For company B, the risks associated with cash flows are higher than that for company A, and are in the order of 11%, but nevertheless, the IRR on the cash flows is higher than the minimum required rate of return of 11% making this investment also attractive. As these two projects are mutually exclusive, and considering only IRR investment selection criteria, purchase of company B. with IRR of 14,305% is more profitable investment than purchase of company A with IRR of 13,052%. The IRR method does not consider the size of the initial investment necessary to achieve this rate of return on the cash flows and thus is not a perfect investment decision tool, as typically higher initial investment require much higher minimum rates of return to motivate investor sacrifice this capital and enter into the project. The payback period reflects the number of years it takes for a specific cash flow from investment to amount to initial investment into this project. If the cash flows form the project are constant in the time, the payback period formula is simply the result or the ratio of initial investment or capital spent to annual cash flows. In the subject example, the cash flows are not constant in time, and the capital initially spent is subtracted from net annual cash flows to estimate the year in which the cash flows will break even. For company A, the payback period is 4 years, where already in the 4th year the company will achieve $28,174 above the initially spent amount. For company B, the payback period is also 4 years, and in the 4th year of operation the company will achieve $42,236 above the initially spent amount. Considering the fact that both company A and B. require the same initial investment, company B. is more profitable and has better payback period. The payback period investment selection criteria is flawed by...
Also, payback period does not consider time value of money and thus the risks associated with achieving the cash flows for different projects, and thus can favor short-term riskier projects over more long-term but sustainable project. On the other hand, payback period is good investment selection criteria for the companies that have tight capital requirements and need to recover their initial capital outlay rather fast.
Capital Structure Analysis: Mattel, Clorox and MGM Resorts According to a report in the Journal of Applied Economics, companies with earnings/price ratios that are higher than their estimated after-tax borrowing costs, like Mattel, demonstrate that managers of publicly traded companies are in fact reluctant to make capital structure changes. Clorox, and MGM Resorts International also fit into this category, per my hypothesis. I suggest a radical move for these risk-averse managers
budget components (Policy Document, Financial Plan, Operating Plan, Communications Device), rank them in order of importance in your opinion and justify your rank order. Rank 1: Policy Document: The Policy Document is synonymous with a Budget Document. The budget document can be a line item detailed listing of every expenditure for every department within the government operation. The document conveys the policies and procedures of the administration and outlines its
Network Support Technologies Case Study Project Scope, Schedule, and Budget Type and Configuration of the Network Hardware Specifications Software Specifications User Policies and Legal Issues Life of Equipment Project Costs Providing an Online Radio Service Second Life Information is now growing at speeds never thought imaginable. Today's world of Information Technology (IT) has provided the dynamic platform in which exponentially growing information resources emerge. This complex arena of knowledge management provides tremendous advantages to modern society. It allows individuals greater
Fictuality -- Each mini project separately consist 2 pages APA format. 5 mini project total pages. Additionally a final project totals 10 pages (based mini projects). Final project combining mini project a final project presented a company (management) cut paste. Consumer decision-making is a process that often involves the word-of-mouth testament of a product or service where the opinion from the use of a consumer is favourable. The process seductively involves
Equipment Needed Market Analysis Situational Analysis Target Market Segmentation Geographical Segmentation Demographic Segmentation Market Targeting Differentiation and Positioning Strengths and Weaknesses of Venture Market Opportunities and Threats Competitor Analysis Management Plan Founders Experience Organizational Chart Financial Plan Project Investment Startup Costs Essentials of financial Plan Pro forma income statement Pro forma Balance Sheet Assessment of Risk External risks Financial Risk Contingency Plan Production Plan Manufacturing Process Machinery & Equipment Equipment Required Operational Plan General Operating Hours Flow of order for goods and services Layout Human Resource Technology utilization Abstract The paper is a business plan for a new business which is aimed to create a new
Banking In the 1899 case of Austen v United States Bank 174, the Supreme Court defined a bank in the following words: "A bank is an institution, usually incorporated with power to issue its promissory notes intended to circulate as money (known as bank notes); or to receive the money of others on general deposit, to form a joint fund that shall be used by the institution, for its own benefit,
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