Help to gain an understanding THE ROLE OF MANAGERIAL FINANCEABC Corporation is a listed company in the business of manufacturingindustrial equipment, and is domiciled in Zambia. The Financial Manager ofABC Corporation has identified two projects to finance for the next fiveyears. One project is in Australia and the other project is in Zambia. The totalfunding required for the Australian and Zambian Project is AUD5 Million,and K35 Million Kwacha respectively. Based on the above information,answer the following questions:A. Discuss the primary funding sources and instruments available for theFinancial Manager to finance these two projects.B. Discuss the potential implications of exchange rate movements, anddomestic and global interest rate changes on the cash flows associatedwith both of these projects, and the subsequent financial performanceof ABC Corporation.

Answer A) The financial manager would basically have two broad options when approaching the…

Answered: ABC Corporation is a listed company in…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 7E

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Buhler Industries is a farm implement manufacturer. Management is currently evaluating a proposal to build a plant that will manufacture lightweight tractors. Buhler plans to use a cost of capital of 12% to evaluate this project. Based on extensive research, it has prepared the following incomplete incremental free cash flow projections (in millions of dollars): Free Cash Flow ($000,000s) Revenues - Manufacturing expenses (other than depreciation) - Marketing expenses - CCA = EBIT - Taxes (35%) = Unlevered net income + CCA Increases in net working capital - Capital expenditures + Continuation value = Free cash flow Year 0 Years 1-9 Year 10 103.00 - 32.00 - 9.00 ? ? ? ? ? - 5.00 - 144.00 103.00 - 32.00 - 9.00 ? ? ? ? ? - 5.00 ? 10.00 ? - 144.00 The relevant CCA rate for the capital expenditures is 15%. Assume assets are never sold. a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight tractors? b. Based on input from the marketing department, Buhler is…
Solve and show solutions completely. Draw the cash flow diagrams. The engineer of a medium scale industry was instructed to prepare two plans to be considered by management to improve their operations. Plan A calls for an initial investment of P200,000 now with an expected salvage of 20% of the first cost 20 years hence. The operation and maintenance disbursements are estimated to be P15,000 each year and taxes will be 2% of the first cost. Plan B calls for an immediate investment of P140,000 and a second investment of P160,000 eight years later. The operation maintenance disbursements will be P9,000 a year for the initial installation and P8,000 a year for the second installation. At the end of 20 years, the salvage value will be 20% of the investments. Taxes will be 2% of first cost. If money is worth12%, which plan will you recommend using present worth cost method.
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A rough rule of thumb for the chemical industry is that OMR 1 of annual sales required OMR 2 of fixed capital investment. In a chemical processing plant where this rule applies, the total capital investment is OMR 3200000 and the working capital is 18% of the total capital investment. The annual net total product cost amounts to 1500000 OMR. If the income tax rates on gross earnings total 21%, determine the following: (a) Percent of total capital investment returned annually as gross earning. (b) Percent of total capital investment returned annually as net profit.
Suppose that KCA University intends to introduce a new course from September 2020. The college estimates that it will incur a fixed cost of Ksh.2.4M per annum and an average annual variable costs of Ksh.8,000 per student to run the course: Required: Calculate the number of students KCA should enroll in order to breakeven if it intends to charge annual fee of Ksh.40,000 per student. Using the level of enrolment obtained in (i) above, compute the level of expected total revenue and total cost of the college. Suppose that you are the Vice Chancellor of KCA University, will you introduce this course if the maximum number of students Kenya University and College Central Placement Service (KUCCPS) will allocate you is 200? (Justify your answer – show all relevant calculations).
Consider the cashflow (n = 10 years, MARR = e = 14%) Cash Flow A Investment P 180,000 Revenues P 350,000 per year Expenses P 400,000 per year for the first 3 years, decreasing by P 50,000 per year thereafter a. Determine the Annual Worth (AW) of each project. b. Determine the Internal Rate of Return (IRR) of each project. c. Determine the External Rate of Return (ERR) of each project. Salvage Value P 40,000
The Double Arthur Company (DAC) has three product lines of coffee mugs — Earth, Sun and Mun — with contribution margins of $9, $8, and $5 respectively. The president Maxat Jexembay foresees sales, consisting of 40K units of Earth, 100K units of Sun, and 100K units of Mun. The company’s fixed costs for the period are $600000. 1. What would the new breakeven point in units be if these relationships persist in the next period? 2. What would the new operating income be if these relationships persist in the next period?
PT POQ Indonesia plans to produce a new product that requires an initial investment of IDR 150 million and operational and maintenance costs of IDR 35000 per hour.In addition, the company must pay other costs of Rp. 75 million per year.Based on the time standard obtained from the study of work procedures and measurement techniques, it can be estimated that it takes 150 hours to produce 1000 units of product.Furthermore, it is also estimated that the price per unit of product is Rp. 15000 and the investment is for 10 years with a salvage value of zero.With a MARR of 20%, calculate how many units must be produced for the firm to break even.
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The engineer of a medium scale industry was instructed to prepare at least two plans which is to be considered by management for the improvement of their operations. Plan “A” calls for an initial investment of P200,000 now with a prospective salvage value of 20% of the first cost 20 years hence. The operation and maintenance disbursements are estimated to be P15,000 a year and taxes will be 2% of first cost. Plan “B” calls for an immediate investment of P140,000 and a second investment of P160,000 eight years later. The operation and maintenance disbursements will be P9,000 a year for the initial installation, and P8,000 a year for the second installation. At the end of 20 years the salvage value shall be 20% of the investments. Taxes will be 2% of the first cost. If money worth 12%, which plan would you recommend? (a) Use the present worth cost method (PWC) (b) Use the equivalent uniform annual cost method (EUAC)
The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider this case: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,500,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because percentages and returns are easier to understand and to compare to required returns. Blue Llama Mining Company's WACC is 9%, and project Delta has the same risk as the firm's average project. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $325,000 Year 2 $450,000 Year 3 $400,000 Year 4 $475,000
Despite their aesthetic landscaping, ease of access and generous parking, out-of-town business parks have not turned out to be the attractive proposition that speculative developers had hoped. Their polished appearance and spaciousness have failed to compensate for limited provision of basic infrastructure such as shops, banks and leisure facilities as less scrupulous developers reneged on earlier promises or struggled with cash flow problems and other difficulties. It is thought that an expansion of hehe working, relying on advanced communication systems and technology, would make visits to smaller head offices situated in the heart of town centres more acceptable. The continued popularity of business parks will be reinforced by new technology. Remember to base your answers only on the information given in the passage. True False Cannot Say

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