The first task on the agenda was to examine the probable future scenarios that could potentially accept the cash flows for SAI and their two potential projects, Dig-Image and W-Comm. Included in SAI's plans are the need to make $54 million in their first year by selling at least 400,000 units produced in Sunnyvale; they need to determine their working capital. "Working capital rises over the early years of the project as expansion occurs. However, all working capital is assumed to be recovered at the end," (Ross, Westerfield & Jaffe, 2006, p. 183). They are expecting that the growth will be 20% in the first three years, and then they are predicting a sales decrease of 10% to a total of 0% in years 4 and 5 (University of Phoenix Simulation, 2006). SAI is expecting some challenges with this new venture; not only is there intense competition, they are expecting priced to drop year to year, and they are also expecting this technology to be replaced soon, perhaps even before the lifespan on their project has run out.
It is stated that Verizon Communications Inc is a holding company that is one of the world’s leading provider of communications, information and entertainment products and services to consumer, businesses and governmental agencies with a presence around the world. They have wireless services (utilizing the largest 4G LTE technology) and wireline services (utilizing local and long distance voice services, data, broadband video, networking solutions, data center and cloud technology. In the report is recorded the investments within the business which they control, investments that they do not control but have the right to exercise the significant influence over are accounted for using the equity method. For investments with no control, they
The major audit issue will be determining when the technology (and/or intangible assets derived from technology development) becomes technologically feasible and when to allow costs to be capitalized. The feasibility is determined through a series of tests and assessments deemed appropriate by DCNC. Once determined, the feasibility of this technology will be expensed in the same periods as the research and development costs occur. One of the most important criteria is determining and measuring the expenditures that are related to the intangible asset during development. Other factors include the completion of the technology and when the intangible asset is eligible to be used. Following the appropriate standards will allow for audit issues such as this to be minimized, but determining the technological feasibility is often challenging for
After reviewing the past nine months of Cyrus Brown Manufacturing's (CBM) cash position, I am a little concerned with a couple months of the cash flow. Although the losses during the first and second quarters are not an ongoing issue it has me wondering about the cash management plan, and why appropriate measures were not taken to budget better for the acquisition of a new building.
When considering the positives and the negatives, we would like to conclude that the gains outweigh the ethical concerns and that this technology will probably be an important part of if not all, but some of our lives. We would like to advise NTV to invest in this product. This investment should cover companies that are performing rigorous research and development which they plan on patenting, as these patent portfolios will become very important in the future. They should also invest in companies that are building basic functionality apps for WAR devices, and companies that are developing necessary hardware for WAR devices as these companies will probably be bought in the future by larger corporations like Google or Samsung.
The capital budgeting practice includes forecasting and identifying cash flows, performing scenario and sensitivity analysis, and applying capital budgeting tools (Kwok & Rabe, 2010). This process is essentially where the financial potential for a possible investment or multiple investments is evaluated. In the chance that there are several potential opportunities for investment, each investment must be analyzed and compared against the other possibilities in order to figure out which opportunity has the pote...
Capital Budgeting may be defined as the process of selecting long-term assets, whose useful life is greater than one year…The capital budget determines funding amounts, what capital equipment will be acquired, what buildings will b...
What this means is that for every $1 that Vestor Corporation raises, they are expected to pay 10 cents to investors. Vestors Corp. expects that this investment will give them an internal rate of return of 11.5%. If we calculate 11.5 - 10.15 = 1.35, so the expected return that Vestors should see from this investment is a positive 1.35% overall. According to InvestingAnswers.com, "It's important for a company to know its weighted average cost of capital as a way to gauge the expense of funding future projects. The lower a company's WACC, the cheaper it is for a company to fund new projects." What this tells us is that Vestors capital structure, overall, has a moderate cost of raising capital for new projects. Because this project is projected to have an overall positive net return for Vestors, then they should take this investment; because we are talking about a $20,000,000 investment if we multiply this by .0135 (20000000 x .0135) the company can expect a $270,000 net return on investment. If we split this
A long-term capital investment are classified as an investment that is longer than a year. Capital investments are necessary for ongoing business activities Capital budgeting is an estimate at the time, “the budgeting process is subject to purposeful manipulation, as well as judgmental errors.” “Considering the significant size and long duration of these investments, inappropriate capital investment decisions may have serious financial consequences for a business.” (Regis University, n.d. p.2 )