Caladonia Products Integrative Problem FIN/370 May 21, 2011 Caladonia Products Integrative Problem Capital budgeting in corporations is the method that rejuvenates and revitalizes itself ,by adjusting previous projects to the present and discovering new ones ( Keown, Martin, Petty, & Scott, 2005). The method entails how a corporation determines whether projects such as building a new plant or investing in a long-term investment are of value (Capital Budgeting, n.d.). Often potential project's lifetime cash inflows and outflows are evaluated in order to decide whether the returns created meet an adequate target measure (Capital Budgeting, n.d.). The subject of this assignment is to prepare calculations and a response to Caladonia Products Integrative Problem. The methods used in this assignment are the payback period, NPV, IRR, and describing factors if Caladonia Products were doing a lease versus a buy will also be considered.
According to Wikipedia.com (2012), in finance the NPV of a time series of cash flows, both incoming and outgoing, is defined as the sum the present values of the individual cash flows of the same entity. NPV is a central tool in discounted cash flow analysis and is a standard method for using the time value of money to appraise long-term projects. NPV is used for capital budgeting and widely throughout economics, finance, and accounting, and it measures the excess or shortfall of cash flows, in present value terms, once financing charges are met. If the calculated NPV is greater than zero, then the project is profitable and worth the risk involved. If the calculated NPV is less than zero then the project should not be accepted and is not worth the risk involved in the project.
The practice of business valuation The first method of business valuation, discounted cash flow (the "DCF"), is based on the idea that the economic value of the asset is equal to the amount of future cash flow Company updated to reflect its risk. The discount rate used is the weighted average cost of capital. Is calculated as follows: • cash flows discounted at the explicit forecast horizon (visibility of the company); • the terminal value from estimating a growth rate to infinity; • the value of equity is the difference between the asset value and the resulting economic value of the bank debt and net financial and possibly other elements. The second evaluation method, the method of multiple analog approach is compared with other companies in the same sector. In this approach, the economic value of the assets of a company is the result of a multiple of its earnings: operating profit multiple or multiple of EBITDA.
The balance sheet provided lists the Target Corporation’s assets as: cash, credit card receivables, inventory, land, buildings, fixtures and equipment, computer hardware and software, and construction in progress (United States Securities and Exchange Commission, 2013). After adjusting for the depreciation of their assets, the Target Corporation calculates their net assets at $48,163,000,000 (United States Securities and Exchange Commission, 2013). As
The statement of cash flows contains the information to show where the business obtained cash during a period of time and how that cash was used. The balance sheet indicates any assets and claims to assets at a certain point in time, the claims are
Week 8 Assignment Kenny D. Gilchrease, Sr. March 1, 2014 Accounting 100 Professor Raymond Schafer Strayer University Financial Statements * Balance Sheet – A financial statement that reports the assets, liabilities and owner’s equity at a specific date. * Income Statement – A financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time. * Owner’s Equity Statement – A financial statement that summarizes the changes in owner’s equity for a specific period of time. * Statement of cash flows – A financial statement which summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time. (Weygandt, Kimmel and
These are important to the investors who are looking at the company but also to managers. Exercise 7-2: Answer the following questions about the statement of cash flow and the statement of retained earnings. 1. The current month’s net cash provided by operations is $34,936.57 2. The year-to-date’s net cash provided by operations is $4,717.37 3.
The assets on the sheet are company holdings. The liabilities are the salaries, accounts payable, and notes payable. The balance sheet is a quick look at the company as a whole at any time which is usually over a specific period of time. The balance sheet should be available on demand for accounting managers to make decisions on where the company stands on dispensable cash and what can be used to purchase materials for inventory. The statement of cash flow tracks all the cash moving in a company during a specific accounting period.