Introduction:
Cranfield Inc. is a leading producer of juices for range of cranberry cocktails. After a market research experiment Cranfield Inc. has many different business decisions to make. One to introduce a new line called lite cocktail which requires space and machinery and will eat into sales of currently offered products. Or not to introduce the new product and lease out it’s space, or do nothing to save the space until it’s needed for its current product line.
1) Incremental cash flows are the cash flows that should be used in calculating the NPV of a project. The cash flows are changes in cash flows that occur as a direct consequence of accepting a project, not the cash flows that the company is already receiving.
No we do
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5) Yes cannibalization effect should be taken into consideration. If Cranfield does introduce lite cocktail than this might have an effect on the sales of regular cranapple, thus it should be taken into consideration in the project.
If management believed if they didn’t introduce the lite product than someone else would, then yes sales of regular cranapple would be adversely affected if they introduced the lite product or not.
6) Year 0 net investment outlay 400,000+20,000+40,000+15,000=475,000$
See Table 1: Expected non-operating cash flow when the project is terminated at year 4 = 165,880$
7) See Table 1 NPV=42,318.71 IRR = 14% MIRR = 12% Payback period= 2.93 years. Yes the project should be undertaken.
8) A) The problems with the discount rate being a nominal rate and the cash flows a real rate is the fact that the discount rate is inflation adjusted and the cash flows are not. Therefore the discount rate should subtract inflation due to the fisher effect, nominal = real plus inflation to have the same “rate” as the cash flows or the cash flows should take into account inflation. If not the cash flows are understated or the discount rate is too high.
B) Inflation can have a significant effect on the cash flows. An
Thus, final free cash flows for the project come out to be $-3.750 million, $0.889 million, $2,563 million, $5,719 million and $2,388 million for years 2011, 2012, 2013, 2014 and 2015 years respectively.
To make the most informed decision the IRRs and payback periods of the projects should be compared in conjunction with the NPVs of the two projects. The NPV analysis of the two projects under consideration indicates that the MMDC Project is the better of the two projects.
Incremental cash flows is the difference between the cash flows a company will have if it implements the new project versus the cash flows the company will have if they choose not to embark
In order for a character to qualify as the tragic hero they must posses all of these qualities: high standing, a major flaw, and a downfall. A tragic hero is someone that is usually of royalty, of nobility, honest, or brave. During the story they usually show a major flaw or weakness. This usually leads to their downfall, loss of power, or even death. Many stories have tragic heroes.
According to recent studies, the age group of 25-40 year old males and females purchase a reliable amount of small appliance to bring in this product. A household income of $40,000 a year is enough purchasing power for a household to afford this product. Through recent studies, it has shown that cocktails are mostly popular with individuals that like to share their experience with others and go to bars and restaurants because of the specialty cocktails that are offered. The United States has been chosen as the target location because of Company G’s location.
In this case study, we will be analyzing the current position of how well Kingsford is within the marketplace and determine which of the issues are plausible causes in its drop in revenue. We will be creating a comprehensive strategy as well as a marketing plan to evaluate and adjust the matter at hand. First we will begin with identifying the issues and implementing a method to reemphasize the importance of marketing in the business. The goal is to create a marketing plan that will add value to Kingsford’s market share, sales, and profitability.
This is an example of a famous criminal case that has taken place in the United States:
Increasing international growth and commitment to the environment and their employees are major strengths for the company. Growth opportunities are present in the organic market, which is projected to grow 9% (Scott-Thomas, 2012), and the smoothie market, which will see a potential growth of 1.6% through 2013 (Technomic, 2012). Some of the weaknesses facing the company are its narrow target market in the organic product industry and lack of traditional advertising. Major competition from Odwalla and Naked Juice are threats to growth and the volatile market for fruit and other natural ingredients may cause unpredictable price increases and as well as an unpredictable future. Also, shifts in popularity of the trendy organic product movement may cause a decline in future revenues. However, both the smoothie and the organic/health food markets are growing rapidly and Clif Bar can secure a larger share in these markets with the introduction of Simply Clif.
We should accept the project because of the positive NPV and high IRR. We will gain $532 million in wealth which is a big money on the scale like this. The company has a bond rating of AA that makes the risk relatively low. So we should definitely say yes.
e) Maintenance contracts - Maintenance costs should be included as incremental cash flows because they could change the NPV of the project if the maintenance costs are significantly different for each of the different projects.
Driving up to Porterfield Health and Rehabilitation, I was first struck by how old the building looked. Evenly spaced small windows covered by broken blinds were equipped with mounted AC units. Cars of different older model types haphazardly scattered the front of the lot. I could tell that some semblance of order was attempted, but due to the lack of a designated parking lot with painted lines, any major attempt at parking evenly had been abandoned. I steeled myself, got out of my car, and walked up to the front door. I pulled, but it was locked. A nurse watching me struggle quickly entered a passcode into the electronic box outside of the door and let me in. I took my place in the long line forming at the reception desk as a woman in a wheelchair
The company should accept this project. The project payback period is between 2 to 3 years.
Based on this calculation, the project should not be accepted. In general, a project should not be accepted if the net present value is below zero. The net present value of this project is -$260,676, so it should not be accepted.
A project has initial costs of $3,000 and subsequent cash inflows in years 1 – 4 of
In my opinion the company should reject the project as the ARR is much less than expected and the payback period is nearly as long as the maximum payback period which could put company to danger.