NPV

10.) Mills Mining is considering an expansion project. The proposed project has the following features: • The project has an initial cost of $500,000 – this is also the amount which can be depreciated using the following depreciation schedule: (see attached chart) • If the project is undertaken, at t=0 the company will need to increase its inventories by $50,000, and its accounts payable will rise by $10,000. this net operating working capital will be recovered at the end of the project’s life (t=4) • If the project is undertaken, the company will realize an additional $600,000 in sales over each of the next four years (t=1, 2, 3, 4). The company’s operating cost (not including dep... click for more

Debt and Dividends

20. Dividend Policy: Here are several assertions about typical corporate dividend policies. Which of them are true? Write out a corrected version of any false statements: a. Most companies set a target dividend payout ratio - b. They set each year's dividend equal to the target payout ratio times that year's earnings ? c. Managers and investors seem more concerned with dividend changes then dividend levels. d. Managers often increase dividends temporarily when earnings are unexpectedly high for a year or two. 21. For each of the following 4 groups of companies state whether you would expect them to distribute a relatively high or low proportion of current earnings an... click for more

Investment decision

XYZ plc operates in the paint industry. XYZ is considering to renew its technology, and to do so, a new machine needs to be bought. There are two types of machines. Machine 1 costs £10,000 and has a 3 year lifetime. Machine 2 costs £1,000 and has a 2 year lifetime. Both machines have nil scrap values at the end of their lifetimes. Also, machines 1 and 2 are the only machines available in the paint business for the next 20 years. Technology renewal by machine 1 and technology renewal by machine 2 will generate the same risk for XYZ plc. The firm would finance its technology renewal by 60% equity and 40% riskless debt. The riskless interest rate is 5% per annum. XYZ has a dividend payout ra... click for more

Working capital management

I need to cite an organization with good working capital management policies. I also have to cite one that has poor working capital policies, I understand what working capital means and I have an organization that I will use for poor working capital policies but I am having trouble finding and being able to analyze a company with a good policy. Can you help?

Use of excess cash

If a company has an excess of cash what are the advantages and disadvantages of paying its suppliers more quikly or reducing the companies outstanding debts?