Capital Budgeting: The method of evaluating long-term investment and taking decision regarding selection of the particular investment which seems profitable to the investor and add value to their investment. It includes evaluation related to the business opportunities and the deciding whether they are profitable or not. The capital budgeting helps decide cash flow of the project. Net Present Value : It is a one of the technique under capital budgeting which helps to decide whether the investment to made on the long term investment are profitable or not. It is difference of present value of cash incoming from the project and present value cash outgoing in project in particular time period. To determine: Net present value of project.

Question

Want to see the full answer?

Answer 1

Question

Chapter 9, Problem 25P

Summary Introduction

Capital Budgeting: The method of evaluating long-term investment and taking decision regarding selection of the particular investment which seems profitable to the investor and add value to their investment. It includes evaluation related to the business opportunities and the deciding whether they are profitable or not. The capital budgeting helps decide cash flow of the project.

Net Present Value: It is a one of the technique under capital budgeting which helps to decide whether the investment to made on the long term investment are profitable or not. It is difference of present value of cash incoming from the project and present value cash outgoing in project in particular time period.

To determine:

Net present value of project.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Crenshaw, Incorporated, is considering the purchase of a $367,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method. The market value of the computer will be $67,000 in five years. The computer will replace five office employees whose combined annual salaries are $112,000. The machine will also immediately lower the firm's required net working capital by $87,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 22 percent. The appropriate discount rate is 15 percent. Calculate the NPV of this project. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. NPV Answer is complete but not entirely correct. S 103,141.80

Your firm is contemplating the purchase of a new $610,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $66,000 at the end of that time. You will save $240,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $81,000 (this is a one-time reduction). If the tax rate is 21 percent, what is the IRR for this project? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. IRR %

QUESTION 1 Examine the information provided below and answer the following question. (10 MARKS) The hockey stick model of start-up financing, illustrated by the diagram below, has received a lot of attention in the entrepreneurial finance literature (Cumming & Johan, 2013; Kaplan & Strömberg, 2014; Gompers & Lerner, 2020). The model is often used to describe the typical funding and growth trajectory of many startups. The model emphasizes three main stages, each of which reflects a different phase of growth, risk, and funding expectations. Entrepreneur, 3 F's Debt(banks & microfinance) Research Business angels/Angel Venture funds/Venture capitalists Merger, Acquisition Grants investors PO Public market Growth (revenue) Break even point Pide 1st round Expansion 2nd round 3rd round Research commercial idea Pre-seed Initial concept Seed Early Expansion Financial stage Late IPO Inception and prototype Figure 1. The hockey stick model of start-up financing (Lasrado & Lugmayr, 2013) REQUIRED:…