Internal rate of return

A. Suppose the company is considering a potential investment project to add to its portfolio. Calculate the following items: Before Home Depot calculates the net present value (NPV), internal rate of return (IRR), terminal value (TV), and modified internal rate of return (MIRR) of its newest potential investment project, the company must first calculate its free cash flows. The calculation begins by subtracting the operating costs and the 20% depreciation expenses from the cash flows…

is necessary to analyze net present value and internal rate of return to gauge return on investment. DT LLC has decided to use three depreciation methods – including straight-line, sum-of-the-year’s digits, and MACRS depreciation – to determine the profitability of XYZ’s investment. DT LLC’s accounting department believes analyzing the computer system investment through three separate depreciation methods would give a comprehensive overview of the return on this investment. DT LLC used the…

investors and is not at all affected by the total capital structure of the business.  Terminal value (TV) – It depicts the value at the end of the Free Cash Flow projection period (which is also known as the horizon period).  Discount rate – This is the rate which is used to discount the projected Free Cash Flows and the respective terminal value to their present values. Cash Flow= Net profit-(Required change in working capital+ Investment) Cash Flow (year 1) =…

According to the CAPM, how would Sports Experts’ required rate of return be affected by an expansion into Thailand? How do you reconcile this result with your answer to question a? Do you think Sports Experts should use the required rate of return resulting from the CAPM to discount the cash flows of the Thai subsidiary to determine its…

major costs of the firm to develop. The terminal value is calculated at the time of liquidation and ceases the business that provides the fair value to firm at fix time period of 5 to 10 years. It was assumed that the expected rate of return was exceeding than required rate and company has enjoyed the benefit of growth. The net present value measures the positive performance of firm that they had decided to go ahead with bearing unsystematic and specific risk. VC methodology is the popular…

individual project and is, therefore, more rational in choosing individual projects. one of the major advantage of using risk adjusted COC is that an investor gets from this approach is that it evaluates the return after accounting for the risk accompanying the investment. The risk adjusted return on capital also helps in forming a steady outlook of profitability across not only business sectors but industries as well. It provides a wider view of the projects that are to be evaluated in order to…

of a reward that is separate from the act itself. The most common example is financial payment for services rendered. Research often concludes that intrinsic motivation is much more useful for motivating creativity and innovation than extrinsic motivation. In fact some authors (Amabile, 1997; Fernandez and Moldogaziev, 2012) suggest that extrinsic motivation, especially in the form of rewards for short-term performance, can result in a narrower view of the task and can cause employees to avoid…

(1) Sun Spots case (10 points). Refer to the case on p. 254 in Daft 6th edition and answer these questions: • What specific steps would you take if you were a senior manager in this situation? Explain why for each step. • Do you consider it motivational and equitable when a substantial part of an employee’s pay is bonus based on company results in a highly uncertain environment? Why? As a senior manager in this situation, one should reexamine how SunDax came to be in their current predicament…

volume and return on investment (ROI). With his arrival, a decentralizing policy in which each branch manager was responsible for the activities of the division in their geographical area was implemented.…

financial performance can be found. Three-Year Returns The first look at these two companies is in regards to their three-year returns. These returns are based off a random seven-day stock period in order to determine how these two companies compare. Under Armour demonstrated a three-year return of 4.28% under the tab, Under Armour Stock Prices in W2 in cell D44. Based on this three-year return, Under Armour is performing moderately and an investor would see a return on their investment over a…