Got a tricky question? Receive an answer from students like you! Try us!

Capital Budgeting: Cash flow projections of Bauer Industries - Math Problem Example

Math Problem
Finance & Accounting
Pages 3 (753 words)
Download 2


The free cash flow projections of Bauer Industries for the next ten years period are analyzed in this work. Based on the cash flows, the NPV of the Bauer Industries’ plant to construct lightweight trucks will be the summation of the present values of all the cash flows from year 1 to year 10 discounted back appropriately by the Cost of Capital 12% minus the Capital Expenditure made in the Year 0. …

Extract of sample
Capital Budgeting: Cash flow projections of Bauer Industries

Since the management of Bauer is not certain about the forecast of revenue in the coming years, they plan to check the NPV’s sensitivity to revenue variations. They consider two cases, one: where the revenues are 10% higher than the given revenue forecast and two: where the revenues are 10% lower than the mentioned revenue forecast.

Case 1) When the revenues are 10% higher than the forecast, then the
Free Cash flows are 42.5 42.5 42.5 42.5 42.5 42.5 42.5 42.5 42.5 54.5
Present Values are 37.95 33.9 30.3 27 24.12 21.53 19.2 17.2 15.33 17.55

Thus, the project’s NPV, when the flow of revenue increases by 10%, would be 94. ...
Download paper
Not exactly what you need?

Related Essays

Capital Budgeting
Next section highlights the motivation of top management of William Hill Plc behind this acquisition deal. Subsequent section emphasizes the impact of this acquisition on the capital structure of William Hill Plc. Last section of this article describes the impact of this acquisition on the value of William Hill Plc followed by a conclusion section which leads to the end of this article. Growth Forms – Organic v/s Acquisition There are different forms of growth approaches that companies generally follow. Typically if a company wants to make growth, then in such circumstances the company has…
10 pages (2510 words)
Sweety Ltd: Cash budgeting
i. Cash Budget A cash budget is keeping an account of the inflows and outflows for a specified time period. It is important to know the liquidity of the business and its ability to fulfill everyday operations (investopedia 2011). The budgeting process includes four elements; cash inflows, cash expenditures, change in cash for the period and any new financing needed. Cash sales, purchases, loan payments, expenses, purchase of equipment, beginning balance and ending balance are all included in the process. The knowledge of a cash budget allows the company to determine its capability of giving…
8 pages (2008 words)
Capital Budgeting
There are various capital budgeting techniques which are used in evaluation of a project so to determine its viability they include; net present value, internal rate of return, profitability index, average rate of return, pay-back period and modified internal rate of return. Guillermo Furniture is faced with three investment situations, which are to continue with the current production, adopt high-tech production, or act as a broker. Therefore, there is need to ascertain which of the investment will yield the highest returns to the firm. In order to carry out efficient investment appraisal, we…
2 pages (502 words)
Net earnings plus added back depreciation have contributed to the bulk of cash flow from operating activities, amounting to 3,883+1,682= $5,565 million. Increases/decreases in inventory, receivables, accounts payable, and other miscellaneous items have contributed the remaining $1,068M. Thus the increase has come mostly from the profits earned during the year. …
3 pages (753 words)
cash flow statement and report
No figure of tax is mentioned in the profit and loss statement of the company so it is assumed that the net income is profit before tax and the tax paid is incorporated in the tax payable figure. From the net income non cash adjustments have been made such depreciation and loss recorded on sale of fixed asset. Since these items were charged to the profit and loss account, these are added back to the net income. In addition the net increase decrease is calculated in the current assets and liabilities. If the asset has decreased from the previous year it would be taken as cash inflow. This can…
5 pages (1255 words)
Cash and Working Capital
These four phases consist of the following management requirements; cash management which is identifying the cash balance available to run the day to day expenses of the business or firm so as to reduce the cash holding costs (Padachi, 2012). Inventory management is identifying the inventory levels that will enable the business to run smoothly without investment in raw materials. This requires the lead times being lowered to reduce Work in Process (WIP) and the finished goods should also be kept as low as possible. This will lead to the reduction of the reordering costs and hence increase cash…
6 pages (1506 words)
cash Flow
Yum Brands Inc. operates six in different segments including YUM Restaurant International, Pizza Hut (US), Taco Bell (US), KFC (US), A&W All American Food Restaurant (US), YUM Restaurant China and LJS Long John Silver’s (US). This paper comments on the difference between net cash provided by operating activities and net income by speculating on which is likely to be superior sign of profitability for the firms in the long term. The paper also comments on the data reviewed by each firm and analyze cash flow position of each firm. After analyzing the cash flows of the companies as per the…
3 pages (753 words)