Chicago Value Company Case - 1129 Words

1. Explain the inputs into 1) the net initial investment outlay at year 0, the initial investment $200,000 which include taxes and delivery, and the cost to install the equipment $12,500. The total net cost $212,500. 2) The depreciation tax savings in each year of the projects economic life, this will show how much the tax savings will be depreciated each year using the MACRS method 3) the projects incremental cash flows? This shows the company profit for each of the eight years. Net Cost MACRS Tax Rate Depreciation Tax Savings $ 212,500 0.20 $ 42,500 40% $ 17,000 $ 212,500 0.32 $ 68,000 40% $ 27,200 $ 212,500 0.19 $ 40,375 40% $ 16,150 $ 212,500 0.12 $†¦show more content†¦5. What is the project s MIRR? The project is 13.24% What is the difference between the IRR and MIRR? The IRR is 16.20% Which is better? Why? The between the MIRR and IRR Ââ€" the IRR for the cash flows for each year are determine from the rate based on the present value. The MIRR the future value based on the initial investment determines the rate. The MIRR is better because have an expected rate of return. N I Present Value PMT Future Value 0 11 -36000 0 $ 36,000.00 1 11 -36000 0 $ 39,960.00 2 11 -41100 0 $ 50,639.31 3 11 -45350 0 $ 62,022.07 4 11 -46200 0 $ 70,134.85 5 11 -52150 0 $ 87,875.78 6 11 -63200 0 $118,210.20 7 11 -53000 0 $110,036.49 $574,878.70 6. Suppose a potential customer wants to know the projects for profitability index (PI). What is the value of the PIU of Lone Star, and what is the rationale behind this measure? Profitability Index = PI Present Value of Future Cash Flow over Initial Cost = 212500 + 36944 = 249,455 over Initial Cost 212,500 equal 1.173 for every $1 invested in the project, the total value created is 1.173. Therefore the Chicago Valve Company has a net profit of 1.173 Ââ€" 1=$0.173 per every dollar invested. 7. Under what conditions do NPV, IRR, MIRR and PI all leads to the same accept/reject decision? If the projects are independent accept both. When can conflicts occur? If a conflict arises,Show MoreRelatedTootsie Roll Qa831 Words   |  4 Pages How does Tootsie Roll Industries (TRI) communicate its values to suppliers and employees? TRI uses a top-down method, which in some cases can alienate lower leveled employees. TRI has implemented a few different programs to encourage accessibility, teamwork, and open communication. The company’s â€Å"open door policy,† allows for employees to observe and participate in the decision-making process throughout all departments. The company also established cross-functional teams, which increasesRead MoreEssay about PWC Corporate Social Responsibility 1469 Words   |  6 Pagesresponsibility of multinational and national companies there days. Various books have been written detailing the right approach to the problem covering different perspectives. 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