Selection of Projects
|
|
- Estella Blake
- 6 years ago
- Views:
Transcription
1 Selection of Projects M A H Sazzad Shikder Chapter objective: To know about several project selection techniques to help project managers for selecting proper projects Project selection: Project selection is the process of evaluating individual projects or group of projects and then choosing to implement some set of them so that the objectives of the parent organization will be achieved. Project selection process is applied when a project or set of projects to be selected from competing alternatives. Say for example, a manufacturing organization can use project selection technique to choose a machine for producing its product. Every project involves cost, risk and benefit. All should be estimated and evaluated properly. In evaluation, projects should be evaluated from the following points of views- Production factors Financial factors Marketing factors Personnel factors Administrative factors Environmental or ecological factors Project selection is a part of project life cycle. Project manager is responsible for project selection. The goal achievement of an organization depends on selection and implementation of proper project. Criteria for project selection models:. Realism: The model should reflect the reality of the manager s decision situation including the multiple objectives of both the firm and its managers. The model should take into account the realities of the firm s limitations on facilities, capital, personnel, etc. The model should also include factors that reflect project risks, including the technical risks of performance, cost, and time as well as the market risks of customer rejection and other implementation risks. Capability: The model should be sophisticated enough to deal with multiple time periods, simulate various situations both internal and external to the project ( e.g. strikes, interest rate changes, etc.) and optimize the decision. An optimizing model will make the comparisons that management deems important, consider major risks and constraints on the projects and them select the best overall project or set of projects. Flexibility: The model should give valid results within the range of conditions that the firm might experience. IT should have the ability to be easily modified or to be self adjusting in response to changes in the firm s environment. e.g. tax laws change, goals change etc. Ease to use: the model should be reasonably convenient, not take a long time to execute and be easy to use and understand. Cost: Data gathering and modeling costs should be low relative to the cost of the project and must surely be less than the potential benefits of the project. Easy computerization: It must be easy and convenient to gather and store the information in a computer data base and to manipulate data in the model through use of widely available, standard computer package Lecturer in Finance; DBA; IIUC; sazzad.amzad@yahoo.com 1
2 M A H Sazzad Shikder Project Selection Models There are basically two categories of project selection model. These are Numeric and Nonnumeric. Numerical Models: Under Profitability 1. Net Present Value (NPV) 2. Internal Rate of Return (IRR) 3. Pay Back Period (PBP) 4. Benefit Cost Ratio (BCR) or Profitability Index(PI) 5. Accounting rate of return(arr) 6. Discounted Pay Back Period(DPBP) Numerical Models: Scoring 1. Un-weighted 0-1 factor model 2. Un-weighted factor scoring model 3. Weighted factor scoring model 4. Constrained weighted factor scoring model Non numerical models: 1. Sacred cow 2. Operating Necessity 3. Competitive necessity 4. Product line extension 5. Comparative Benefit. Pls. visit text book for the details of the above project selection models. Capital Budgeting Problem: 1 You are considering a project costing Tk with estimated useful life of 5 years (using the straight line depreciation method). Expected cash flows before depreciation and Tax (EBDT) over next five years are as follows: Year EBDT 1 Tk Assuming 50% tax rate. Calculate i) Pay back Period (PBP) ii) Net Present value (NPV) of project and comment on it (when interest rate is 12%) the Problem: 2 Tranter, Inc. is considering a project that would have a ten-year life and would require a $1,500,000 investment in equipment. At the end of ten years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows: Lecturer in Finance; DBA; IIUC; sazzad.amzad@yahoo.com 2
3 M A H Sazzad Shikder Sales... $2,000,000 Less variable expenses... 1,100,000 Contribution margin ,000 Less fixed expenses: Fixed out-of-pocket cash expenses... $500,000 Depreciation , ,000 Net operating income... $ 250,000 All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 12%. Requirement: a. Compute the project's net present value. b. Compute the project's internal rate of return to the nearest whole percent. c. Compute the project's payback period. Problem: 3 Jamuna Company is considering to purchase one of the two machines. Particular for the both machines are given below: Particulars Machine- A Machine-B Purchase price $ $ Freight and carriage Installation charge Working capital requirement Estimated life 5 years 5 years Salvage value Nil Annual EBDT of the two machines are given below: Year Machine-A Machine-B 1 $ $ The company pays 50% and expects 7% return on its investment. The first Machine should be depreciated on sum of the year digit method and Machine B on straight line basis. Apply capital budgeting techniques and advise Jamuna Company which machine should be purchased? Lecturer in Finance; DBA; IIUC; sazzad.amzad@yahoo.com 3
4 M A H Sazzad Shikder Problem: 4 SAF Builders, a real estate developer in Chittagong, contemplating to avail one of the two projects, project Karnafuli and Project Shangu. You are a financial analyst and you are given the following information relating to project Karnafuli - NPV PBP IRR BCR $ years 9 % 1.1% You are also given the following information of project Shangu - Year Capital Operating cost(other Revenue than depreciation) 0 $ $6,000 $47, The useful life of project Shangu is 4 years and the fixed assets be depreciated as per straight line method. At the end of the project Shangu the fixed assets of the project be sold for $ The corporate tax rate is 40% in the Bangladesh. SAF calculated its overall cost of capital is 10%. As a financial analyst you are requested to advice SAF regarding one project selection between Project Karnafuli and Project Shangu Problem: 5 SCL limited is engaged in the manufacture of power intensive products. As part of its diversification plans, the company proposes to put up a windmill to generate electricity. The details of the scheme are as follows: 1. Cost of the wind mill, TK. 300 lakhs 2. Cost of land. TK. 15 lakhs 3. Subsidy from Government of Bangladesh to be received at the end of first year of installation, TK. 15 lakhs 4. Cost of electricity will be TK per unit in year 1. This will be increased by TK per unit every year till year 7. After that it will increase every year by TK per year until year Maintenance cost will be TK. 4 lakhs in year 1 and the same will be increased by TK. 2 lakhs every year. 6. Estimated life, 10 years 7. Cost of capital, 15 percent 8. Residual value, nil. However, land value will go up to TK.60 lakhs, at the end of year Depreciation will be 100 percent of the cost of the windmill in year 1 and the same will be allowed for tax purposes. 10. As windmills are expected to work based on wind velocity, the efficiency is expected to be on an average 30 per cent. The gross electricity generated at this level will be 25 lakh units per annum; 4 percent of which will be contributed to the national power grid as per agreement. 11. Tax rate, 35 percent. From the above information, you are requested to calculate the Net Present Value. Ignore tax on capital profit. Use present value up to two digits. Lecturer in Finance; DBA; IIUC; sazzad.amzad@yahoo.com 4
5 M A H Sazzad Shikder Problem: 6 Tabin Enterprise is considering a project. The total outlay of the project will be Tk. 2,50,000. It includes Tk. 50,000 for net working capital and rest for fixed investment cost. The entire outlay will require 3 years (beginning (beginning from zero year) in a ratio of 40: 40:20. That is total investment will cover 3 investment phases. To finance this project, Tabin Enterprise has submitted a loan proposal to a bank where the project is situated. The bank will provide Tk. 1, 50,000 at 10% interest and Tk. 1, 00,000 will be sponsor s contribution (cost of equity capital 15%). The firm follows straight-line depreciation on fixed assets. The project will provide revenues of Tk. 1,00, 000 over its economic life of 5 years but it will require operating expenses Tk. 30,000 per year (other than interest on loans, depreciation on fixed assets and tax). The effective tax rate is 40% There is a salvage value of Tk. 20, 000 at the end of the life of the project. Determine the NPV, BCR, IRR, PBP. Problem: 7 Below are the cash flows information related to two investment projects. Project X Project Y a Investment cost Tk. 50, 000 Tk. 50, 000 b Net cash Inflows Year 1 Tk Tk Year 2 Tk Tk Year 3 Tk Tk Year 4 Tk Tk Compute PBP, NPV BCR and IRR(using 10% discount rate). Problem: 8 Assume a project of 5 years life with the following cost and benefit characteristics Year Capital cost Operating cost ( Other Revenue(Tk) (Tk) than depreciation (Tk) 0 Tk. 1,00, The fixed asset would have a 5 year useful life and be depreciated using 20% straight line rate. At the end of the project the fixed assets of the project could be sold Tk. 20, 000. The tax rate is 40% and cost of fund is 10%. Calculate the PBP, NPV, BCR and IRR. Lecturer in Finance; DBA; IIUC; sazzad.amzad@yahoo.com 5
6 M A H Sazzad Shikder Problem:9 Preet Ltd., is considering the purchase of a machine which will have a working life of five years. The machine is expected to earn Tk p.a. the company considers a yield of 20% necessary before investment is made in a project. How much could be spent in purchasing the machine? Problem: 10 A company is considering the possibility of manufacturing a particular component which at present is being bought from outside. The manufacture of the component would call for an investment of Tk. 7,50,000 in a new machine besides an additional investment of Tk. 50,000 in working capital. The life of the machine would be 10 years with a salvage value of Tk. 50,000. The estimated saving (before tax) would be Tk. 1,80,000 p.a. the income tax rate is 50%. The company s required rate of return is 10%. Depreciation is considered on straight line method. Problem: 11 The management of a firm is considering an investment project costing Tk. 1,50,000 that will have a scrap value of Tk. 10,000 at the end of its 5-year life. Transportation cost are expected to be Tk and installation charges are expected to be Tk. 25,000. The project is accepted, a spare parts inventory of Tk. 10,000 must also be acquired. It is estimated that the spare parts will have and estimated scarp value after 5 of their initial costs. The annual revenue from the project is expected to be Tk. 1,70,000 and annual labour, material and maintenance expenses are estimated to be Tk , Tk. 50,000 and Tk. 5,000 respectively. The depreciation and taxes for each of the five years will be: Year Depreciation( Taka) Taxes (Taka) 1 72,000 11, ,200 22, ,400 27, ,600 31, ,680 Calculate net cash flows for each year, NPV and cost of the project.(cut of rate 12%). Lecturer in Finance; DBA; IIUC; sazzad.amzad@yahoo.com 6
Important questions prepared by Mirza Rafathulla Baig. For B.com & MBA Important questions visit
Financial Management -MBA-II SEM 1. Charm plc, a software company, has developed a new game, Fingo, which it plans to launch in the near future. Sales of the new game are expected to be very strong, following
More informationInvestment Appraisal
Investment Appraisal Introduction to Investment Appraisal Whatever level of management authorises a capital expenditure, the proposed investment should be properly evaluated, and found to be worthwhile
More information1 INVESTMENT DECISIONS,
1 INVESTMENT DECISIONS, PROJECT PLANNING AND CONTROL THIS CHAPTER INCLUDES Estimation of Project Cash Flow Relevant Cost Analysis for Projects Project Appraisal Methods DCF and Non-DCF Techniques Capital
More informationIntroduction to Capital
Introduction to Capital What is Capital? Money invested in business to generate income The money, property, and other valuables which collectively represent the wealth of an individual or business The
More informationCommercestudyguide.com Capital Budgeting. Definition of Capital Budgeting. Nature of Capital Budgeting. The process of Capital Budgeting
Commercestudyguide.com Capital Budgeting Capital Budgeting decision is considered the most important and most critical decision for a finance manager. It involves decisions related to long-term investments
More informationSOLUTIONS TO ASSIGNMENT PROBLEMS. Problem No.1 10,000 5,000 15,000 20,000. Problem No.2. Problem No.3
MASTER MINDS No. for CA/CWA & MEC/CEC. CAPITAL BUDGETING SOLUTIONS TO ASSIGNMENT PROBLEMS Problem No. Calculation of ARR for machine A and B: Machine A Step : Average Profit After Tax 5,, 5,, 5, Total
More informationCash Flow of Capital Budgeting
Chapter 7 Cash Flow of Capital Budgeting OBJECTIVES At the end of this chapter, you should be able to: 1. identify the guidelines in estimation of cash flow; 2. identify the three types of cash flow for
More informationCAPITAL BUDGETING Shenandoah Furniture, Inc.
CAPITAL BUDGETING Shenandoah Furniture, Inc. Shenandoah Furniture is considering replacing one of the machines in its manufacturing facility. The cost of the new machine will be $76,120. Transportation
More informationBFC2140: Corporate Finance 1
BFC2140: Corporate Finance 1 Table of Contents Topic 1: Introduction to Financial Mathematics... 2 Topic 2: Financial Mathematics II... 5 Topic 3: Valuation of Bonds & Equities... 9 Topic 4: Project Evaluation
More informationBefore discussing capital expenditure decision methods, we may understand following three points:
J B GUPTA CLASSES 98184931932, drjaibhagwan@gmail.com, www.jbguptaclasses.com Copyright: Dr JB Gupta Chapter 7 Capital Budgeting (Capital Expenditure decisions) Chapter Index Method Based on Accounting
More informationMANAGEMENT ACCOUNTING REVISION CLASS
MANAGEMENT ACCOUNTING REVISION CLASS Section 1. (DAY3) STANDARD COSTING Definition of standard costing Types of standard costing Importance of standard costing Variance analysis Control ratio in standard
More informationSOLUTIONS TO END-OF-CHAPTER QUESTIONS CHAPTER 16
SOLUTIONS TO END-OF-CHAPTER QUESTIONS CHAPTER 16 DEVELOP YOUR UNDERSTANDING Question 16.1 Podcaster University Press Payback Accounting book Economics book Annual Cumulative Annual Cumulative cash flows
More informationPostal Test Paper_P14_Final_Syllabus 2016_Set 1 Paper 14: Strategic Financial Management
Paper 14: Strategic Financial Management Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1 Paper 14 - Strategic Financial Management Full
More informationWeek 1 FINC $260,000 $106,680 $118,200 $89,400 $116,720. Capital Budgeting Analysis
Dr. Ahmed FINC 5880 Week 1 Name Capital Budgeting Analysis Facts: Calculations Cost $200,000 Shipping $10,000 Installation $30,000 Depreciable cost $24,000 Inventories will rise by $25,000 Payables will
More informationCPET 581 Smart Grid and Energy Management Nov. 20, 2013 Lecture
CPET 581 Smart Grid and Energy Management Nov. 20, 2013 Lecture References [ 1] Mechanical and Electrical Systems in Building, 5 th Edition, by Richard R. Janis and William K.Y. Tao, Publisher Pearson
More informationCapital Budgeting and Time value of money
Capital Budgeting and Time value of money Meaning and Concepts: Capital budgeting is commonly referred to as a fixed- asset management, when integrated with the financial manager s goal of attaining proper
More informationDiff: 1 Topic: The Internal Rate of Return Method LO: Understand and apply alternative methods to analyze capital investments.
Chapter 10 Capital Budgeting Decisions 1) The present value of a given sum to be received in five years will be exactly twice as great as the present value of an equal sum to be received in ten years.
More informationDescribe the importance of capital investments and the capital budgeting process
Chapter 20 Making capital investment decisions Affects operations for many years Requires large sums of money Describe the importance of capital investments and the capital budgeting process 3 4 5 6 Operating
More informationCapital Budgeting, Part I
Capital Budgeting, Part I Lakehead University Fall 2004 Capital Budgeting Techniques 1. Net Present Value 2. The Payback Rule 3. The Average Accounting Return 4. The Internal Rate of Return 5. The Profitability
More informationCapital Budgeting, Part I
Capital Budgeting, Part I Lakehead University Fall 2004 Capital Budgeting Techniques 1. Net Present Value 2. The Payback Rule 3. The Average Accounting Return 4. The Internal Rate of Return 5. The Profitability
More informationEngineering Economics and Financial Accounting
Engineering Economics and Financial Accounting Unit 5: Accounting Major Topics are: Balance Sheet - Profit & Loss Statement - Evaluation of Investment decisions Average Rate of Return - Payback Period
More informationCAPITAL BUDGETING AND THE INVESTMENT DECISION
C H A P T E R 1 2 CAPITAL BUDGETING AND THE INVESTMENT DECISION I N T R O D U C T I O N This chapter begins by discussing some of the problems associated with capital asset decisions, such as the long
More informationSOLUTIONS TO ASSIGNMENT PROBLEMS. Problem No.1
W.N.-1: Calculation of depreciation per annum Depreciation p.a. = SOLUTIONS TO ASSIGNMENT PROBLEMS Cost -Scrap Value Life W.N.-2: Calculation of PAT p.a. Problem No.1 80,000 5 10,000 = Rs.14,000 p.a. 2.
More informationCapital investment decisions
Chapter 20 Capital investment decisions Business Accounting and Finance 2nd Edition Questions 1. The Tullane Biscuit Company plc is a successful biscuit manufacturer. Since it was established five years
More informationFinancial Analysis Refresher
Financial Analysis Refresher Spring 2017 CE Conference Mark Myles - TURI Financial Analysis Requirements Economic Evaluation of Potential TUR Techniques (310 CMR 50.46A) The TUR plan must include the discount
More informationUnit-2. Capital Budgeting
Unit-2 Capital Budgeting Unit Structure 2.0. Objectives. 2.1. Introduction. 2.2. Presentation of subject matter. 2.2.1 Meaning of capital budgeting. 2.2.2 Capital expenditure. 2.2.3 Definitions. 2.2.4
More informationLesson 7 and 8 THE TIME VALUE OF MONEY. ACTUALIZATION AND CAPITALIZATION. CAPITAL BUDGETING TECHNIQUES
Lesson 7 and 8 THE TIME VALUE OF MONEY. ACTUALIZATION AND CAPITALIZATION. CAPITAL BUDGETING TECHNIQUES Present value A dollar tomorrow is worth less than a dollar today. Why? 1) Present consumption preferred
More information1) Side effects such as erosion should be considered in a capital budgeting decision.
Questions Chapter 10 1) Side effects such as erosion should be considered in a capital budgeting decision. [B] :A project s cash flows should include all changes in a firm s future cash flows. This includes
More informationFirst Edition : May 2018 Published By : Directorate of Studies The Institute of Cost Accountants of India
First Edition : May 2018 Published By : Directorate of Studies The Institute of Cost Accountants of India CMA Bhawan, 12, Sudder Street, Kolkata 700 016 www.icmai.in Copyright of these study notes is reserved
More informationCHAPTER 6 MAKING CAPITAL INVESTMENT DECISIONS
CHAPTER 6 MAKING CAPITAL INVESTMENT DECISIONS Answers to Concepts Review and Critical Thinking Questions 1. In this context, an opportunity cost refers to the value of an asset or other input that will
More informationCHAPTER 6 MAKING CAPITAL INVESTMENT DECISIONS
CHAPTER 6 MAKING CAPITAL INVESTMENT DECISIONS Answers to Concepts Review and Critical Thinking Questions 1. In this context, an opportunity cost refers to the value of an asset or other input that will
More informationMANAGEMENT INFORMATION
CERTIFICATE LEVEL EXAMINATION SAMPLE PAPER 1 (90 MINUTES) MANAGEMENT INFORMATION This assessment consists of ONE scenario based question worth 20 marks and 32 short questions each worth 2.5 marks. At least
More informationVALLIAMMAI ENGINEERING COLLEGE
VALLIAMMAI ENGINEERING COLLEGE SRM Nagar, Kattankulathur 603 203 DEPARTMENT OF MANAGEMENT STUDIES QUESTION BANK III SEMESTER BA5013 Strategic Investment and Financing Decisions Regulation 2017 Academic
More informationINSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN Vision To be the Preference in Value Optimization for Business. Mission Statement To develop strategic leaders through imparting quality education
More informationINVESTMENT CRITERIA. Net Present Value (NPV)
227 INVESTMENT CRITERIA Net Present Value (NPV) 228 What: NPV is a measure of how much value is created or added today by undertaking an investment (the difference between the investment s market value
More informationCIMA F3 Workbook Questions
CIMA F3 Workbook Questions Lecture 1 Financial Strategy Shareholder Wealth - Illustration 1 Year Share Price Dividend Paid 2007 3.30 40c 2008 3.56 42c 2009 3.47 44c 2010 3.75 46c 2011 3.99 48c There are
More informationCapital Budgeting-Part II
Capital Budgeting-Part II Dr. Ram Chandra Rai Sr.Professor (Finance Management) Railway Staff College, Vadodara, 390004 Risk Management Risk indicates extent of uncertainty of future cash flows Risk assessment
More information2. State any four tools and techniques of management accounting.
SUBJECT : MANAGEMENT ACCOUNTING SUB CODE : CM616S SUB HANDLING : Dr. F.ANDREWS CLASS: III B.COM 1. Define management Accounting. 2. State any four tools and techniques of management accounting. 3. What
More information10. Estimate the MIRR for the project described in Problem 8. Does it change your decision on accepting this project?
1 CHAPTER 5 Problems and Questions 1. You have been given the following information on a project: It has a five-year lifetime The initial investment in the project will be $25 million, and the investment
More informationChapter Organization. Net present value (NPV) is the difference between an investment s market value and its cost.
Chapter 9 Net Present Value and Other Investment Criteria Chapter Organization 9.1. Net present value 9.2. The Payback Rule 9.3. The Discounted Payback 9.4. The Average Accounting Return 9.6. The Profitability
More information2/9/2010. Investment Appraisal. Investment Appraisal. Investment Appraisal. Investment Appraisal. Investment Appraisal. Investment Appraisal
A means of assessing whether an investment project is worthwhile or not Investment project could be the purchase of a new PC for a small firm, a new piece of equipment in a manufacturing plant, a whole
More informationLO 1: Cash Flow. Cash Payback Technique. Equal Annual Cash Flows: Cost of Capital Investment / Net Annual Cash Flow = Cash Payback Period
Cash payback technique LO 1: Cash Flow Capital budgeting: The process of planning significant investments in projects that have long lives and affect more than one future period, such as the purchase of
More informationChapter 14 Solutions Solution 14.1
Chapter 14 Solutions Solution 14.1 a) Compare and contrast the various methods of investment appraisal. To what extent would it be true to say there is a place for each of them As capital investment decisions
More information3 Leasing Decisions. The Institute of Chartered Accountants of India
3 Leasing Decisions BASIC CONCEPTS AND FORMULAE 1. Introduction Lease can be defined as a right to use an equipment or capital goods on payment of periodical amount. Two principal parties to any lease
More informationFinal Course Paper 2 Strategic Financial Management Chapter 2 Part 8. CA. Anurag Singal
Final Course Paper 2 Strategic Financial Management Chapter 2 Part 8 CA. Anurag Singal Internal Rate of Return Miscellaneous Sums Internal Rate of Return (IRR) is the rate at which NPV = 0 XYZ Ltd., an
More informationINTER CA MAY Note: All questions are compulsory. Question 1 (6 marks) Question 2 (8 Marks)
(50 Marks) Note: All questions are compulsory. INTER CA MAY 2018 Sub: Financial Management Topics Capital Structure, Cost of Capital, Capital Budgeting, estimation of working capital, receivables management,
More informationMANAGEMENT INFORMATION
CERTIFICATE LEVEL EXAMINATION SAMPLE PAPER 3 (90 MINUTES) MANAGEMENT INFORMATION This assessment consists of ONE scenario based question worth 20 marks and 32 short questions each worth 2.5 marks. At least
More information[Type text] Section 2 Version A [Type text]
FIN 301 Prof. Thistle Principals of Managerial Finance Fall 2017 EXAM 3 PUT YOUR NAME, SECTION NUMBER AND TEST VERSION ON THE SANTRON FORM MULTIPLE CHOICE. Choose the one alternative that best completes
More information[Type text] Section 2 Version B [Type text]
FIN 301 Prof. Thistle Principals of Managerial Finance Fall 2017 EXAM 3 PUT YOUR NAME, SECTION NUMBER AND TEST VERSION ON THE SANTRON FORM MULTIPLE CHOICE. Choose the one alternative that best completes
More informationAsset Valuation Models Capital Budgeting Criteria Problem Set Boise State EMBA Byers
Asset Valuation Models Capital Budgeting Criteria Problem Set Boise State EMBA Byers Remember this is an individual assignment. You should start with a blank spreadsheet. Deliverable: submit your spreadsheet
More informationThe Use of Modern Capital Budgeting Techniques. Howard Lawrence
The Use of Modern Capital Budgeting Techniques. Howard Lawrence No decision places a company in more jeopardy than those decisions involving capital improvements. Often these investments can cost billions
More informationMAXIMISE SHAREHOLDERS WEALTH.
TOPIC 4: Project Evaluation 4.1 Capital Budgeting Theory: Another term for investing, capital budgeting involves weighing up which assets to purchase with the funds that a company raises from its debt
More informationINVESTMENT APPRAISAL TECHNIQUES FOR SMALL AND MEDIUM SCALE ENTERPRISES
SAMUEL ADEGBOYEGA UNIVERSITY COLLEGE OF MANAGEMENT AND SOCIAL SCIENCES DEPARTMENT OF BUSINESS ADMINISTRATION COURSE CODE: BUS 413 COURSE TITLE: SMALL AND MEDIUM SCALE ENTERPRISE MANAGEMENT SESSION: 2017/2018,
More informationThe formula for the net present value is: 1. NPV. 2. NPV = CF 0 + CF 1 (1+ r) n + CF 2 (1+ r) n
Lecture 6: Capital Budgeting 1 Capital budgeting refers to an investment into a long term asset. It must be noted that all investments have a cost and that investments should always have benefits such
More informationFinancial Management Bachelors of Business Administration Study Notes & Tutorial Questions Chapter 1: Investment & Project Appraisal
Financial Management Bachelors of Business Administration Study Notes & Tutorial Questions Chapter 1: Investment & Project Appraisal Ibrahim Sameer AVID College Page 1 INTRODUCTION Capital budgeting is
More informationMOCK TEST PAPER INTERMEDIATE (IPC): GROUP I PAPER 3: COST ACCOUNTING AND FINANCIAL MANAGEMENT
MOCK TEST PAPER INTERMEDIATE (IPC): GROUP I PAPER 3: COST ACCOUNTING AND FINANCIAL MANAGEMENT Test Series: March 2018 Answers are to be given only in English except in the case of the candidates who have
More informationChapter-8 Risk Management
Chapter-8 Risk Management 8.1 Concept of Risk Management Risk management is a proactive process that focuses on identifying risk events and developing strategies to respond and control risks. It is not
More informationChapter 6 Making Capital Investment Decisions
Making Capital Investment Decisions Solutions to Even-Numbered Problems and Cases 6.2 Manitoba Railroad Limited (MRL) (a) Discount Rate 7% Cash Cash Net Cash Cumulative Year Outflows Inflows Flows Cash
More informationProject Management. Project Initiation. by Dr Mohd Yazid Faculty of Manufacturing Engineering
Project Management Project Initiation by Dr Mohd Yazid Faculty of Manufacturing Engineering myazid@ump.edu.my Project Initiation Aims To organize project initiation by developing strategies to support
More informationASSOCIATION OF ACCOUNTING TECHNICIANS OF SRI LANKA. Examiner's Report AA3 EXAMINATION - JULY 2015 (AA32) MANAGEMENT ACCOUNTING AND FINANCE
ASSOCIATION OF ACCOUNTING TECHNICIANS OF SRI LANKA Examiner's Report AA3 EXAMINATION - JULY 2015 (AA32) MANAGEMENT ACCOUNTING AND FINANCE OVERVIEW: This paper has three sections covering 100 marks, 1.
More informationACCTG101 Revision MODULES 10 & 11 LITTLE NOTABLES EXCLUSIVE - VICKY TANG
ACCTG101 Revision MODULES 10 & 11 TIME VALUE OF MONEY & CAPITAL INVESTMENT MODULE 10 TIME VALUE OF MONEY Time Value of Money is the concept that cash flows of dollar amounts have different values at different
More informationAnalyzing Project Cash Flows. Chapter 12
Analyzing Project Cash Flows Chapter 12 1 Principles Applied in This Chapter Principle 3: Cash Flows Are the Source of Value. Principle 5: Individuals Respond to Incentives. 2 Learning Objectives 1. Identify
More informationINTRODUCTION TO RISK ANALYSIS IN CAPITAL BUDGETING PRACTICAL PROBLEMS
CHAPTER8 INTRODUCTION TO RISK ANALYSIS IN CAPITAL BUDGETING PRACTICAL PROBLEMS PROBABILISTIC APPROACH Question 1: A project under consideration is likely to cost `5 lakh by way of fixed assets and requires
More informationch11 Student: 3. An analysis of what happens to the estimate of net present value when only one variable is changed is called analysis.
ch11 Student: Multiple Choice Questions 1. Forecasting risk is defined as the: A. possibility that some proposed projects will be rejected. B. process of estimating future cash flows relative to a project.
More informationCHAPTER 8 MAKING CAPITAL INVESTMENT DECISIONS
CHAPTER 8 MAKING CAPITAL INVESTMENT DECISIONS Answers to Concept Questions 1. In this context, an opportunity cost refers to the value of an asset or other input that will be used in a project. The relevant
More informationGlobal Financial Management
Global Financial Management Valuation of Cash Flows Investment Decisions and Capital Budgeting Copyright 2004. All Worldwide Rights Reserved. See Credits for permissions. Latest Revision: August 23, 2004
More informationFINANCIAL MANAGEMENT ( PART-2 ) NET PRESENT VALUE
FINANCIAL MANAGEMENT ( PART-2 ) NET PRESENT VALUE 1. INTRODUCTION Dear students, welcome to the lecture series on financial management. Today in this lecture, we shall learn the techniques of evaluation
More informationInternational Project Management. prof.dr MILOŠ D. MILOVANČEVIĆ
International Project Management prof.dr MILOŠ D. MILOVANČEVIĆ Project Evaluation and Analysis Project Financial Analysis Project Evaluation and Analysis The important aspects of project analysis are:
More informationINTERNATIONAL JOURNAL OF MANAGEMENT RESEARCH AND REVIEW
INTERNATIONAL JOURNAL OF MANAGEMENT RESEARCH AND REVIEW A FUNDAMENTAL STUDY ON LONG- TERM INVESTMENT DECISION P. Selvam* 1, N. Punitavati 2 1 Assistant Professor, Department of Management studies, Alpha
More informationManagement Accounting Level 3
LCCI International Qualifications Management Accounting Level 3 Model Answers Series 4 2008 (3023) For further information contact us: Tel. +44 (0) 8707 202909 Email. enquiries@ediplc.com www.lcci.org.uk
More informationCAPITAL BUDGETING. Key Terms and Concepts to Know
CAPITAL BUDGETING Key Terms and Concepts to Know Capital budgeting: The process of planning significant investments in projects that have long lives and affect more than one future period, such as the
More informationMG 177 Third Year B. B. A. Examination April / May 2003 Advanced Financial Management
MG 177 Third Year B. B. A. Examination April / May 2003 Advanced Financial Management Seat No. Time : 3 Hours] [Total Marks : 70 Instructions : (1) All the calculations-work sheet should be a part of your
More informationPES INSTITUTE OF TECHNOLOGY BANGALORE SOUTH CAMPUS Dept. of MBA
PES INSTITUTE OF TECHNOLOGY BANGALORE SOUTH CAMPUS Dept. of MBA Lesson Plan Semester II Subject Code : 16MBA22 Total no of Lectures: 56 Subject Title : Financial Management IA Marks: 20 Type : Core Credits:
More informationSuggested Answer_Syl12_Dec2017_Paper 14 FINAL EXAMINATION
FINAL EXAMINATION GROUP III (SYLLABUS 2012) SUGGESTED ANSWERS TO QUESTIONS DECEMBER 2017 Paper- 14: ADVANCED FINANCIAL MANAGEMENT Time Allowed: 3 Hours Full Marks: 100 The figures on the right margin indicate
More informationPrinciples of Managerial Finance Solution Lawrence J. Gitman CHAPTER 10. Risk and Refinements In Capital Budgeting
Principles of Managerial Finance Solution Lawrence J. Gitman CHAPTER 10 Risk and Refinements In Capital Budgeting INSTRUCTOR S RESOURCES Overview Chapters 8 and 9 developed the major decision-making aspects
More information(59) MANAGEMENT ACCOUNTING & BUSINESS FINANCE
All Rights Reserved THE ASSOCIATION OF ACCOUNTING TECHNICIANS OF SRI LANKA FINAL EXAMINATION JULY 2013 (59) MANAGEMENT ACCOUNTING & BUSINESS FINANCE Time: 03 hours Instructions to candidates: (1) This
More informationBuilding the Business Case for Automation
Building the Business Case for Automation Presented by: Thomas Coyne, System Logistics Jerry Koch, Intelligrated John Hill, St. Onge Company Sponsored by: MHI s Automation 2014 MHI Copyright claimed as
More informationMTP_Intermediate_Syllabus 2012_Jun2017_Set 1 Paper 8- Cost Accounting & Financial Management
Paper 8- Cost Accounting & Financial Management Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1 Paper-8: Cost Accounting & Financial
More informationCA. Sonali Jagath Prasad ACA, ACMA, CGMA, B.Com.
MANAGEMENT OF FINANCIAL RESOURCES AND PERFORMANCE SESSIONS 3& 4 INVESTMENT APPRAISAL METHODS June 10 to 24, 2013 CA. Sonali Jagath Prasad ACA, ACMA, CGMA, B.Com. WESTFORD 2008 Thomson SCHOOL South-Western
More informationDISCLAIMER. The Institute of Chartered Accountants of India
DISCLAIMER The Suggested Answers hosted in the website do not constitute the basis for evaluation of the students answers in the examination. The answers are prepared by the Faculty of the Board of Studies
More informationOrganization Strategy and Project Selection The McGraw-Hill Companies, All Rights Reserved
Chapter 2 Organization Strategy and Project Selection McGraw-Hill/Irwin 2008 The McGraw-Hill Companies, All Rights Reserved 2-2 Why Project Managers Need to Understand the Strategic Management Process
More informationThe Cash Payback Period
Accounting presentation created by Rex A Schildhouse 2015-01-01 www.schildhouse.com Created by Rex A Schildhouse, www.schildhouse.com Slide 1 The Cash Payback Period is a quick and dirty, non-scientific
More informationSuggested Answer_Syl2012_Dec2014_Paper_20 FINAL EXAMINATION
FINAL EXAMINATION GROUP IV (SYLLABUS 2012) SUGGESTED ANSWERS TO QUESTIONS DECEMBER 2014 Paper- 20 : FINANCIAL ANALYSIS & BUSINESS VALUATION Time Allowed : 3 Hours Full Marks : 100 The figures in the margin
More informationTopic 12 capital investment
Topic 12 capital investment Aldi press- release - There is a strong appetite among South Australians for an alternative place to shop and we are eager to show them the significant benefits that can come
More informationPAPER 3 : COST ACCOUNTING AND FINANCIAL MANAGEMENT PART I : COST ACCOUNTING QUESTIONS
PAPER 3 : COST ACCOUNTING AND FINANCIAL MANAGEMENT PART I : COST ACCOUNTING QUESTIONS Material 1. The following information has been extracted from the records of a cotton merchant, for the month of March,
More informationnet present value discounted cash flow valuation payback period. discounted payback period.
1. A project has an initial cost of $27,400 and a market value of $32,600. What is the difference between these two values called? net present value internal return payback value profitability index discounted
More informationIbrahim Sameer (MBA - Specialized in Finance, B.Com Specialized in Accounting & Marketing)
Ibrahim Sameer (MBA - Specialized in Finance, B.Com Specialized in Accounting & Marketing) Introduction A long term view of benefits and costs must be taken when reviewing a capital expenditure project.
More informationMULTIPLE-CHOICE QUESTIONS Circle the correct answer on this test paper and record it on the computer answer sheet.
M I M E 3 1 0 E N G I N E E R I N G E C O N O M Y Class Test #2 Thursday, 23 March, 2006 90 minutes PRINT your family name / initial and record your student ID number in the spaces provided below. FAMILY
More informationContract Costing. CA Past Years Exam Questions
Contract Costing CA Past Years Exam Questions Question : 1 (Nov, 1994) A company undertook a contract for construction of a large building complex. The construction work commenced on 1 st April 2011 and
More informationChapter 6 Capital Budgeting
Chapter 6 Capital Budgeting The objectives of this chapter are to enable you to: Understand different methods for analyzing budgeting of corporate cash flows Determine relevant cash flows for a project
More informationUniversity 18 Lessons Financial Management. Unit 2: Capital Budgeting Decisions
University 18 Lessons Financial Management Unit 2: Capital Budgeting Decisions Nature of Investment Decisions The investment decisions of a firm are generally known as the capital budgeting, or capital
More informationUNIT I INTRODUCTION TO ECONOMICS PART A (2 MARKS)
UNIT I INTRODUCTION TO ECONOMICS PART A (2 MARKS) 1. What is elasticity of Demand? Elasticity of demand may be defined as the degree of responsiveness of quantity demanded to a Change in price. 2. Define
More informationCHAPTER 2 LITERATURE REVIEW
CHAPTER 2 LITERATURE REVIEW Capital budgeting is the process of analyzing investment opportunities and deciding which ones to accept. (Pearson Education, 2007, 178). 2.1. INTRODUCTION OF CAPITAL BUDGETING
More informationTHIS CHAPTER COMPRISES OF. Working knowledge of : AS 1, AS 2, AS 3, AS 6, AS 7, AS 9, AS 10, AS 13, AS 14.
Star Rating On the basis of Maximum marks from a chapter On the basis of Questions included every year from a chapter On the basis of Compulsory questions from a chapter CHAPTER 1 Accounting Standards
More informationReview of Financial Analysis Terms
Review of Financial Analysis Terms Financial Analysis Requirements Economic Evaluation of Potential TUR Techniques (310 CMR 50.46A) The TUR plan must include the discount rate, cost of capital, depreciation
More information11B REPLACEMENT PROJECT ANALYSIS
App11B_SW_Brigham_778312_R2 1/6/03 9:12 PM Page 11B-1 11B REPLACEMENT PROJECT ANALYSIS Replacement Analysis An analysis involving the decision of whether or not to replace an existing asset with a new
More informationQuestion: Insurance doesn t have much depreciation or inventory. What accounting methods affect return on book equity for insurance?
Corporate Finance, Module 4: Net Present Value vs Other Valuation Models (Brealey and Myers, Chapter 5) Practice Problems (The attached PDF file has better formatting.) Question 4.1: Accounting Returns
More informationSeminar on Financial Management for Engineers. Institute of Engineers Pakistan (IEP)
Seminar on Financial Management for Engineers Institute of Engineers Pakistan (IEP) Capital Budgeting: Techniques Presented by: H. Jamal Zubairi Data used in examples Project L Project L Project L Project
More informationNet Present Value Q: Suppose we can invest $50 today & receive $60 later today. What is our increase in value? Net Present Value Suppose we can invest
Ch. 11 The Basics of Capital Budgeting Topics Net Present Value Other Investment Criteria IRR Payback What is capital budgeting? Analysis of potential additions to fixed assets. Long-term decisions; involve
More informationACCA. Paper F9. Financial Management. Interim Assessment Answers
ACCA Paper F9 Financial Management 03 Interim Assessment Answers To gain maximum benefit, do not refer to these answers until you have completed the interim assessment questions and submitted them for
More information