CORPORATE FINANCE - MODULE 6 MINICASE Essay Example | Topics and Well Written Essays - 2750 words

CORPORATE FINANCE - MODULE 6 MINICASE - Essay Example This means that it generates enough cash to recover the cost of investment and the return that the investors want. If both franchise L and S are independent, then both of them should be accepted as both of them have a positive NPV. On the other hand, if they are mutually exclusive, then franchise S should be selected, as it gives a higher NPV value. (3) Would the NPV's change if the cost of capital changed (Ehrhardt & Brigham, 2006) The NPV inversely depends on the cost of capital. Therefore, if NPV increases then the cost of capital decreases; and, if the NPV decreases then the cost of capital increases. d. (1) Define the term internal rate of return (IRR). What is each franchise's IRR (Ehrhardt & Brigham, 2006) The IRR is the discount rate at which NPV is equal to zero. Expressed as an equation, we have: IRR: = $0 = NPV. 0 18.1% 1 2 3 | | | | -100.00 10 60 80 8.47 43.02 48.57 $ 0.06 $0 Franchise L's IRR is 18.1%. 0 23.6% 1 2 3 | | | | -100.00 70 50 20 56.63 32.73 10.59 $ (0.05) $0 Franchise S's IRR is 23.6% (2) How is the IRR on a project related to the YTM on a bond (Ehrhardt & Brigham, 2006) As the YTM is the promised rate of return on a bond, the IRR is the expected rate of return on a project. (3) What is the logic behind the IRR method According... Independent projects are those whose cash flows are not affected by the acceptance of another project. On the other hand, mutually exclusive projects are those whose cash flows are affected by the acceptance of another project. The rationale behind the NPV method is that if NPV=$0, then the project breakevens in a financial sense (but not in the accounting sense). This means that it generates enough cash to recover the cost of investment and the return that the investors want. If both franchise L and S are independent, then both of them should be accepted as both of them have a positive NPV. On the other hand, if they are mutually exclusive, then franchise S should be selected, as it gives a higher NPV value. IRR measures a project's profitability in the rate of return sense: if a project's IRR equals its cost of capital, then its cash flows are just sufficient to provide investors with their required rates of return. An IRR greater than r implies an economic profit, which accrues to the firm's shareholders, while an IRR less than r indicates an economic loss, or a project that will not earn enough to cover its cost of capital. No, the IRR wouldn't be affected by a change in the cost of capital. It should be noted, however, that the acceptability of the IRR may change if the cost of capital changes. For example, franchise L would be rejected if the cost of capital increases beyond 18.1%. (2)

Is high speed railway a better way to promote benefits to public Essay

Is high speed railway a better way to promote benefits to public - Essay Example Moreover, over the historic moment, the train has been evolving and the Japanese system was the first in the world, starting in 1964. It has borrowed a lot from it foster mothers of coal engine. However, most of high-speed rail is usually designed for passenger travels although some are used for freight services. Like any transport system, high-speed railway is not inherently convenient, fast, clean, or comfortable. All of this depends on design, implementation, maintenance, operation and funding. Operational smoothness is often more indicative of organizational discipline than technological prowess. Additionally, the growths of travel systems are constrained by the existing infrastructure. When other modes cannot expand, HSR may possibly provide a feasible alternative. HSR systems are more environmentally friendly than air or road travel, given their higher fuel efficiency per passenger-kilometer and reduced land use. The initial impulsion for the introduction of high speed rail was the need for additional capacity to meet increasing demand for passenger rail travel. Urban density and mass transit have been key factors in the success of railway transport. We decided to base our research on the efficacy of the high speed rail on the public. In general, the study will detail on how efficient the railway has become to the society. Moreover, HS2 are high investment long-term infrastructure projects meant to substantially change travel patterns. Beyond the travel mode change, this paper seeks to evaluate if HS2 station have an economic benefit to the public. Consequently, urban areas in UK were selected for the analysis because of the age, gender and employment status of the respondents. Specifically: There are various negative costs associated with emerged high speed railways. For instance, there is raised cost of transporting goods and services, land