## CHECK THESE SAMPLES OF Net Present Value and Capital Expenditures

...Net Present Value and Capital Expenditures... Net Present Value and Capital Expenditures... of the due: Planning and Controlling Capital Expenditures Capital Expenditures According to Nice(2002), Capital expenditures imply outlays of cash that are mostly needed to upgrade a business asset. Capital expenditure can sometimes be referred to as capital spending or capital expense. Many public traded companies always list their capital expenditure annually in annual reports, with the aim that stockholders can see how the company is spending its money in planning long term decisions. Thus most companies hold on capital expenditures every year, in an attempt to continuously upgrade and improve things like facilities, vehicles, buildings and equipment. A ...

13 Pages(3250 words)Essay

...Net Present Value and Capital Expenditures... Net Present Value and Capital Expenditures... Primary Drawbacks of Net Present Value as Capital Budgeting Technique: This method or tool is used to assess the profitability of an investment opportunity. This tool is classified as one of the capital budgeting technique that is used by a firm to assess the viability of a project. The application of this tool is dependent upon the future cash flows that the investment opportunity or project will generate. This technique takes future cash flows generated by an investment opportunity and discount them to reach the present value of those cash flows. This entire process has multiple loopholes, for instance the uncertainty that is prevailing when it comes to...

6 Pages(1500 words)Assignment

...Net Present Value and Capital Expenditures... Net Present Value and Capital Expenditures... USE OF NET PRESENT VALUE ANALYSIS BY ELECTRIC COOPERATIVES Published: 2000 http www.entrepreneur.com/tradejournals/article/66172514.html
The article states that NPV is a good measure for both profit and not-for-profit business organizations for capital budgeting and investment appraisal related issues. As the title of the article suggests, this article talks about how NPV has been adopted by Electric COOPERATIVES. The article stated that there are two problems in NPV system as result of which this method is not very common among COOPERATIVE firms. If these two problems are solved then only we can expect full-fledged use of this method by the firm's which a...

4 Pages(1000 words)Article

...Net Present Value and Capital Expenditures... Net Present Value and Capital Expenditures... Direct Material cost per unit calculation for years 2, 3 & 4 at inflation rate of 3% (a) Whistle Yr 2: 18.00 X 103% = 18.54 Yr 3: 18.54 X 103 % = 19.10
Yr 4: 19.10 X 103 = 19.67
(b) Flute
Yr 2: 13.50 X 103% = 13.9
Yr 3: 13.91 X 103% = 14.33
Yr 4 14.33 X 103% = 14.76
(2) Incremental fixed production overhead calculation
(a) Whistle
Yr 2: 12.96 X 105% = 13.61
Yr 3: 13.61 X 105% = 14.29
Yr 4: 14.29 X 105% = 15.00
(b) Flute
Yr 2: 9.63 X 105% = 10.11
Yr 3: 10.11 X 105% = 10.62
Yr 4: 10.62 X 105% = 11.15
(3) Calculation of selling prices of whistle and flute for years 2, 3 and 4
Year 2
Whistle Flute
/unit / ...

6 Pages(1500 words)Essay

...Net Present Value and Capital Expenditures... Net Present Value and Capital Expenditures... A Net Present value 2. Pay Back period 3. Internal rate of Return In the NPV calculation above the rate of interest used is 20% whereby the NPV of cash flows is -1940. At IRR rate NPV has to be zero. So using interest rate of 21% NPV is calculated again as under
4. Appraisal on selling price lowered by 3 pence
5. Appraisal when sale volume greater by 10%
Please note that operational cost being fixed will not change with change sale volume.
6) Year sales in units = 52000 units
Assuming contribution is 20%
Sales = (30400/20) * 100 = 152000
Then Sales per unit = ((30400/20) * 100) / 52000 = £2.92 per unit (rounded)
Yearly sale on 900 units per week =...

5 Pages(1250 words)Essay

...Net Present Value and Capital Expenditures... Net Present Value and Capital Expenditures... The Net Present Value (NPV) Model a) Year Cash flow PVIF 10%, n Present value -50,000 50,000 12,000 0.909 10,908 16,000 0.826
13,216
2014
20,000
0.751
15,020
2015
24,000
0.683
16,392
2016
28,000
0.621
17,388
NPV
22,924
i) This is a worthwhile investment to venture into since it results in a positive NPV. Therefore, the present value of the cash flows expected is more than the present value of the initial cash outlay incurred at the beginning.
ii) Due to time value of money, the value of money now would be much less in one year since money loses value as time passes. This means that it is prudent for an investor to consider the present value of the expected ...

6 Pages(1500 words)Assignment

...Net Present Value and Capital Expenditures... Net Present Value and Capital Expenditures... The three main capital budgeting techniques are payback period, net present value (NPV) and internal rate of return (IRR). The payback period calculates the number of years that it takes a company to recover its original investment. An advantage of this method is that it is simple to calculate. A con of the payback period is that it does not take into consideration the time value of money. The net present value calculates the present value of future cash flows of a project. A project is accepted only if the present value is above cero. An advantage of this method is that it takes into consideration time value of money. A con of this method is that the...

1 Pages(250 words)Coursework

...Net Present Value and Capital Expenditures... Net Present Value and Capital Expenditures... concept of net present value is an analytic tool that can help both corporations and novice investors. From an investor standpoint the use of netpresent value is very useful because net present value takes into consideration the time value of money. Due to inflation money depreciates over time. A person has $100 saved up in a cookie jar and leaves it there for five years will lose money because those $100 will not have the same purchasing power five years into the future. Using the net present value table can help a person determine how much interest is required to ensure that the individual does not lose purchasing power over time.
The net present value ...

1 Pages(250 words)Essay

...Net Present Value and Capital Expenditures... Net Present Value and Capital Expenditures... Net Present Value Learner’s Affiliated institute Net Present Value Initial investment 600,000 Duration = 5 years Rate = 10%
Cash flow:
Year 1: $380,000
Year 2: $390,000
Year 3: $400,000
Year 4: $410,000
Year 5: $420,000
Net Present Value: -$1,598,490.88
PV of Expected Cash Flows: $1,509.12
Discussion
At a rate of 10.00% and for a period of 5 years, the projected cash flows are worth $1,509.12 today, which is less than the initial $1,600,000.00. The NPV of the project is -$1,598,490.88, which implies that, the project is not likely to receive the expected return at the end of the project. For this reason, pursuing this project may not be an optimal decisio...

1 Pages(250 words)Coursework

...Net Present Value and Capital Expenditures... Net Present Value and Capital Expenditures... Theoretical Rationale for the Net Present Value
Introduction
Net present value technique is one of the project appraisal techniques that are used by project managers or investors to determine whether the project is profitable. It indicate the value that a project or investment add to the firm. Net present value reflects the future value of money as compared to the present and it assumes that the cash flow that has been generated from investment are reinvested at the cost of capital. Therefore, it can be used to rank mutually exclusive projects based on the value of the net present value to be earned. The project with the highest net present value is ranke...

12 Pages(3000 words)Research Paper