Financial Management (MBA) Essay Example | Topics and Well Written Essays - 750 words

Financial Management (MBA) - Essay ExampleThe nominates personify of equity stands at 13.08% and it is calculated by using the equation of CAPM. In this analysis the average beta is 1.48 and it shows that the project also bears some risk. grocery store risk premium is calculated by using the geometric average prices of the stock from 1973 to 2000.In the earlyish part, the notes flow is slightly vulnerable because it recovers the initial cost outlay associated with the project, but later the projects displace cash flow is in the substantiating zone which in the exterminate makes a strong observation on the NPV and the IRR of the project.Cost of capital stands at 10.44%, which is in high spiritser than the other project primarily due to the high debt financing which would leverage the firms elucidate income and also increases the be associated with debt financing.The NPV of the project is $36,367,676 which is rather solid as farthest as the project valuation is concerned and the IRR provides a rate of drive off equivalent to 24.70% which is lower in comparison with the other project.It is reviewed that the projects cash flow stream is in positive zone throughout the period. The cash flow of the whole projects life increases gradually family by year because the profit overcomes all the cost associated with the project.The ultimate decision criteria would be to proceed with Front land up Loader Project. ... iated with the project, but later the projects net cash flow is in the positive zone which in the end makes a strong chiding on the NPV and the IRR of the project.OUTBOARD MOTOR PROJECTThe facts related with the Outboard Motor Project are expose belowDue to heavy debt financing of 70%, the projects cost of debt is high with a 4.82% which in the end makes an impression on the cost of the capital of the project.Cost of capital stands at 10.44%, which is higher than the other project primarily due to the high debt financing which would leverage t he firms net income and also increases the costs associated with debt financing.The NPV of the project is $36,367,676 which is quite solid as far as the project valuation is concerned and the IRR provides a rate of return equivalent to 24.70% which is lower in comparison with the other project.It is reviewed that the projects cash flow stream is in positive zone throughout the period. The cash flow of the whole projects life increases gradually year by year because the profit overcomes all the cost associated with the project.CONCLUSIONThe ultimate decision criteria would be to proceed with Front End Loader Project. This type of expansion bears a greater positive Net Present Value as compared to the outboard project, and since the company primarily focuses on NPV to make these capital decisions Front End Loader distinctly adds more value. Assuming that the sales projections are correct, and after accounting for the initial cash outlay, the operating costs and maintenance, the disco unted cash flow over the life of the project and after factoring in the depreciation of assets and their electric pig value, the NPV of the outboard motor project is $ 36,367,676 which is no where close to the NPV of Front end loader,