Caledonia Products Essay

1229 words - 5 pages

Caledonia Products Company is introducing a new product. With previous fallouts from the company and ranging a 34% marginal tax bracket with a 15% required rate of return or cost of capital the change of direction is to initiate the new plan. Mr. V. Morrison, CEO, Caledonia products is asking for professional guidance to analyze his current cash flow statement to determine if the project of adding two mutually exclusive projects is profitable. Therefore, as an Assistant Financial Analyst, is take into account the interest to calculate Project A and Project B’s payback period, net present value, and internal rate of return to provide a recommendation on which project is tangible than the other.
Payback period
The payback period is the length of time required to break even on an investment measured in years. Where the annual cash flow is identical, the payback period is equal to the investment divided by the annual cash flow. The payback period emphasizes the liquidity of an investment but not its value. Caledonia Products have both projects A and B at an equal negative value of ($100,000) in the first year at an 11% rate of return.
Project
A Year UNDISCOUNTED FREE CASH FLOWS PVIF * 11%, n DISCOUNTED FREE CASH FLOWS CUMULATIVE DISCOUNTED FREE CASH FLOWS
0 ($100,000) 1.0 ($100,000) ($100,000)
1 $32,000 .901 $28,832.00 ($128,832.00)
2 $32,000 .812 $25,984.00 ($154,816.00)
3 $32,000 .731 $23,392.00 ($178,208.00)
4 $32,000 .659 $21,088.00 ($199,296.00)
5 $32,000 .593 $18,976.00 ($218,272.00)

3 years and 2 months

The payback period for project A occurs in three years and two months to recover the money.

Project
B Year UNDISCOUNTED FREE CASH FLOWS PVIF * 11%, n DISCOUNTED FREE CASH FLOWS CUMULATIVE DISCOUNTED FREE CASH FLOWS
0 ($100,000) 1.0 ($100,000) ($100,000)
1 $0 .901 $0.00 ($100,000.00)
2 $0 .812 $0.00 ($100,000.00)
3 $0 .731 $0.00 ($100,000.00)
4 $0 .659 $0.00 ($100,000.00)
5 $200,000 .593 $118,600.00 ($218,600.00)

4.5 years

The payback period for project B occurs in four and half years to recover the money.
Net Present Value at an 11% Rate of Return

Year
Project A

Project B

0 -100,000 -100,000
1 32,000 0
2 32,000 0
3 32,000 0
4 32,000 0
5 32,000 200,000
NPV $11,208 $11,608

Net Present Value (NPV) is the standard method for the financial appraiser of long-term projects. Measuring the excess or shortfalls of cash flows is to measure the difference of the invested and market cost. This method is a good investment, if of course, it brings money to the company, after the discounted rate is calculated. The discounted rate is the project’s Cost of Capital. If the present cash flows and future cash flows are done correctly, this will give the company the New Present Value. Thus, the projects should be accepted only if the plus is on the calculations of Net Present Value NPV > 0 measurements of time, profitability, value to the...

Find Another Essay On Caledonia Products

Nickel Essay

888 words - 4 pages Nickel is one of the most important elements on the periodic table. It has plenty of history, as well as a huge importance to society. Its has unique chemical, physical, and geological properties. Nickel is used commercially in abundance, as it is used anywhere from simple art products such as ceramics to complex structures such as tubing for desalination plants. It is even used in the American five-cent coin, the "nickel".Nickel was

France - The Country Essay

1164 words - 5 pages republic.ParliamentFrance is a republic today and it has a president. The French president has great power. He alone can give orders to use nuclear bombs. France is divided into 22 legions. Each town has a mayor whose job is taking decisions about the economy of the town. France also owns overseas department as well as territories that includes New Caledonia, French Polynesia and Wallis and Futuna.The parliament is divided into two groups: the National Assembly and

Research Paper on France

959 words - 4 pages world supplier of agricultural and industrial products and a major partner in the EC, or Common Market).Today, the term metropolitan France refers to the mainland departments and Corsica, a large island located in the Mediterranean Sea off the coast of Italy that has been a part of France since 1768. France has six overseas departments: French Guiana in South America; Guadeloupe and Martinique in the West Indies; Mayotte, an island formerly part of

Marketing of Changhong in China

1267 words - 5 pages Marketing of Changhong in ChinaSection 1. Customer AnalysisA. Segments1. Color TVPure flat serialSuper flat serialFlat square serialComments: Largest segment, dairy products, segmented by regional needs/functional Offerings/entertainment, accelerating growth2. Projection TVComments: Second largest segment, technical offerings, Middle-class's favourites, high growth rate in urban areas.3. LCDS & PDP TVComments: Potential, high technical

Corporate Expansion in Barbados

1902 words - 8 pages to export goods to a larger area which allowed for expansion. The creation of manufacturing sectors within companies led to expansion and supplying products to companies in neighboring countries. The partnering of local companies with large international companies from Europe, Asia, and North America allowed the Barbadian companies to expand in other regions. Local reputation seems to have been a major factor in allowing companies to expand while

Nixon

2100 words - 8 pages firm to be able to better support his new wife, World War II brought him to Washington, where he worked in the tire-rationing section of the Office of Price Administration. In August 1942 he joined the Navy as a lieutenant. He served in New Caledonia for the remainder of the war. He left the service four years later, in 1946 Before Nixon's release from active duty, Nixon decided to run for Congress. Nixon's campaign was an example of the

A deep look into Nixon's early life and political position

2095 words - 8 pages to be able to better support his new wife, World War II brought him to Washington, where he worked in the tire-rationing section of the Office of Price Administration. In August 1942 he joined the Navy as a lieutenant. He served in New Caledonia for the remainder of the war. He left the service four years later, in 1946Before Nixon's release from active duty, Nixon decided to run for Congress. Nixon's campaign was an example of the aggressive

The Life and Contribution to the Development of the British Empire of James Cook

5097 words - 20 pages steam engine invented in1769 provided the power to drive machinery and thus enabled mass production of goods. The new ways of making products more quickly and inexpensively together with the extension of new markets also caused a commercial revolution. The structure of commerce changed: imports of raw materials were rising and ever more finished products were exported. Such a structure of commerce enabled the immense growth of wealth of the

EKB's consumer decision model - Holiday to Vanuatu

5404 words - 22 pages (Sheth JN & Mittal B, 2004).2.4.2 Evaluative CriteriaAn important aspect of the evaluation of alternatives is the criteria set to eliminate the alternatives in order to produce one final purchase choice. This is done by viewing 'each product as a collection of features or attributes' (Quester et al, 2004 p.205). A common and simple way to determine criteria is by using an evaluative grid, which shows features common to different products

Extensive decision-making process - consumer behaviour: analyse the many elements of EKB's consumer decision model in relation to consumer behaviour

5457 words - 22 pages evaluative grid, which shows features common to different products (Quester et al, 2004). We used this to determine which holiday destination to choose (Refer Appendix 6).2.4.3 Decision RulesThe usage of decision rules also assists with evaluating which criteria is suitable for the selected product (Schiffman et al, 2001). There are various types of decisions rules and each are suited to a particular type of product (see Figure 2.4.3).Type of decision

The Three Major Issues in the Advertising Campaign for Coca Cola Classic

5338 words - 21 pages , Indonesia, Iran, Ireland, Israel, Italy, Japan, Jordan, Kuwait, Lebanon, Lesotho, Macao, Macedonia, Malaysia, México, Morocco, Namibia, New Caledonia, New Zealand, Nigeria, Norway, Oman, Pakistan, Panama, Paraguay, Peru, Philippines, Poland, Portugal, Puerto Rico, Qatar, Romania, Russia, Saudi Arabia, Seychelles ,Singapore, Slovakia, Slovenia, South Africa, South Korea, Sri Lanka ,Spain, Swaziland, Sweden, Switzerland, Tahiti, Taiwan, Thailand

Similar Essays

Caledonia Products Integrative Problem Essay

623 words - 2 pages Upon acquiring a new position as an assistant financial analyst with Caledonia Products, the boss has requested an evaluation of two mutually exclusive projects that may be considered as potential additions to the organization. In order to complete this assessment this paper will explore the capital budgeting process of Caledonia and will answer five specific questions from the Financial Management: Principles and Applications text. What is each

“Caladonia Products” Integrative Problem Essay

846 words - 3 pages Week 1 Assignment "Caladonia Products" Integrative Problem Team C University of Phoenix FIN/370 James Lytle July 16, 2009 Caledonia Products Upon acquiring a new position as an assistant financial analyst with Caledonia Products, the boss has requested an evaluation of two mutually exclusive projects that may be considered as potential additions to the organization. In order to

“Caladonia Products” Integrative Problem Essay

846 words - 3 pages Week 1 Assignment "Caladonia Products" Integrative Problem Team C University of Phoenix FIN/370 James Lytle July 16, 2009 Caledonia Products Upon acquiring a new position as an assistant financial analyst with Caledonia Products, the boss has requested an evaluation of two mutually exclusive projects that may be considered as potential additions to the organization. In order to

"Caladonia Products" Integrative Problem Paper

1019 words - 4 pages After occupying the new position as an assistant financial advisor at Caledonia Products, I was asked to assess the new investment projects that Caledonia was considering. To get a clear and exact picture, I hired a professional team in order to do the calculation of the cash flow associated with new investment under my supervision. Therefore, the team will evaluate two mutually exclusive projects and provide an explanation about which one of
2 - 14 Episódio 14 | Voiles, gréements, cordages | كازينو