Learning Team Case Week 4a: Firm Has Five Identified Capital

Question

Learning Team Case Week 4a Firm Has Five Identified Capital Project Learning Team Case – Week 4 A firm has five identified capital projects they could fund in the upcoming year. Each project has an initial capital cost of $5,000,000, however, the firm only has $15,000,000 allocated for capital projects in the current year. The company needs to decide which projects to fund. The firm’s initial cost of capital (discount rate) is 8%. Cash Flows ($ in thousands) Projects A B C D E Year 1 $1,100 $6,000 -- $1,000 $ $1,100 -- $1,000 $2,500 $1, $1,100 -- $2,000 $3,500 $3, $1,100 -- $3,000 $2,750 $3, $1,100 -- $2,200 $1,000 $4. What is the net present value of each investment? 2. According to the net present values, which investment(s) should the firm make? Why? 3. What is the internal rate of return on each investment? 4. According to the internal rates of return, which investment(s) should the firm make? Why? 5. Using the simple payback method which investments should they choose? 6. If the firm could reinvest the $3,600,000 earned in year 1 from investment B at 10 percent, what effect would that information have on your what the return would be on the investment? 7. If the firm’s cost of capital had been 11 percent, what would be NPV of the investments alternatives? What would be the IRR for the investment projects? Note: I need to see your method of calculation, I will not accept only the answer. I recommend you use the Excel spreadsheet for this assignment since the cell contents will show your calculations. Exercise : Build an Excel workbook, capture and review the financial statements for Oracle Corporation from its most recent Annual Report on Form 10K or EDGAR, and run the relevant financial ratios for the last three fiscal years. Do the same for Oracle’s competitors Microsoft and SAP on the same worksheets in your workbook. Compare and contrast their respective financial ratios (pick four metrics most relevant and used by financial analysts), and build tables and g

Dr. Jack HW Helper · Accepted Answer

Learning Team Case Week 4a Firm Has Five Identified Capital Project Learning Team Case – Week 4 A firm has five identified capital projects they could fund in the upcoming year. Each project has an initial capital cost of $5,000,000, however, the firm only has $15,000,000 allocated for capital projects in the current year. The company needs to decide which projects to fund. The firm’s initial cost of capital (discount rate) is 8%. Cash Flows ($ in thousands) Projects A B C D E Year 1 $1,100 $6,000 -- $1,000 $ $1,100 -- $1,000 $2,500 $1, $1,100 -- $2,000 $3,500 $3, $1,100 -- $3,000 $2,750 $3, $1,100 -- $2,200 $1,000 $4. What is the net present value of each investment? 2. According to the net present values, which investment(s) should the firm make? Why? 3. What is the internal rate of return on each investment? 4. According to the internal rates of return, which investment(s) should the firm make? Why? 5. Using the simple payback method which investments should they choose? 6. If the firm could reinvest the $3,600,000 earned in year 1 from investment B at 10 percent, what effect would that information have on your what the return would be on the investment? 7. If the firm’s cost of capital had been 11 percent, what would be NPV of the investments alternatives? What would be the IRR for the investment projects? Note: I need to see your method of calculation, I will not accept only the answer. I recommend you use the Excel spreadsheet for this assignment since the cell contents will show your calculations. Exercise : Build an Excel workbook, capture and review the financial statements for Oracle Corporation from its most recent Annual Report on Form 10K or EDGAR, and run the relevant financial ratios for the last three fiscal years. Do the same for Oracle’s competitors Microsoft and SAP on the same worksheets in your workbook. Compare and contrast their respective financial ratios (pick four metrics most relevant and used by financial analysts), and build tables and g

Learning Team Case Week 4a Firm Has Five Identified Capital Project

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