Finance
This information will affect the opportunity cost of the decision, because the company will not have any access to the Chilean market. Well, more likely it will need to sue via the WTO over the policy, so it would eventually gain access to the Chilean market, but until that happens would be shut out. However, there are always opportunity costs associated with any decision. The decision as to whether or not the company should set up in Chile has to be made based on the merits of that decision alone. Making decisions based on speculation and worst-case hypotheticals, in particular when those are opportunity costs, is poor decision-making practice. Thus, this rumor about Matsubara should not have any influence on the decision with respect to setting up in Chile. The decision is still that setting up in Chile is expected to have a positive NPV, and should be undertaken.
Normally, it is advised that opportunity costs are included in an NPV calculation, but to do that the opportunity cost has to be legitimate, not hypothetical. Hypothetically, we could take the money not invested in Chile, go to Vegas, and win $100 million hypotheticals should only be included if they are...
1 0.107 0.107 1.788005 4.37% 7.24% D 20 Lev 1.2925 0.120475 0.11038 1.653411 4.05% 7.22% D 50 Lev 1.87 0.1609 0.16045 -0.1731 -0.44% 7.05% 5. The only project that is unacceptable is Project D. At the 50% leverage level. This has a negative NPV. The other projects at each leverage level all have positive net present values. The following graph shows the NPVs for the different projects: 6. My objective in making this decision is to maximize firm value. The projects are mutually exclusive. I would use NPV as the main
Capital Budgeting Financial Analysis of a Mineral Resources Opportunity on the North Ridge of Mt. Zircon Situation Overview Engineers working for Peru Resources have proposed a new mine on the North Ridge of Mt. Zircon. They have discovered a vein of transcendental zirconium ore that led them to believe that there was a sufficient amount to produce roughly 340 tons of this mineral per year for a seven-year period. Furthermore, it was believed
Any discount rate lower will yield a positive net present value, up to $126,000. Part II. For capital budgeting decisions, NPV is a better metric. NPV and IRR are very similar in many respects, and they carry the same reliance on the same underlying assumptions about the underlying cash flows. Additionally, they both relate to the company's cost of capital. IRR is typically used as a go/no-go threshold, whereas NPV measures
Some people compare buying a car to renting an apartment: "you pay a monthly fee to use it but don't own it -- and aren't making payments toward ownership. The leased vehicle remains the property of the lessor -- the company that issued the lease" (Peters 2009). However, cars depreciate rather than appreciate in value, unlike real estate. Monthly lease payments are cheaper than payments on a new car,
Approximately 19% of the short-term liabilities in the form of notes payable and other short-term debt. The long-term liabilities consist of long-term debt and other miscellaneous liabilities. The debt portion of this represents approximately 39% of the total long-term liabilities. Johnson & Johnson has issued notes onto the market that mature in 2017, comprising the bulk of the long-term debt. The calculate the market value capital structure of JNJ, we need
But even with no cost savings whatsoever, this project has a positive NPV. We can see, therefore, that the greatest area of sensitivity is with the terminal value. The terminal value at present is worth $143 million of the NPV. If we break down the variables that go into the terminal value, however, we notice that the cost savings are critical. If SGA expense is not reduced, then the terminal
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