AirJet Best Parts - Coursework Example

Only on StudentShare

Extract of sample
AirJet Best Parts

This increases your positive cash flows for the project and ultimately resulting in higher NPV. A company which opts for incremental method of depreciation will have higher cash flows in the initial years and it will reduce by the time it reaches its expiry. On the other hand, a company which opts for straight line method will have equal positive cash flows every year. Lastly, Depreciation of $10,000 per year, with an income tax of 40%, saves $4,000 and that amount is accounted as a positive cash flow. 5. Opportunity cost is the profit forgone by not investing in a particular opportunity. It is particularly pertinent to this project as the company may have other investment opportunities which they overruled for this particular investment. (Shim & Siegel, 2008)For example, if this money was not invested in the purchase of a machinery, it may have been deposited in a bank and earn a decent enough return without any substantial risk. Moreover, this could have been distributed among shareholders as dividend or the money could have been used to purchase any other equipment with different set of anticipated cash flows. Therefore, the cost of not depositing that money in the bank or distributing as dividend or not purchasing any other equipment is the opportunity cost of the project. 6. ...
Download paper

Summary

1. For IRR we keep NPV equals to zero and by using financial calculator we get 22.3% 2. Project’s NPV is calculated as follows: 3. The company should accept this project for two key reasons. Firstly, the rate of return that the company will get is above their required rate of return for it…
Author : qbartell

Tags

Parts

Related Essays

Best Self Exercise
I remember one time when I graduated high school and about to enter college, my parents strongly suggested that I go to the university near our community because it was easy to access and most of my friends were already enrolled in that university. However, my goal was already set and I was determined to go to a different university my parents opposed to. I wanted to go to a different university certainly not because I wanted to defy my parents but because I trust myself that I could perform very well if enrolled in the university where the course I wanted was offered. I thought that I could...
3 pages (753 words) Coursework
AirJet Best Parts
The interest payments would be lower with National First. Hence, the loan should be taken from them. 3. The interest payment that AirJet Best Parts Inc. has to make is: Yes, I agree with the decision as the effective annual interest rate is lower than National First. The interest payment till the end of the term would be lower in comparison to the deal offered by National First. Task 2: Evaluating Competitor’s Stock 1. Rate of return is calculated for Raytheon Boeing and dividend stated is annualized. Price of Raytheon Boeing’s share is $65.38 and Dividend annualized is $1.68 which is...
6 pages (1506 words) Coursework
Capital Budgeting for a New Machine
Secondly, internal rate of return for a project provides a percentage of the amount of return that the cash flows will generate. It is noted that the required rate of return is 15% however; the return for this project is 22% which provides a 7% spread. These two ground are enough to take up this project. 4. Explain how depreciation will affect the present value of the project. (10 pts) Depreciation is a non cash expense and it is also tax deductible. The depreciation is first reduced from the operating income to get earnings before interest and taxes. The amount of depreciation deducted is...
8 pages (2008 words) Coursework
Concepts Learned to a Real-life Simulation Experience
Now, on the right hand side of the equation, ‘e’ is taken as the number of times the interest is compounded. Now if we substitute the values in the equation we can get the following results. National First   Prime Rate 3.25% Floor Rate 6.75% Number of times compounded Semiannually i 0.1 e 2 a 10.25% Regions Best   Prime Rate 13.17% Number of times compounded Monthly i 13.17% e 12 a 13.99% (ii) Thus it is apparent from the above calculation that the company should borrow from National First Bank as it is charging interest at a lesser Equivalent rate which is 10.25%. If we suppose that the...
11 pages (2761 words) Research Paper
"In finance, risk is best judged in a portfolio context." Is this true? Why?
The giant players of this sector, the business are generated by management of the funds of the High Net-worth Individuals [HNI] clients and the big Corporate Houses. The services are obviously for a pre-determined fee which is generally structured on the basis of the returns generated by the investment bankers. In most common cases, there is a fixed portion of fee as well irrespective of the return generated by the fund managers (View, 2007 p.144). In this essay the researcher will analysis different aspects of portfolio. The theoretical background of portfolio especially risks and return is...
6 pages (1506 words) Essay
case: Best Buy
To achieve this, an organization needs to understand their market environment, capitalize on their strengths to overcome business threats and weakness and take and take advantage of any opportunities that arise in the market. Below is a case analysis of Best Buy Company Inc and suggestion of new strategies that this firm can employ to remain profitable and successful. Roy (2011) recognizes the need for an organization to conduct as environment scanning to understand better the business market which is essential in strategic management. He identifies the Porter’s five forces Model (PFFM) as...
4 pages (1004 words) Case Study
Got a tricky question? Receive an answer from students like you! Try us!