Purpose Of Assignment Students Should Understand And 843550

Purpose Of Assignmentstudents Should Understand And Be Able To Calcula

Purpose of Assignment Students should understand and be able to calculate the net present value and internal rate of return for corporate cash flows, determine project cash flows and a company's sales, variable costs, fixed costs, and its breakeven point. Prepare in Microsoft® Excel® or Word. •Ch. 9: Questions 7 & 8 (Questions and Problems section) 7. Calculating IRR A firm evaluates all of its projects by applying the IRR rule. If the required return is 14 percent, should the firm accept the following project? 8. Calculating NPV For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 11 percent, should the firm accept this project? What if the required return is 24 percent? •Ch. 10: Questions 3 & 13 (Questions and Problems section) 3. Calculating Projected Net Income A proposed new investment has projected sales of $635,000. Variable costs are 44 percent of sales, and fixed costs are $193,000; depreciation is $54,000. Prepare a pro forma income statement assuming a tax rate of 35 percent. What is the projected net income? 13. Project Evaluation Dog Up! Franks is looking at a new sausage system with an installed cost of $540,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $80,000. The sausage system will save the firm $170,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $29,000. If the tax rate is 34 percent and the discount rate is 10 percent, what is the NPV of this project? •Ch. 11: Questions 1 & 7 (Questions and Problems section) 1. Calculating Costs and Break-Even Night Shades, Inc. (NSI), manufactures biotech sunglasses. The variable materials cost is $9.64 per unit, and the variable labor cost is $8.63 per unit. a. What is the variable cost per unit? b. Suppose NSI incurs fixed costs of $915,000 during a year in which total production is 215,000 units. What are the total costs for the year? c. If the selling price is $39.99 per unit, does NSI break even on a cash basis? If depreciation is $465,000 per year, what is the accounting break-even point? 7. Calculating Break-Even In each of the following cases, calculate the accounting break-even and the cash break-even points. Ignore any tax effects in calculating the cash break-even. Format your assignment consistent with APA guidelines if submitting in Microsoft® Word. Purpose of Assignment Students should understand how to use the financial information and tools learned in the class on a public company, obtain public company SEC reports, and use that data to calculate a company's financial ratios and their comparison to industry or competitor standards. Assignment Steps Resources: Tutorial help on Excel® and Word functions can be found on the Microsoft® Office® website. There are also additional tutorials via the web that offer support for office products. Select one of the publicly traded corporations listed below and obtain the most current SEC Form 10-K (annual financial report) from the company's web site (Do not use the Annual Report that is sent to shareholders): · Lowes Corporation · Kroger Corporation · Harley Davidson Corporation · Apple Corporation · Intel Corporation · Marriott Corporation My choice. · Berkshire Hathaway Corporation · PepsiCo Corporation · Procter and Gamble Corporation · General Electric Corporation Calculate and analyze the following ratios for your selected company for the last two years from the SEC Form 10-K: · Current Ratio · Inventory Turnover · Debt Ratio · Time Interest Earned · Gross Profit Margin · Equity Multiplier · Return on Assets · Net Profit Margin · Return on Equity (Use three ratio DuPont method) Compare and contrast your company's ratios to industry and competitor standard ratios obtained from Yahoo Finance, Morningstar, MotleyFool, Macroaxis or other Internet sources, and provide a detailed answer and analysis as to why your company's ratios are different than the industry/competitor standard. Prepare your analysis in a minimum of 875 words in Microsoft® Word. The use of Microsoft® Word tables is encouraged. Cite the source of the industry/competitor ratio information. Format your assignment consistent with APA guidelines.

Paper For Above instruction

The purpose of this comprehensive assignment is to develop a nuanced understanding of crucial financial analysis tools and methods that are essential for evaluating corporate projects and financial health. Students are expected to master the calculations of net present value (NPV) and internal rate of return (IRR), assess project cash flows, and determine the breakeven points for companies. Additionally, students will analyze and interpret financial ratios from publicly traded companies' SEC filings, comparing these metrics to industry and competitor benchmarks to evaluate relative performance and financial stability.

Understanding and Calculating NPV and IRR for Investment Projects

One of the foundational concepts in capital budgeting is evaluating whether to accept or reject investment projects based on NPV and IRR calculations. The Internal Rate of Return (IRR) represents the discount rate at which the present value of future cash flows equals the initial investment. A project is generally acceptable if its IRR exceeds the company's required rate of return; otherwise, it should be rejected. For example, in the given exercise, students are tasked with calculating IRR for a project with specified cash flows and a current required return of 14%. This requires understanding the iterative process or using financial software like Excel®, which provides built-in functions such as IRR().

Similarly, the Net Present Value (NPV) calculation involves discounting future cash flows at a given rate and subtracting initial investments. The project acceptance decision hinges on whether NPV is positive, indicating value addition for the firm. The activity involves recalculating NPV at various hurdle rates (11% and 24%) to assess how sensitive the project's viability is to changing discount rates.

Project Financials and Cost-Breaking Analysis

Preparing projected income statements enables firms to estimate future profitability. Using sales projections, variable costs, fixed costs, and depreciation, students learn to construct pro forma income statements. For instance, with projected sales of $635,000, variable costs at 44%, fixed costs of $193,000, and depreciation of $54,000, students compute the projected net income after taxes. This exercise enhances understanding of operational profitability and tax impacts.

Furthermore, project evaluation involves estimating the net present value of proposed investments, considering initial costs, operational savings, disposal value, and changes in net working capital. The provided project example—evaluating a sausage system—illustrates applying discounted cash flow (DCF) techniques, considering tax rate, salvage value, depreciation, working capital, and discount rate to determine whether the project creates value for the firm.

Capital Cost and Breakeven Point Analyses

Calculating costs and break-even points is vital for assessing the viability of manufacturing processes. Students analyze variable costs per unit, total costs at given production levels, and critically evaluate whether the firm can cover its costs at current prices and costs. For biotech sunglasses manufacturer NSI, computing the variable cost per unit, total costs, and both cash and accounting break-even points provides insights into the firm's operational efficiency.

Break-even analysis extends to assessing the point where total revenues equal total costs—both on a cash basis (excluding depreciation, taxes) and on an accounting basis (including depreciation). These calculations help firms understand sales volume thresholds necessary to avoid losses and make strategic decisions about pricing and cost management.

Financial Ratio Analysis of Public Companies

The second component of the assignment involves selecting a publicly traded company, obtaining their most recent SEC Form 10-K report, and calculating key financial ratios. These ratios include liquidity ratios (current ratio), efficiency ratios (inventory turnover), leverage ratios (debt ratio), profitability measures (gross profit margin, net profit margin), and return measures (return on assets and equity).

Using ratios like the DuPont analysis, students will dissect the return on equity into components—profit margin, asset turnover, and financial leverage—to better understand how different operational and financial factors contribute to overall performance.

Comparing these ratios to industry and competitor standards from reputable sources such as Yahoo Finance, Morningstar, or Macroaxis allows students to analyze variances. These differences may stem from company-specific strategies, industry conditions, or financial management practices. Analyzing root causes behind ratio deviations enhances students’ ability to interpret financial statements critically.

Conclusion

This assignment integrates practical financial calculations with interpretive analysis, equipping students with skills necessary for sound financial decision-making. Mastery of NPV, IRR, breakeven, and ratio analysis fosters a deeper understanding of how firms evaluate investments, manage costs, and measure financial health in a real-world context. The comprehensive nature of this assignment emphasizes the importance of both quantitative analysis and qualitative interpretation in strategic financial management, preparing students for roles in financial analysis, investment decisions, and corporate finance.

References

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8. Wikipedia contributors. (2023). Financial ratio analysis. Wikipedia. https://en.wikipedia.org/wiki/Financial_ratio_analysis
9. Yahoo Finance. (2023). Company Financials. https://finance.yahoo.com
10. SEC.gov. (2023). EDGAR Search Results. https://www.sec.gov/edgar/searchedgar/companysearch.html