This website uses cookies to ensure you have the best experience.

# Caledonia Essay

982 words - 4 pages

Caledonia Products Integrative Problem
Michelle M. Rayford, Peter Pontone, and Sibylle Letzelter
FIN/370
June 18, 2012
Laura Haase

Caledonia Products Integrative Problem
Question 1
Caledonia should focus on project free cash flows as opposed to accounting profits earned because free cash lows show the value of the projects. Caledonia needs to isolate the project independent from regular company financials to understand how the project will contribute value to the business. Accounting profits earned will take into account the entire business and it will not isolate the project. A good example is dry cleaners that decide to open up a second location. The owner needs to look at the ...view middle of the document...

Profits indicate how much money is left after the company has sold its good and service from a performance standpoint. A company needs to be profitable, but it also needs to ensure there is cash available when needed. The cash flow statement allows the company to plan for purchasing raw materials and paying off taxes, debt and any other expenses. A company can be profitable, but can still go bankrupt because it does not have money to pay the bills or purchase raw materials.
Question 3
The initial outlay of the project is calculated as follows.
CAPEX + NOWC
= (\$7,900,000 +\$100,000) = (\$100,000)
= \$8,100,000
The initial outlay for the project is \$8,100,000.
Question 4
For cash flow diagram, you need to consider your Operating cash flow plus or minus your change in working capital. For this project
Initial cash outlay: \$8,100,000
Year 1 = \$3,956,000
Year 2= \$8,416,000
Year 3=\$10,900,000
Year 4=\$8,548,000
Year5=\$5,980,400
Question 5
. The formula for Net Present Value (NPV) is as follows
NPV= (-8,100,000)+3,956,000/1.15+8,416,000/1.15²+10,900,000/1.15³+8,548,000/1.154+5,980,000/1.155=\$16,731,096
The NPV for this project is: \$16,731,096
6. The project’s Internal Rate of Return is as follows
6. At IRR, NPV = 0
0 = -8,100,000 + 3,956,000/ (1 + IRR) + 8,416,000/ (1 + IRR) 2 + 10,900,000/ (1 + IRR) 3 + 8,548,000/ (1 + IRR) 4 + 5,980,000/ (1 + IRR) 5
Solving for IRR,
IRR = 77%
The IRR for this project is 77%.
Question 7
Should the project be accepted? Why or why not?
The project should be accepted because of a strong Net Present Value as well as a High Internal Rate of Return. Using NPV and IRR as your benchmarks to evaluate your projects are the two most common used measures. A higher NPV and IRR will show a stronger investment opportunity.

Question 8...

## Other Papers Like Caledonia

### Caldonia Products Integrative Essay

1276 words - 6 pages Caledonia Products Integrative Problem Adam Pugh, Estee Vargas-Nichols, Jenny Clark University of Phoenix FIN 370 Cassandra Ryder April 26, 2012 Caledonia Products Integrative Problem When companies are determining whether an investment must be undertaken, they decide if the investment will add to or detract from the value of the firm. There are several determining factors in evaluating an investment. These include project free cash

### Genotoxicity of Alstonia Bonnei Essay

1248 words - 5 pages .) K.Sidiyasa - Cambodia, Vietnam 5.Alstonia balansae Guillaumin - New Caledonia 6.Alstonia beatricis K.Sidiyasa - Waigeo I in E Indonesia 7.Alstonia boonei De Wild. - W + C + E Africa 8.Alstonia boulindaensis Boiteau - New Caledonia 9.Alstonia breviloba K.Sidiyasa - Papua New Guinea 10.Alstonia congensis Engl. - W + C Africa 11.Alstonia constricta F.Muell. – Bitterbark, Quinine Tree, Australian Fever Bark - E Australia 12.Alstonia coriacea Pancher

### Bus401 Paper

589 words - 3 pages Caledonia Your Name BUS401 Instructors Name Date Caledonia Hello Mr. Morrison. After reviewing everything in the assignment for the new project and considering that we are in the 34 percent marginal tax bracket with a 15 percent required rate of return or cost of capital, I have put together the following answers to the questions that were included in my assignment. Please review the answers to the questions. A. Should Caledonia

### Atherley Furniture Company

1588 words - 7 pages Key Events/Case Synopsis Despite being well-established, over the last three years, sales at Atherley Furniture Company have remained the same while profits have declined by almost 24%. Their chair division produces three different types of chairs, the Atherley, the Caledonia and the Parkdale. Each model has its own production plan and production costs. The increasing production costs, alongside the intense competition the company faces, have

### P4 – Describe Sources of Internal and External Finance for a Selected Business

932 words - 4 pages P4 – describe sources of internal and external finance for a selected business Caledonia is a small takeaway outlet shop that sells chicken burgers, chips and drinks. It is located in Harlesden, near the estates. This is so that they can get a lot of customers coming in and out of there shop. There are two ways that Caledonia can get financial resources: * From within the business (internal sources) * From outside the business

### Xaledonia

947 words - 4 pages It’s been two months since you took a position as an assistant financial analyst at Caledonia Products. Although your boss has been pleased with your work, he is still a bit hesitant about unleashing you without supervision. Your next assignment involves both the calculation of the cash flows associated with a new investment under consideration and the evaluation of several mutually exclusive projects. Given your lack of tenure at Caledonia, you

### Vale Case Study

861 words - 4 pages of Vale, the firm expanded in the past years in many new markets at the same time, and in parts of the world where it never evolved before. It is crucial for Vale to make these foreign expansions successful. Suppose that you are the country manager for New Caledonia operations. Please try to see what could be specific about these operations. Prepare a BSC for New Caledonia and explain how it’s linked to the corporate BSC. | Objective

### Fin370 Week 4 Learning Team Assignment

542 words - 3 pages Caledonia should focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project because cash flows formulas focus on the project itself. Free cash flow formula determines whether an investment adds value to the firm, which important to Caledonia’s management. Since one of a firm’s primary goal is to gain profits for its stakeholders, using free cash flow formula

### Amphidromous Fish Demographic Pattern

1452 words - 6 pages . The latter species, Smilosicyopus chloe ,was included as a control group. Si. zosterophorum comprised the majority of the sample collection (N=165), followed by Sm. chloe (N=44), and Sm. fehlmanni (N=21). Si. Zosterophorum samples were taken from the northwest (Japan, Philippines, Palau, Papua, Indonesia) and the southwest (New Caledonia, Vanuatu Fiji) regions in order to capture the full range of the species distribution on either side of the

### Mini Case

619 words - 3 pages Mini Case BUS 401: Principles of Finance Chapter 11 Mini Case A. Due to flows being an item that the firm obtains and can reinvest, Caledonia should concentrate on cash flows verses accounting profits. When cash flows are being evaluated, the firm’s benefits and costs can be reviewed in a better manner. Since firms are more interested in benefits for the shareholders, they are only interested in the cash flows after-tax

645 words - 3 pages To: Mr. V.Morrison, CEO, Caledonia Products From: Julien Thizeau-Amir-Sadri, Applicant for the position of Financial Analyst Date: May 31, 2012 Subject: A test of my understanding of basic financial concepts and tax code The appropriate goal for the firm is the maximization of shareholders' wealth (maximization of the market value of common stock) because it includes the effects of all financial decisions. Indeed

## Related Essays

### Caledonia Products Integrative Problem Essay

792 words - 4 pages Caledonia Products Integrative Problem Part A. What is each project’s payback period? Payback period = Investment required / Net Annual Cash Inflow Project A: 100,000 / 32,000 = 3.125 years Project B: 5 years. There is no cash inflow until the fifth year when an inflow of \$200,000 comes in to offset the investment. To determine payback period it is the following: Payback Period = Y + ( A / B ) where Y = The number of years before

### Caledonia Products Integrative Program Essay

955 words - 4 pages Caledonia Products Integrative Program FIN 370 - Finance for Business |Operating Cash Flow |Year One |Year Two |Year Three |Year Four |Year Five | |Project Revenue |\$21,000,000 |\$36,000,000 |\$42,000,000 |\$24,000,000 |\$15,600,000 | |Cost of Goods

### Caledonia Understanding Of Capital Budgeting Essay

1424 words - 6 pages Caledonia Understanding of Capital Budgeting La Wanda Holland BUS401: Principles of Finance (BAO1237A) Instructor:  Tekeria Watson October 15, 2012 Capital budgeting is the decision process that managers use to identify those projects that add value to the firm’s value. The success of a business depends on the capital budgeting decisions taken by management. The management of a company should analyze various factors before taking on

### Pepsi Vs Coke Essay

632 words - 3 pages Caledonia Products Integrative Problem 1. Why should Caledonia focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project? Free cash flows are being focused on because it the amount that Caledonia will receive and they will be able to reinvest that amount. Caledonia should analyze the free cash flow so that they are able to see the real amount of value or what the