StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Financial Mangement Decisions - Essay Example

Comments (0) Cite this document
Summary
The initial investment is of $1,200,000. Time taken to recover this amount is during the third year. This can be seen by adding the cash flows of the first three years (295,875 + 456,750 + 456,750) which comes out to be $1,209,375 which is more than the investment…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER94.5% of users find it useful
Financial Mangement Decisions
Read TextPreview

Extract of sample "Financial Mangement Decisions"

Download file to see previous pages With an interest of capital at 10% seeing from the NPV table we multiply the values with the respective year cash flow. Then we add all the present values and subtract the initial investment to reach the NPV. The NPV is $1,021,901.
The NPV shows a huge and positive value of $1.2 million. The accounting theory says that any project with a positive NPV should be accepted. This criterion is met and it is the most important criteria since it keeps the time value of money into consideration for the whole stream of the cash flows.
Any changes done in the above cash flows can and cannot change the decision. However this depends on the value of the change at the end of the project. The additional building would have to be further depreciated and this may cause the change in decision. And depending on the amount of money invested the NPV could also become negative leading to a change in decision. Also it needs to be noted that the payback period is very close to the 3 year policy of the company. If the payback period changes and goes over the 3 year mark, then the project would be rejected.
Question - Many corporate acquisitions result in losses to the acquiring firms' stockholders. Accordingly, why do firms purchase other corporations Are they simply paying too much for the acquired corporation A co-worker asks your opinion. Specifically state the reasons for your argument.
According to a research done by Sara Moeller, Frederik ...
1,021,901
3) Based on your answer for question 2, do you think the project should be accepted Why Assume Superior has a P/B (payback) policy of not accepting projects with life of over three years.
Yes, the project should be accepted based on the calculations done above.
The NPV shows a huge and positive value of $1.2 million. The accounting theory says that any project with a positive NPV should be accepted. This criterion is met and it is the most important criteria since it keeps the time value of money into consideration for the whole stream of the cash flows.
The criterion set by Superior is also met as the payback is less than three years (2 years 11 months).
Since both criterions are met, it is advised that this project should be accepted.
4) If the project required additional investment in land and building, how would this affect your decision Explain.
Any changes done in the above cash flows can and cannot change the decision. However this depends on the value of the change at the end of the project. The additional building would have to be further depreciated and this may cause the change in decision. And depending on the amount of money invested the NPV could also become negative leading to a change in decision. Also it needs to be noted that the payback period is very close to the 3 year policy of the company. If the payback period changes and goes over the 3 year mark, then the project would be rejected.
Part Two
Question - Many corporate acquisitions result in losses to the acquiring firms' stockholders. Accordingly, why do firms purchase other corporations Are they simply paying too much for the acquired corporation A co-worker asks your opinion. Specifically state the reasons for your argument.
In your own words, please provide a ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Financial Mangement Decisions Essay Example | Topics and Well Written Essays - 750 words”, n.d.)
Retrieved from https://studentshare.org/miscellaneous/1508276-financial-mangement-decisions
(Financial Mangement Decisions Essay Example | Topics and Well Written Essays - 750 Words)
https://studentshare.org/miscellaneous/1508276-financial-mangement-decisions.
“Financial Mangement Decisions Essay Example | Topics and Well Written Essays - 750 Words”, n.d. https://studentshare.org/miscellaneous/1508276-financial-mangement-decisions.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Financial Mangement Decisions

Mangement

... to find a suitable solution. The leader also evaluates the products and conducts a SWOT analysis in order to reach a final decision as to which is the best suited course of action to be taken to get the best results. (Drypen, (2011)). 13. Entrepreneurial orientation – A competent leader must be a visionary. He must think like an entrepreneur and be ready to successfully steer the organization to attain desired goals. He must be ready to take risks and bear responsibility for the success and failures of the organization. Other than the above mentioned qualities, a competent leader must be able to mix the various leadership styles in order to resolve problems and conflicts and to facilitate the decision making process. A competent leader...
3 Pages(750 words)Essay

Managing Financial Decisions

On the other hand, sole proprietorship and partnerships have unlimited liability for shareholders. Although, it is easier to set up sole proprietorship or partnership as compared to the limited company, but limited companies have better access to external markets for funding and business opportunities. This implies that there is a separation of the business and individuals holding interests in the company. This type also has the advantage of being able to raise large amounts of funds from external sources. Also, the business is managed by a group of professional directors who have the experience and knowledge to operate different affairs of the business (Bendrey, Hussey, & West, 2004). In addition, only those profits, which are t...
12 Pages(3000 words)Essay

Financial Mangement 1

2008 1700 0.592 1006
2009 1900 0.455 865
2010 1300 0.350 455
2011 6550 0.269 1762
5242
Less initial cash outlay 5500
258
STEP 3
After now getting a negative NPV from step 2 above interpolate the results
I. R. R = lower discounting + [N. P.V at lower discounting rate - NPV at I.R.R] HDR
rate NPV at LDR - NPV at H.D.R LDR
Where HDR = Higher Discounting Rate = 30%
LDR = Lower Discounting Rate = 11%
IRR = Internal Rate of Return
& NPV at I.R.R = 0
I. R.R = 11% + [3362 - 0] (30% - 11%)
3362 - - 258
= 11% + 17.65% = 28.65%
Since the internal rate of return is greater than cost of capital the project should be...
10 Pages(2500 words)Essay

Financial Mangement

...The American Stock Exchange and the NASDAQ: Similarities and Differences The common traits of the American Stock Exchange and the NASDAQ stem out ofthe fact that they represent two basic types of stock market. Both of them deal with trading of vast variety of securities and play an active role in formation of a firm's stock price. Many of securities can be listed and traded at both the AMEX and the NASDAQ. At both markets an important role in the process of stock trading belongs to professionals - so called specialists at the AMEX and the dealers at the NASDAQ. However, the ways two stock markets operate differ as the AMEX is one of the largest examples of the organized exchanges while the NASDAQ is, by all means, the most... American Stock...
3 Pages(750 words)Essay

Financial resources and decisions

... 05 March 2006 Financial Resources and Decision Task 1. Calculate the following: a. Average annual return on average capital invested. Project A Average Annual Cash Flow = Total Cash Flow/ Years = $80,000/4 = $20,000 Average Annual Return on Capital Invested = $20,000/$50,000 = 40% Project B Average Annual Cash Flow = $70,000/4 = $17,500 Average Annual Return on Capital Invested = $17,500/$50,000 = 35% b. Payback Period Payback Period is computed as ratio between the total capital investment and the annual cash inflows. Since depreciation does not require cash outflow, depreciation is added back to the profit at year end. Payback Period: Project A. Year 1 = $50,000 - $37,500 = $12,500 Year 2 = $12,500 - $32,500 = -$20,000...
10 Pages(2500 words)Essay

Service Management in Financial Services

 Measurement of quality is the result of the services provided to the customer with a prompt response based on the requirements and expectations. Quality of various processes must be managed so as to provide the customer with consistent, accurate and timely results. These results must be of high quality because various other factors pertaining to a business deal are dependent on them. Quality assures the customer of an appropriate service that includes an error-free transaction, access to accurate data pertaining to the specific schemes and services, transfer of credits, changes concerned with the membership and account details and an undoubted trust that helps in attaining the services time and again.

Financial se...
11 Pages(2750 words)Case Study

Financial Systems and Auditing

Financial auditing is one of the aspects that may be considered to the audit process, wherein the said audit objective pertains to the financial statements for the auditor to be able to express the opinion on the preparation of financial statements and in all material respects according to the financial reporting framework as identified.

The auditor’s responsibility is to form and express an opinion on the company’s financial statements, while the entity’s management is responsible for the preparation and presentation of financial statements. Audit, in general, may include the entire examination of the unit’s organization, the system as well as the function including the evaluation of the audit c...
7 Pages(1750 words)Term Paper

Corporate Financial Analysis: HBG UK Limited

Analyzing a company’s financial performance is crucial in determining the actual performance and investment potential of a business within the industry. The financial analysis not only gauges the internal but also the external aspects of a company.

Specifically, the use of financial ratios is considered as efficient indicators of a company’s financial situation and overall performance. Most of these financial ratios are calculated from the data provided within the financial statements of the company. Financial ratios are not used only in determining the performance of the company but also in comparison to other competitors’ financial status and the possibility of future bankruptcy.

HBG UK Li...
14 Pages(3500 words)Case Study

Marketing, Financial and Production Analysis of Vail Resorts

Finally, in 1966, the town of Vail was established. By 1985, George Gillett purchased Vail Associates and high-speed quad chairlifts were established to help the skiers get to higher elevations on the mountain. In 1992 Apollo Partners purchased Vail Associates, which in turn became Vail Resorts Inc., which was followed by the acquisition of ski resorts Keystone and Breckenridge. The acquisition of these ski resorts was a major change that helped Vail succeed in the long run by appealing to a broader market. Both Keystone and Breckenridge have lower prices than Vail Mountain and attract more single- and college-aged customers (Vail Resorts).

The company then added the Real Estate segment which comprised 6 percent of the...
9 Pages(2250 words)Case Study

Unmarried Parents: Financial Provisions

There was no evidence before the court to suggest otherwise. I would, therefore, suggest that the child be examined by an expert in child welfare to first determine whether or not the mother is ultimately right in her assessment that the disparity in the value of her parent’s home causes her some concern. It is also important to determine via a welfare expert whether or not relocating to one of the properties suggested by the father would adversely impact upon the child’s wellbeing. If an expert agrees that relocating and the disparity in the value of the parents’ homes are not matters of concern for the child then an appeal would be likely to succeed. I would go further to predict that the father’s origina...
6 Pages(1500 words)Case Study

Accounting & Financial Management

AWB’s operations can be categorized into areas ranging from ‘pool management services’ to ‘harvest financing’, and ‘International commodity management’. Only a company with such a big range of activities and financial outlays can become the benchmark for an equally big company like ‘Woolworth Limited’.

The performance of an entity can be better analyzed through its profitability analyses. The profitability ratios like Gross Profit ratio, Net Profit Margins, Return on assets (ROA), and Return on Equity (ROE). The calculations of such ratios are shown in the attached annexure. The Gross Profit ratio measures the percentage of each pound or dollar of sales remaining aft...
10 Pages(2500 words)Assignment

Financial Management Analysis of Rio Tinto Plc

Taking into consideration that Harmony is the sixth-largest in the world in the gold mining industry, the choice of Harmony God Mining Co. as a benchmark company is the most suitable and justifiable. Moreover, Harmony has also some investment stake in Rio Tinto, and this situation makes the company more suitable for the choice. At places, the benchmark company’s performances have been better than Rio Tinto, and thus Harmony has a competitive edge as well over Rio Tinto.

Profitability ratios like Operating Margin Ratio, Net Margin Ratio, Return on Assets (ROA), and Return on Equity (ROE) are the performance analyzer of any company. Profit Margin ratios show the relationship between profit and sales. Since profit ca...
8 Pages(2000 words)Case Study

Emergency Economic Stabilization Act of 2008 and How It Has Impacted the Financial Markets

Though there were objections from various quarters about the huge amounts of tax payer’s money being used in the bailout of huge corporates, the Act has been successful in moving the downturn towards a flat point and now has started slowly moving towards a recovery stage. The various programs under the EESA 2008 have played a significant role in the financial sector, housing mortgage, and banking institutions to save the institutions from complete disaster.

The Emergency Economic Stabilization Act is a huge taxpayer bailout designed to rescue the financial sector. The amount of money to be used is around $700 billion or $2000 per American citizen (Public mark up). Emergency Economic Stabilization Act of 2008 is al...
10 Pages(2500 words)Research Paper

The Effects of Financial Crisis on Supplier Selection Criteria of the Oil and Gas Industry Equipment Market

It is a difficult task to find those vendors who not only have the adequate quality and quantity of the needed raw materials but who also have an attitude of efficiency and display commitment to customer service (Sonmat, 2006). Further, organizations also strive to locate and select vendors who can be depended upon for long term relationship.

The number of factors or attributes desired from the vendor is vast, and different organizations and different industries place different importance on the attributes (Sonmat, 2006). Some of the vendor attributes may gain importance owing to the nature of the industry, for example, in the case of consumer perishables suppliers, like fresh vegetables or fruits, the buying firm would...
20 Pages(5000 words)Literature review

Management of Financial Institutions

The first paper is about International Banking Regulation. For banks that may want to spread across borders, the study gives an explanation of how the various policies and laws may affect its operations. The second paper in the study gives the various restrictions on the development of Pan-European bank mergers. It shows how regional liquidity shocks limit cross-border bank mergers. Thirdly, the study shows the various methods banks use in risk assessment when lending to less developed countries’ sovereign governments. It gives a topology that can help banks efficiently assess risks. An explanation of the multi-nationalization that is given in this paper comes with a model showing how applicable the profit maximization hypot...
8 Pages(2000 words)Literature review
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Financial Mangement Decisions for FREE!

Contact Us