We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Corporate Finance Essay Sample

essay
The whole doc is available only for registered users OPEN DOC
  • Pages:
  • Word count: 342
  • Category: cash

A limited time offer!

Get a custom sample essay written according to your requirements urgent 3h delivery guaranteed

Order Now

Corporate Finance Essay Sample

Investment in Assets and required returns
·Cash flow determination
·Non-DCF and DCF techniques
Case: Investment analysis and Lockheed Tri Star
Assignment Questions
1.Compute the payback, net present value (NPV), and internal rate of return (IRR) for this machine. Should Rainbow purchase it? Assume that all cash flows (except the initial purchase) occur at the end of the year, and do not consider taxes. 2.For a $500 per year additional expenditure, Rainbow can get a “Good As New” service contract that essentially keeps the machine in new condition forever. Net of the cost of the service contract, the machine would then produce cash flows of $4,500 per year in perpetuity. Should Rainbow Products purchase the machine with the service contract? 3.Instead of the service contract, Rainbow engineers have devised a different option to preserve and actually enhance the capability of the machine over time. By reinvesting 20% of the annual cost savings back into new machine parts, the engineers can increase the cost savings at a 4% annual rate.

For example, at the end of year one, 20% of the $5,000 cost savings ($1,000) is reinvested in the machine; the net cash flow is thus $4,000. Next year, the cash flow from cost savings grows by 4% to $5,200 gross, or $4,160 net, of the 20% reinvestment. As long as the 20% reinvestment continues, the cash flows continue to grow at 4% in perpetuity What should Rainbow Products do? 4.Using the internal rate of return (IRR), which proposal(S) do you recommend? 5.Using the net present value rule (NPV), which proposal(s) do you recommend? 6.How do you explain any difference between the IRR and NPV rankings? Which rule is better? 7.Which of the four subsidy plans would you recommend to the city if the appropriate discount rate is 20%? 8.What is the net Present Value of this project?

9.How many shares of common stock must be issued (at what price) to raise the required capital? 10.What is the effect of this new project on the value of the stock of the existing shareholders, if any?

We can write a custom essay

According to Your Specific Requirements

Order an essay
Get Access To The Full Essay
icon
300+
Materials Daily
icon
100,000+ Subjects
2000+ Topics
icon
Free Plagiarism
Checker
icon
All Materials
are Cataloged Well

Sorry, but copying text is forbidden on this website. If you need this or any other sample, we can send it to you via email.

By clicking "SEND", you agree to our terms of service and privacy policy. We'll occasionally send you account related and promo emails.
Sorry, but only registered users have full access

How about getting this access
immediately?

Become a member

Your Answer Is Very Helpful For Us
Thank You A Lot!

logo

Emma Taylor

online

Hi there!
Would you like to get such a paper?
How about getting a customized one?

Can't find What you were Looking for?

Get access to our huge, continuously updated knowledge base

The next update will be in:
14 : 59 : 59
Become a Member