final exam study guide

final exam study guide - .2569811 70(1.256981)2 year...

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→ annual return rate over two year 1.2569811+70(1.256981)2 Capital Budgeting A. Capital Budgeting 1.) Step 1: FCF=Cash from operations-capital expenditures-acquisitions+assets I. Cash From operations= Net Income+depreciation-increase in working capital a. Net Income=Sales-Cost of goods sold-SG&A-depreciation(= Earnings before taxes)- taxes i. Cost of goods sold includes: direct labor, materials, office supplies, utilities, and insurance. ii. SG&A includes: marketing and advertising cost along with additional overhead cost associated with project (usually managers time with project added to overhead). iii. Depreciation: depreciation expense associated with capital expenditures for project. iv. Working Capital: difference between current assets and current liabilities (includes: accounts receivables, inventories, cash necessary to operate business(register), less accounts payable, and accrued expenses.) b. Salvage value : sales price of assets no longer needed. 2.) Step 2: Implement decision rule for accepting and rejecting
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This note was uploaded on 02/01/2011 for the course FI 320 taught by Professor Wiggins during the Spring '08 term at Michigan State University.

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final exam study guide - .2569811 70(1.256981)2 year...

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