Caledonia.week4groupassigndocx - Caledonia Products...

Info icon This preview shows pages 1–2. Sign up to view the full content.

Caledonia” Products Integrative Problem Introduction: Caledonia Products 12 a. What is each project’s payback period? Caledonia Products Company is introducing a new product. With previous fallouts from the company and ranging a 34% marginal tax bracket with a 15% required rate of return or cost of capital the change of direction is to initiate the new plan. Mr. V. Morrison, CEO, Caledonia products is asking for professional guidance to analyze his current cash flow statement to determine if the project of adding two mutually exclusive projects is profitable. Therefore, as an Assistant Financial Analyst, is take into account the interest to calculate Project A and Project B’s payback period, net present value, and internal rate of return to provide a recommendation on which project is tangible than the other. Payback period The payback period is the length of time required to break even on an investment measured in years. Where the annual cash flow is identical, the payback period is equal to the investment divided by the annual cash flow. The payback period emphasizes the liquidity of an investment but not its value. Caledonia Products have both projects A and B at an equal negative value of ($100,000) in the first year at an 11% rate of return. Project A Year UNDISCOUNTED FREE CASH FLOWS PVIF * 11%, n DISCOUNTED FREE CASH FLOWS CUMULATIVE DISCOUNTED FREE CASH FLOWS 0 ($100,000) 1.0 ($100,000) ($100,000) 1 $32,000 .901 $28,832.00 ($128,832.00) 2 $32,000 .812 $25,984.00 ($154,816.00) 3 $32,000 .731 $23,392.00 ($178,208.00)
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern