicated the need for a commercial 24-hour pharmacy within the hospital. The pharmacy would ensure that patients and families fill prescriptions and begin taking prescribed medicines as and when ordered instead of waiting for the following day. In response to the findings of the survey, this paper seeks to look into the viability of the business. Herein provided is the proposal for the first three months of operations. The paper also looks into the financial implications of the proposed project by looking into ...

LIMITED LEVERAGE

One thing that is clear from the vignette is Frank does not want to close his business and work for someone else. However, he must replace his primary asset, his truck, or he will be forced to close the business. Since he does not have the equity to purchase the truck, he must find the funds somewhere else. The only options are to find an investor or borrow the money. The vignette mentions nothing about an option to find an investor. He is adamantly against using debt. His daughter Stephanie suspects he does not know the proper use of ...

Introduction

The purpose of business is to obtain the maximum revenue at the lowest cost of capital in a competitive environment. The realization of this goal requires of comparing the size of the capital invested in the production and trading activities with the financial results of this activity. However, in the implementation of any kind of economic activity there is objectively a risk of loss, the volume of which is due to the specifics of a particular business. Risk is the probability of losses, damages, shortfalls of projected revenues, profits. Losses that occur in business activities can be divided into ...

Article Reviews

The newly developed SASB allowed companies to take into consideration external events (Eccles, 2016) that cannot be controlled such as the effects of climate change. The reason for the accounting standard addition is that governments cannot ignore the effects on industrial markets and their investors (Eccles, 2016). The value of accounting standards is that it allows individuals, companies, and governments to generate wealth since it allows financial performance comparisons (Eccles, 2016). The problem is that there was no previous standard developed for nonfinancial performances (Eccles, 2016) especially on environmental and social activities.

Areas of Agreement

The advantage of the article is that ...

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 ...

PROFFESOR

b. According to calculations of Net Present Value the Project Alpha has a better value for the company, than the project Beta. d. With the calculation of Internal Rate of Return, the better project is the project Alpha. g. The Net Present Value represents the best tool to calculate the return on an investment or effectiveness of a project; the Net Present Value considers all the cash flows of the project and the economic conditions of the environment where the project will be developed (Boyte-White, 2015). The use of the Weighted Average Cost of Capital represents the internal conditions ...

Investment Portfolio Statement

Investment Policy Statement: Executive Summary:

Tax ID: A1258122 Current assets: $10,000,000 Return: 7 % 1-yr Loss Limit: (Worst case scenario): - 10 % Purpose of investment policy statement: The main purpose of this investment policy statement is to provide the client with a clear investment plan that ensures maximum returns. It therefore:

Provides an excellent overview of all investment options available to the client

Ensures that all investment options are in line with the client’s needs, wants, and objectives It provides the required means of communication between the client and all other parties involved in the investment plan It meets all the laid out international, state, and federal laws ...

INVESTMENT PORTFOLIO STATEMENT

Investment Policy Statement: Executive Summary: Type of policy: Individual Retirement Investment Policy Tax ID: A1258122 Current assets: $10,000,000 Return: 7 % 1-yr Loss Limit: (Worst case scenario): - 10 % Purpose of investment policy statement: The main purpose of this Investment Policy Statement (IPS) is to provide the client with a clear investment plan that ensures maximum returns. The IPS plays the role of assisting the client in monitoring, evaluating and supervising his or her investment portfolio. The IPS therefore:

Provides an excellent overview of all investment options available to the client.

Ensures that all investment options are in line with the client’s needs, wants, and objectives. It provides ...

Abstract

Going international has stood to be the primary means by which corporations have gained access to the global markets. Beyond their home markets, companies have been able to increase their sales and growth rate following the large customer base created and greater access to capital in existence in the larger market. The emerging markets such as China have been the primary focus for the companies seeking to globalize their operations. Companies have used different financial strategies, such as bonds and stocks that finance expansion and growth in the international markets. However, an ultimate understanding of the internationalization plays a ...

Vodafone

Introduction This report seeks to assess the expected returns for Vodafone using the CAPM model. The CAPM model is based on three inputs: risk-free return, market return and company beta. Therefore, the report will estimate these three parameters and use them to find the expected return of Vodafone. Finally, it will provide a critique of the CAPM estimation technique.

The risk-free rate of return is often taken as the return of short term government securities. The 3-month treasury bill for UK is 0.48 . Therefore, we assume that the risk free rate.

Market Return

Expected market return are the average rate of ...

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 ...

Value of Financial Instrument

Value of Financial Instrument It can be noticed from the above-provided table that Microsoft (AAA) has less yield to maturity as compared to others. The negative relationship is observed between rating and yield to maturity. The B-rated company that is Goldman Sachs has higher yield to maturity as compared to others. The highest yield-to-maturity rate is of Rolta that is 6.9 as the company is rated the lowest in the market regarding bonds . The coupon rates and yield-to-maturity are determined by comparing it with other bonds available in the market. The bonds are traded at par value that is ...

The primary goal of every investor is to maximize his returns. To determine the right company to invest in an investor require analyze the performance of a company using various tools which include the financial ratios analysis, cash flow analysis, risk analysis, stock valuation and time value of money. This paper provides a detailed analysis of an investor who has 100,000 and is in differenced between saving the money in a saving account or investing it in stocks of 3M company which is a manufacturing and mining company producing over 55, 000 products.

Use of Financial Ratios

The liquidity ratios shows the ...

Introduction

Receiving education is a costly choice. There are costs to education in terms of direct monetary payments and an opportunity costs. The choice to go to school means forgoing waged employment. Therefore, there is an opportunity costs of the wages that would have been earned. Therefore, there is a need to compare the returns versus the cost of education to make optimal decisions. Estimating the returns to education for any population segment is useful in making decisions on the optimal schooling level at both a personal as well as societal level. From a policy standpoint, estimating returns to education ...

Walmart is a multinational store that was founded on the idea of selling inventory at a low price (selling more for less). This selling concept has propelled the retailer to be among the largest across the globe. The firm enjoys a presence in over twenty-eight countries. Its network is made up of eleven thousand five hundred stores and eleven e-commerce sites (Walmart, 1). The adoption of e-commerce has enabled it to tap the growing demand for internet shopping. In the recent financial year, the firm revenue was $482.1 billion. The continuous growth and increasing economic value of the retail ...

Net present value

NPV is gotten by subtracting cash outflows from the sum cash inflows from the project investment. To get current values, a discounted rate used which is the rate of return or the opportunity cost of capital. The opportunity cost of capital is the rate of return that an investor could earn if the money would have invested in financial assets of equal risk (Gollier, 2009). It’s therefore, the return that an investor would expect to receive. It’s vital in capital budgeting because of the determination of the expected profits from the projects to be invested if approved ...

Price: 438.31 GBP Date: 4 May 2016

Company profile: Aviva Plc provides insurance, savings, and investment products to over 31 million customers around the world (Aviva, 2016). Aviva is a composite insurance that combines life insurance, general insurance, and asset management (Aviva, 2016). Aviva operates worldwide with its headquarters in London United Kingdom (Yahoo! Finance, 2016).

One-year Price chart:

Figure 1: One-Year Aviva Price Chart

Source: Bloomberg

Price performance: Valuation (by DDM and by comparables):

Analysts’ recommendation:

Introduction 3 Price performance and news analysis 3 News 4 Valuation 5 Multi-stage DDM 5 SML analysis 6 Discussion of pros and cons of the methods used for the above valuation 7 Conclusion 10

Appendix 13

Exhbit1: ...

Investment analysis

In order to choose which option is the best, there is a need to calculate at first Net Present Value and pick the one with the biggest value: Option 1: to add a new window: NPV (1) = 44,0001,15 + 44,0001,15 x 1.15 + 44,0001,15 x 1,15 x 1,15 – 75,000 = 38,260 + 33,270 + 28,930 – 75,000 = 25,460 $.

Option 3: to build a new stand: NPV (3) = 70,0001,15 + 70,0001,15 x 1.15 + 70,0001,15 x 1,15 x 1,15 – 125,000 = 60,869 + 52,930 + 46, ...

Abstract 2

Introduction . 3 Lessons from Capital Market History . 3 Return, Risk and the SML .. 5

Cost of Capital 7

Financial Leverage and Capital Structure Policy 9 Conclusion 11 Abstract This paper entails a critical analysis and discussion of the components of the corporate finance and its subsequent application in the contemporary business environment. The discussion and analyses contained in this paper are centered on the book by Ross, Westerfield and Jordan (2012) which is titled: “Fundamentals of Corporate Finance.” In this book, different aspects and components of this subject of corporate finance have been discussed in great depth and this paper essentially entails ...

Re:

Anyone who needs to perform time value of money calculations Definition A financial calculator is an instrument used to perform time value of money calculations in the finance and business environment The purpose of a calculator is to perform math calculations. If you press the “2” key, hit the “+” button, press the”2” key again and hit the “=” button, you will see the number 4 as the result. Of course we don’t need calculators for simple calculations like this. We need them for the more complicated ones that could take hours to do by hand, thus increasing ...

Q1 Answer

The risk in financial investment refers to the events that may affect the attainment of a financial goal. On the other hand, Paul (2012) defines the rate of return as the gains from the investment that an investor receives after a given duration of time. Both risk and rate of return can be said to be directly related. This is to mean that when the risk of investment is very high, then the rate of return is very high. However, this does not mean that always when an investor takes high risks will gain high returns, He or she ...

Introduction

In financial management, the finance managers primarily make several kinds of decisions including investment decisions, financing decisions, routine decisions and dividend decisions. For this case, the paper focusses on dividend decisions. The paper shall evaluate the theoretical framework and empirical evidence that examines the relationship between the firm’s dividend policy and its market share price. Quantitative business analytics refers to application of mathematics and statistics to solve business problem. From the definition, it means that one to define the business problem to solve first then apply the relevant techniques. In this case, the paper hopes to understand the ...

Evaluation of franchise investment

The franchise investment project is evaluated based on the net present value and the internal rate of returns. The available information is used to determine the NPV and IRR of Schneller Zug and Kyuko Densha. The two measures are used to assess whether each project is viable. NPV and IRR also help in choosing the better project between the two. NPV and IRR are determined using the cost of capital for Javelin Railway Co.

Determination of the cost of capital

The cost of capital is the return investors require from investment to secure funding. It is the minimum return projects must generate to be funded ...

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 ...

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 ...

Introduction

We know that the money we are having in hand now is more valuable than the money collected later. This is due to the fact that we can make money right now by putting the money in business, purchasing something, selling it later like stocks or depositing in the bank to earn interest. But the future money is always less valuable. This is known as time value of money (TVM). Future money is always less valuable due to inflation. So how do we compare the value of money now and the value of money in the future. This is ...

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 ...

Net Present Value

The Net Present Value is used in estimating the potential value of every project by applying the discounted cash flow valuation that requires an estimation of the size and time of all cash flows that increases from the project (Ehrhardt & Brigham, 2016). However, NPV is affected greatly by the discounting rate. Therefore, making a selection on the proper rate that is sometimes known as the hurdle rate is essential during decision making. Moreover, this should make a reflection on the riskiness of the investment because it is typically measured by the unpredictability of cash flows. Therefore, it must take ...

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 ...

Summary

Chesapeake Energy Corporation was incorporated in 1989 and trades at the New York Stock Exchange under the Ticker Symbol (CHK) (Bloomberg). The company operates in the oil and gas industry. The company share price has declined form a 52-week high of $16.98 to a 52-week low of $1.50. As at April 4th, the share closed at $3.86. Over the past 1 year investors have lost 74.46% of their wealth. The share performance is 75.40% lower than the market return (S&P Index). The share price is likely to experience further declines and therefore recommend investors to sell of the company ...

Question 1: Olter’s Beta coefficient

Olter’s Beta can be determined using the Capital Asset Pricing Model. The required return on the average stock is the market return while the average return on Olter’s stock is Olter’s required rate of return. Beta = (Expected return – Risk-free rate)/ (Market return – Risk free rate) = (13-6)(13-6) = 1.0

Question 2: Effect of Beta coefficient on stock price

Beta is a measure of risk and gives the variability of a stock’s return (price changes) in relation to the variability of the overall market. Since it represents the stock’s risk, Beta influences the prices of stocks. Under the Capital Asset Pricing Model, Beta is ...

Overview of the performance

According to an article published on Market Watch Samsung Electronics reported that the net profit of the company rose by 5.2% which could be estimated to $1.8 Billion. The results were achieved by the successful sales of LCD panels. The sales of the company increased dramatically from 18.1 trillion won a year earlier to 21 trillion won comparatively. This rise which was observed in the share price of Samsung Electronics was 0.8% during the morning trade in Seoul (Kitchen, 2009)

The South Korean electronics giant Samsung Electronics announced an issues which the company was facing regarding the management shake ups. ...

Question one

Capital budgeting is a process that may be defined by proper understanding of the terms; capital which means the initial investment needed to kick start a business activity and budgeting which is the process of aligning resources to meet a given business goal. Capital-budgeting may be defined on the bases of the goals of a project, which are supposed to define the value of a project to the firm. Proper understanding of capital budgeting decisions is helpful in definition of the strategic decision of a firm.

Various processes should be taken into consideration while defining the use of capital-budgeting process useful in defining projects ...

ABSTRACT

The aim of this dissertation is mainly to analyzethe risk in the New York Stock Exchange using Statistical aspects and the computation of Value at Risk. The technique of Value at Risk or Value at Risk (VaR) is a methodology to standardize the calculation of the various risks that occur in a business e.g. banks, stock exchanges and corporations. The risk is defined as the probability of obtaining a result different than expected, the factors that will depend on the position of the entity, the risk factor under consideration and the time of calculation. Thus, the VaR seeks to establish quantitatively the ...

Answer 1)

With depreciation expenses cosndiered, the cash flow for second year was $624688. However, if there were no depreciation expenses, in such case the annual cash flow would have been: [Sales- Cash Expenses- Taxes]= $5,25,000 ii) If depreciation is excluded from the analysis, in such case this will increase the national income but will decrease the annual cash flow in the absence of depreciation.

Answer 2)

NPV Analysis is the most popular tool of capital budgeting analysis and aims at providing maximum value to the shareholders by accepting only those projects which have positive Net Present Value. ...

Profitability index is a variation of the net present value method. While NPV provides the absolute total amount for a project, the PI is a relative measure in terms of the ratio ...

Fiscal planning is the means of ensuring that one is making the best use of his or her money and help individual to prepare for their future. The planning may involve a range of activities, with strategies ranging from the short-term to the long-term (Garman & Forgue, 2011, p.21). A person may want to create a budget to enable him or start saving towards a future purchase, or they may be more concerned about guaranteeing their future financial security through retirement planning. Financial planning prevents a person from overspending by crafting and sticking to a sensible budget. It can also help people to avoid accumulating ...

- Conditions for investing in employee training

Employers engage in employee training under certain circumstances. When there is technological change as well as a new product to be launched in an organization, the employer has to ensure that the employees are familiarized with the new technology. It calls for training to ensure there is maximum operational efficiency. Also, in the event that the business is making constant losses, adequate training is mandatory to ensure that various costs are reduced thereby increasing the profit margins of the company.

In the event that new employees are hired or promoted ...

- Mention two of the most common capital budgeting methods, and list some situations where these methods are used more often. When it comes to capital budgeting, a lot of businesses follow academic theory, using the well-known methods of Internal Rate of Return (IRR) and net present value (NPV) practices to weigh new projects. As you can see in the article that a survey showed that the ‘respondents cited net present value and internal rate of return as their most regularly used capital budgeting techniques; 74.9% of CFOs always or almost always used NPV and 75.7% always or almost ...

Report to the CEO

Financial management is a broad filed; in which there are number of concepts are buried. Among number of concepts, the name of capital budgeting and investment appraisal is one of them, which has its own significance and importance. The financial statement of an organization is the end document of a company which analyzes and presents different financial information accordingly. Basically a financial statement is comprises on different things, which predominantly are, income statement, balance sheet, cash flow and statement of changes in equity. In this particular assignment, which is all about capital budget and investment appraisal technique, it is required to recommend ...

A dollar today is worth more than a dollar tomorrow

One of the most important concepts in finance is time value of money that means that money has its value. This means that a dollar in hand today will be worth more than a dollar a person will have in the near future. For example, that a dollar that is invested today in saving account or in some bond will have an interest added in it on an annual basis that will eventually result in the rise of dollar value in the future. (Business Finance Online, 2013) This occurs because of:

- Risk and Uncertainty is always present because no one can pre-determine ...

Introduction

International Airline Group (IAG) is a British-Spanish based multinational airline holding company with its headquartering located in London, United Kingdom (Menter, 2009). In terms of size and financial competitiveness, IAG is known as the seventh largest company of the world. The shares of the company are actively trading in the London Stock Exchange (LSE) and it is a major constitute of Financial Times Stock Exchange (FTSE-100) Index. The company earned net revenue amounting to €18,675 million in the year 2013 with net profit amounting to €147 million in the same year. The main perspective of this assignment is ...

Introduction

Every business tries to enhance its productivity from different standpoints and angle and every standpoint deems extremely important from the viewpoint of an organization in total. Analysts analyze an organization from different angles and with the help of different methods and tools. All of these tools are essential to analyze and assess the level of financial based initiation from different angles in total.

Among number of methods and tools to analyze the financial based competitiveness of an organization, the name of different amount of ratios is one of them. Different sorts of ratios are profitability ratios, liquidity ratio, efficiency ...

In capital evaluation a number of financial decision making options are used. The paper shall focus on the following capital investment decision making evaluation criteria Net Present Value, Profitability Index and the Internal Rate of Return. The paper shall discuss the definitions, the advantages and the disadvantages in each of the criterion for capital evaluation.

The Net Present Value (NPV) is the capital investment evaluation method that considers the final outcome after the cash outflows have been deducted from the cash inflows. In other words, in NPV method, all the costs and incomes are considered and the difference calculated. The ...