Finance - 2116 Words

TEAM 5 AYSEL NAZIROVA BANU ALIZADA KHAVAR GULIYEVA KONUL AHMADOVA SHAFIGA MAMMADZADA SADRADDIN RZAYEV- CAPTAIN 1. RAINBOW PRODUCTS A. Rainbow should not purchase this equipment by looking at NPV as the purchase criteria because it seems that although IRR may give the false impression of 14.15% return on investment, when those cash flows get discounted at the rate of cost of capital, the total payback comes to $34,054 which means we are actually paying $946 more today compared to sum of the benefits we will get through labor costs reduction for 15 years. Machine Savings per year | $5,000 | Machine cost | $35,000 | Machine lifetime (yrs) | 15 | Cost of Capital ( r ) | 12.00% | | | Payback period | 7.00 |†¦show more content†¦In order for MBA Tech to invest $743.478 then Bean City will have to subsidize $256, 522. Subsidized Payback Period | Total Investment Required | City subsidization | 2.00 | ($743,478) | ($256,522) | C) Our Current NPV is -$37,666, and in order for MBATech to incur positive NPV of $75,000 Bean City will have to provide a subsidy of $112,666. 1 | 2 | 3 | 4 | $309,783 | $258,152 | $215,127 | $179,272 | | | | | | | | | Current NPV | Subsidized NPV | City subsidization | | ($37,666) | $75,000 | ($112,666) | | D) Our Current ARR on this project is 24%, in order to bring ARR to 40% Bean City will have to subsidize $173,880. | Current ARR | Subsidized ARR | City Subsidization | | 24% | 40% | ($173,880) | | | | | Average Annual Cash Flow | $371,739 | $371,739 | | Investment/# of years | $250,000 | $206,530 | | Investment/2 | $500,000 | $413,060 | | * The best option would be the Plan C with bringing NPV to $75,000, in this alternative we will only subsidize $112,666 as an initial investment. For other paymentShow MoreRelatedFinance1352 Words   |  6 Pagesfinancial manager differ from the traditional financial manager? Does the modern financial managers role differ for the large diversified firm and the small to medium size firm? 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As the banking and finance industry has transformed, so has the process of how your money is handled. To accompany those changes, regulators and lawmakers create laws designed to protect consumers, banks, and the economy as a whole. As you will learn, the history of the bankingRead MoreFinance : Finance A Carry Trade Essay1144 Words   |  5 Pages In finance a carry trade is a strategy that consists of borrowing at a low interest rate currency to fund investment in higher yielding currencies. (Moffett) The country in which the investors borrow from is called the funding country and the country where the investment occurs is called the target country. (4) Carry trade is also termed currency carry trade; this strategy is speculative in that the currency risk is present and not managed or hedged. (Moffett) Although there are several complicatedRead MoreFinance998 Words   |  4 PagesPlant Improvements Total Investments: total investment in plant and equipment brought forward from the Production spreadsheet. Sales of Plant and Equipment : total sales of plant and equipment brought foraad from the Production spreadsheet. Common Stock * Shares Outstanding: The number of shares of common stock in the hands of shareholders. Reflect any issue/ retire stock transaction at the beginning of this year * Price Per Share: stock price as of yesterday’s close. Stock will be issuedRead MoreInternal Sources Of Finance And Finance Essay2349 Words   |  10 PagesInternal sources of finance: Internal sources of finance are funds that arise from within the business such as profits as they can be retained to grow the finance and selling assets. Retained profit Retained profit is the money kept in the company after paying dividends. It is used to reinvest in the business or to pay debt. It comes by a business after it makes profit and is kept separate to use in other ways such as expanding the business by developing new buildings or certain areas, buying new