Home / Business / Finance

QUESTION

Capital Budgeting

1) Exercise The Investments Committee of an important food company is studying the possibility of building a new production line for botteled natural fruit juice. During the last year the company has produced small batchs of the product in a pilot production line and has conduced acceptance tests with selected clients obtaining very promising results. The new production line would be installed in factory facilities that the company already owns and does not use, and will only require some conditioning to install the new equipment.

Operations Department: Batch Production Line for Bottled Juice Estimates

-The Chief Operating Officer has provided the following detailed information:

• Equipment and tooling (includes bottelling), 500000 euros. 0.5% prompt payment discount offer available.

• Transportation of equipment, 5000 euros. Includes insurance.

• Incurred costs for the pilot line, 75000 euros. Fee to be paid for project proposal to marketing consultancy included.

• Conditioning of facilities, 25000 euros. Electrical work upgrade.

• Depreciation, 5 years. Straight line depreciation schedule.

• Residual value (selling price) of equipment, 150000 euros. Estimated.

• Fixed Operating costs, 300000 euros. Full annual fixed costs including personnel and maintenance.

• Variable Cost, 0.45 euros per bottle. Juice concentrate + recyclable bottles + packaging.

Marketing & Sales: Natural Juice Estimates

- Following the information provided by the Marketing department.

• 1000000 bottles the first year of operations (net after returns).

• 20 percent annual growth every year (units).

• 0.9 euros per bottle (net after promotions & discounts).

Finance & Administration: Natural Juice Project Estimates

- Based on the information from Marketing and Operations, the finance and administration department has prepared the following assumptions in order to analyze the investment and prepare a financing proposal.

• The company controller has estimated the requirements of Working Capital for the new operation:

– receivables account amount will be estimated considering 90 average credit days

– payables account amount will be estimated considering 30 average payable days

– the inventory amounts needed to avoid out-of-stock lost sales will be estimated with 30 days of stock for raw materials and 15 days for inventory of finished product. For both cases inventory units are valued at variable cost of 0.45 euros per unit. Net working capital of the first year of operations will be considered an initial investment outlay (year zero), and the investment in working capital will be fully recovered the last year (year 5).

• 5-years horizon project • applicable tax rate of 30 percent

• 75 percent of debt and 25 percent of equity

• the loan to be fully returned in 5 years with an equal payment amortization schedule. Interest rate will be 14 percent with flotation cost of debt of 0 percent.

• the necessary equity will be raised by issuing new stock in the market. The dividend yield will be in line with that of equities with similar beta, 16 percent, and the flotation cost of equity will reach 6.25 percent that will be capitalized and amortized during the whole 5-years-life of the project.

• reinvestment rate is 5 percent.

• risk free rate 3 percent.

• for risk analysis, will consider three scenarios for Net Present Value,

      – optimist: 1.15×NPV with a probability of 40 %

      – neutral: 1×NPV with a probability of 40 %

      – pessimist: 0.85×NPV with a probability of 20 %

• the utility function that will use for the firm is U = NPV2

Answer the following questions in the task questionnaire by Tuesday 21 of March at 23:59. Upload your excel file with the model and answers in the last question.

(a) InvestmentProject.SelecttheelementsthatmakeuptheInitialInvestmentOutlayandcalculate the corresponding initial cash flow (cf0). Which is its value?

(b) Investment Project. Working Capital. Whithin the initial investmet outlay, which is the amount needed for working capital?

(c) Investment Project. Which is the investment cash flow generated the last year of operations (year 5), cf5, including the terminal cash flow ?

(d) Financing Project. Which is the Debt Financing Cash flow of the first year of operations, cf1?

(e) Financing Project. Which is the Equity Financing cash flow of the fourth year of operations?

(f) Aggregated Project. Prepare the sequence of cash flows of the aggregated project. The sum of cash flow residuals of your model should be around 670159 euros (check your work in case obtain significantly different). Is the project financially balanced?

(g) Which is the Net Present Value (NPV)? Use as discount rate a cost of capital of 12.37 percent.

(h) Which is the Internal Rate of Return (IRR)?

(i) Which is the Net Terminal Value (NTV)? Assume a reinvestment rate of 5 percent.

(j) Calculate the pay-back period rounded-up to years.

(k) Calculate the profitability index.

(l) Risk Analysis. Which would be the NPV of the project if instead of using the cost of capital of 12.37 uses a discount rate estimated with the Capital Asset Pricing Model (CAPM) considering a risk premium (Market Return - Risk Free Rate) of 15 percent, a risk free rate of 3 percent, and a beta of 1.0?

(m) Risk Analysis. The Certainty Equivalent of an uncertain cash flow is the minimum (certain) amount that an investor is willing to accept in exchange of the uncertain cash flow. Which is the certainty equivalent for the 206162 euros cash flow calculated for the third year of the investment project? Use for your calculation the Risk Adjusted Discount Rate estimated with the CAPM which is 18 percent, and the risk free rate of 3 percent. 2

(n) Scenario Analysis. Considering the optimistic: 115 percent of NPV, neutral: 100 percent of NPV and pessimistic 85 percent of NPV, together with their respective probabilities of 40, 40 and 20 percent, calculate the Expected NPV of the project. Use the NPV calculated with the cost of capital (question 7).

(o) Scenario Analysis. Considering the same three possible scenarios, which is the volatility of the NPV?

(p) Scenario Analysis and Utility Function. The risk preference of the firm is stated by its utility function. The utility of the certainty equivalent is equal to the expected utility of the uncertain value. Which is the certainty equivalent of the NPV?.

(q) Which is the Risk Premium that relates the certainty equivalent of the NPV and the Expected NPV?

(r) Has the investor either a risk averse or a risk seeking profile?

(s) Sensitivity analysis. Which is the break even for units sold? Express as units to be sold in year one and growing at the 20 percent rate annually as stated in the model.

(t) Upload your excel workbook which apart from your data, model and calculations should include one sheet with the answers only.

Public Answer

TI9VFN The First Answerer

Related Questions

Using LC-3 Programming Exercise 1 Use .BLKW to set up a remote array of 10 values, starting at memory location x4000, as in lab 3. Now programmatically populate the array with the numbers 0 through 9 (note - NOT the characters '0' through '9'!) – i.e. hard-code just the first value (0), then calculate the rest one at a time, storing them in the array as you go. Remember the proper way of setting a register to 0! After you've stored them all, grab the seventh value (i.e. 6) and store it in R2. Clearly, you can't access this location via a label, so you'll need its actual address. How will you obtain that? And how will you use that address to get the value stored there? As always, step through your program and examine the values as they are stored in the array, and examine the final value stored in R2, to make sure your program works as expected. Exercise 2 You'll notice that Exercise 1 didn't ask you to output to console the array you built. Why not? Because as you know by now, numbers are not characters! So now copy your exercise 1 code into lab4_ex2.asm, and add an output loop, making it output the characters corresponding to the numbers stored in your array. Exercise 3 Let's try another modification of our well-used array program from Exercise 1: This time, instead of calculating and storing the numbers from 0 to 9 in the array, calculate and store the first ten powers of 2, starting with 20 = 1 in array index 0. Finally, grab the seventh value (26) from the array, and store it in R2. In order to do this, you will have to figure out how to calculate powers of 2. Some hints: Mathematically speaking: How do I obtain 2n+1 if I know 2n? What LC-3 operation could I use to multiply a number by 2? As always, place a breakpoint in your program, and step through it, examining the values as they are being stored in the array, and examine the final value stored in R2,  to make sure your program works as expected. Pay attention to both the decimal and hex representations of the values being stored. You already understand that you can't simply output the values in the array to the console “as is”, so we have to manipulate them somehow to turn them into characters. But this time all but the first four are multi-digit numbers when represented as decimal values, so our trick from the last exercise won't work – it can only convert the numbers from 0 to 9 into the single-digit ascii characters '0' through '9'.  Exercise 4 For now, we will instead observe what happens if we attempt to do what we just said can't be done - output the contents of the array "as is", i.e. as if they were ascii codes (which they are not!). Copy your exercise 3 code into your lab4_ex4.asm file, and add a second loop that loads the content of each element of the array into R0 and outputs it to the console using OUT. Now place a breakpoint at the start of your display loop and step through it: You will need to keep an eye on the Console to understand what is going on!! Please add comments!!!
7. The number of surface flaws in plastic panels used in the interior of automobiles has a Poisson distribution with mean of 0.04 flaws per square foot of plastic panel. Assume automobile interior contains 10 square feet of plastic panel.(a) What is the probability that there are no surface flaws in an auto's interior?(b) If 10 cars are sold to a rental company, what is the probability that none of the 10 cars has any surface flaws?(c) If 10 cars are sold to a rental company, what is the probability that at most two cars have any surface flaws?
Design a 4-bit UP-DOWN counter. It counts 1 to 7 only. The middle output is 1111. Include truth table, K-map with equation, and decoder implementation. Please answer fast 20 mins left
Complete MS Project Exercise 2 on Appendix A: Brief Guide to Microsoft Project Professional 2016 2. Continue performing the steps in this appendix, starting with the section called Developing the Schedule. Print out the following screens or send them to your instructor, as directed: a. Figure A-32. All task durations and recurring task entered b. Figure A-39. Network diagram view c. Figure A-46. Changing Work hours for tasks d. Figure A-56. Earned value report e. Continue performing the steps, or at least read them. Write a one-to-two page paper describing the capabilities of Project Professional 2016 and your opinion of this software. What do you like and dislike about it?
FINAL SEMESTER PROJECT in C++ Create a bank management system using the concepts of oop in c++ having the following features Creating new account Withdrawing money Depositing money Money transfer Credit card and Debit card payments Modifying account Deleting account View your account details View all account details Use the concepts of encapsulation, abstraction, polymorphism, Inheritance, Abstract-Concrete class, filing, Generic programming, Exception handling, vectors-sets-lists. The project should be of atleast 900-1000 lines.
Please DO NOT respond to this question by copy/pasting the code provided elsewhere on the site, none of those work. Thanks. Virtual Memory Lab This lab project addresses the implementation of page-replacement algorithms in a demand-paging system. Each process in a demand-paging system has a page table that contains a list of entries. For each logical page of the process, there is an entry in the table that indicates if the page is in memory. If the page is in memory, the memory frame number that page is resident in is indicated. Also, for each page, the time at which the page has arrived in memory, the time at which it has been last referenced, and the number of times the page has been referenced since the page arrived in memory are maintained. The page table data structure is a simple array of page-table entries (PTEs). Each PTE contains five fields as defined below: struct PTE { int is_valid; int frame_number; int arrival_timestamp; int last_access_timestamp; int reference_count; } Each process in the system has a page table that is simply an array of PTEs. Each process also has a pool of frames that is allocated. The frame pool for a process is represented as an array of integers, where each Integer represents the frame number of a frame that is free and is available for use by the process. Note that in order to get the frame number in the pool, you first need to access the integer in the array. This lab project aims to exercise the various policies for page replacement. In particular, we study the following three page-replacement policies: First-In-First-Out (FIFO) Least-Recently-Used (LRU) Least-Frequently-Used (LFU) In order to implement the above policies, we need to develop corresponding functions that process page accesses for a process. That is, for each process, given its page table, a logical page number being referenced and the free frame pool of the process, the functions should determine the memory frame number for the logical page. Also, the functions should modify the page table and the free frame pool appropriately. The details of the functions with respect to the different policies are described below. You need to develop code for these functions that implement the specifications. Place the code in a file called virtual.c. You should include the oslabs.h file.
About
About
Blog
Sitemap
More
Help Center
Become an Expert
Download App
Legal
Terms of Service
Privacy Policy
Honor Code
Copyright Policy
Contact
contact@studyx.im
Facebook
Instagram
Twitter
YouTube
Copyright © 2023 StudyX Inc