Discounted cash flow

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  • Corporate Finance Case Study

    Using a spreadsheet, financial calculator, or trial and error to find the root of the equation, we find that: IRRNX-20 = 20.34% The IRR criteria implies accepting the NX-20. c. The profitability index is the present value of all subsequent cash flows, divided by the initial investment, so the profitability index of each project is: PINP-30 = ($185,000{[1 – (1/1.15)5 ] / .15 }) / $550,000 PINP-30 = 1.128 PINX-20 = [$100,000 / 1.15 + $110,000 / 1.152 + $121,000 / 1.153 + $133,100 /…

    Words: 204327 - Pages: 818
  • Equity Vs Equity Valuation

    There are two variants of the DCF valuation: the equity valuation and the firm valuation. In fact, we can either use the free cash flow to the firm (FCFF), which is the after-tax cash flow that accrues from the firm's operations, net of investments in capital and net working capital, or we can use the free cash flow to equity (FCFE) that is the cash remaining after a firm meets all of its debt obligations and provides for necessary capital expenditure. Discounting the FCFF at the cost of capital…

    Words: 834 - Pages: 4
  • Cash Flow Analysis Essay

    Results A cash flow analysis for establishing a high density apple orchard is contained in Table 5. while one for a standard density apple orchard is contained in Table 6. A cash flow analysis shows the cash costs required to establish the orchard (Mowen, Hansen & Heitger, 2014). Cash costs include labor, trees, the irrigation system, chemicals, bee hives, equipment repairs and property taxes. The cost of the land is not included, since the orchard is paid off from income from another…

    Words: 703 - Pages: 3
  • Miller Modigliani Case Study

    1. State the Miller Modigliani (MM) dividend irrelevance proposition Modigliani and Miller (MM) proposed that in an ideally simple and perfect capital market, shareholders are indifferent between dividend and capital gains, and the value of a company is determined solely by the earning power of its assets and investments. Focuses more on firm value but not on firm risk. MM argued that if a company with investment opportunities decides to pay dividend, so that retained earnings are insufficient…

    Words: 1034 - Pages: 5
  • Ocean Carriers Inc.: Case Study: Ocean Carriers Inc.

    analysis is to determine whether Ocean Carriers should launch the two year production of a new capsize carrier incurring costs of $39 million. To thoroughly analyze this decision, various factors should be considered such as net present value of future cash flows, current and future expectations of supply and demand determining costs of production and expected revenues from future orders. It is recommended to minimize costs that Ocean Carriers consider producing the capsize carrier in Hong Kong…

    Words: 1086 - Pages: 5
  • Importance And Importance Of Financial Planning

    Accounts affected: cash, equity, Issued Share Capital (par value £1 per share), shares B. Cash increase, equity increase, Issued Share Capital (par value £1 per share) decrease by £3,000; shares increase by £7,000 C. Cash will increase by (3000 shares x £1) = £3,000, Issued Share Capital (par value £1 per share) decrease by £3,000; shares increase by £7,000 and equity…

    Words: 5320 - Pages: 22
  • Viatical Settlement Case Study

    In general, viatical settlements are ethical. In the case of a viatical settlement, it is simply an exchange of cash today for payment in the future, although the payment depends on the death of the seller. The purchaser of the life insurance policy is bearing the risk that the insured individual will live longer than expected. Although viatical settlements are ethical, they may not be the best choice for an individual. In a Business Week article (October 31, 2005), options were examined for a…

    Words: 24287 - Pages: 98
  • Case Study: Proforma Cash Flows And Valuation

    Proforma Cash Flows & Valuation. The Gordon Company is considering starting up a new business line of paint. The equipment required to produce the paint will cost $1,600,000. It will cost an additional $200,000 to ship, install and prepare the equipment for operation. The cost of materials in permanent working capital amount to $320,000. They anticipate training expenditures of $30,000 that must be paid prior to operating the equipment. Marketing representatives say that the company should…

    Words: 767 - Pages: 4
  • The Gordon Growth Model: The Dividend Discount Model

    Dividend per share for the first 5 years has to be discounted back to t=0 (present value) as follows: Year Growth Rate Dividend per share PV at t=0 Formula 1 25% 2.50 2.27 2.50 / (1 + 0.10) 2 20% 3.00 2.48 3.00 / (1 + 0.10)2 3 15% 3.45 2.60 3.45 / (1 + 0.10)3 4 10% 3.80 2.60 3.80 / (1 + 0.10)4 5 5% 4.00 2…

    Words: 794 - Pages: 4
  • Cash Conversion Cycle Theory: The Cash Conversion Cycle Of Business

    the following theories: 2.2.1 Cash Conversion Cycle Theory Cash conversion theory was propounded by Blinder and Maccini (2001), cash conversion cycle theory is the time it takes a company to convert its resource inputs into cash. It evaluates how effectively a firm is managing its working capital. In most cases, a company acquires inventory on credit, which results in accounts payable. A firm can also sell products on credit, which results in accounts receivable. Cash, therefore, is not…

    Words: 888 - Pages: 4
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