question archive 1-The analysis of the financial performance is to determine the meaning and significance of the financial data to check the performance in past, forecast for the future business performance and verifying the financial strength of the organisation
1-The analysis of the financial performance is to determine the meaning and significance of the financial data to check the performance in past, forecast for the future business performance and verifying the financial strength of the organisation
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1-The analysis of the financial performance is to determine the meaning and significance of the financial data to check the performance in past, forecast for the future business performance and verifying the financial strength of the organisation. Therefore, there are two procedural groups. Describe each of the group
2-You have been appointed as a Project Manager for Maya Construction Company. The company is about to select a group of independent projects competing for the company’s capital budget of $6.0 million. The firm recognized that its cost of capital is 14%. The company Chief Executive Officer (CEO) has given you the summarized key information (refer to Table 4.1) to be used in selecting the best group of projects.
|
Table 4.1 Project Information Project |
Initial Investment |
Internal Rate of Return (IRR) |
Present Value (PV) of Inflows at 14% |
|
A |
$7,500,000 |
16% |
$7,600,000 |
|
B |
$ 650,000 |
17% |
$ 950,000 |
|
C |
$1,800,000 |
15% |
$2,100,000 |
|
D |
$1,450,000 |
20% |
$1,700,000 |
|
E |
$ 950,000 |
25% |
$1,150,000 |
|
F |
$2,400,000 |
21% |
$2,800,000 |
|
G |
$1,200,000 |
22% |
$1,500,000 |
|
H |
$ 900,000 |
19% |
$1,000,000 |
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ANSWER
1.
the two groups are balance sheet and income statement
The Balance Sheet shows the financial position (condition) of the firm at a given point of time. It provides a snapshot that may be regarded as a static picture. “Balance sheet is a summary of a firm’s financial position on a given date that shows Total assets = Total liabilities + Owner’s equity.”
The Income Statement reflects the performance of the firm over a period of time. “Income statement is a summary of a firm’s business revenues and expenses over a specified period, ending with net income or loss for the period.”
However, financial statements do not reveal all the information related to the financial operations of a firm, but they furnish some extremely useful information, which highlights two important factors profitability and financial soundness.
2.
| PROJECT | INTIAL INVESTMENT | PROJECT INFLOWS | NPV | IRR |
| A | 7,500,000 | 7,600,000 | 100,000 | 16% |
| B | 650,000 | 950,000 | 300,000 | 17% |
| C | 1,800,000 | 2,100,000 | 300,000 | 15% |
| D | 1,450,000 | 1,700,000 | 250,000 | 20% |
| E | 950,000 | 1,150,000 | 200,000 | 25% |
| F | 2,400,000 | 2,800,000 | 400,000 | 21% |
| G | 1,200,000 | 1,500,000 | 300,000 | 22% |
| H | 900,000 | 1,000,000 | 100,000 | 19% |
with given 6 million - project b , c , f and g can be accepted
both provide with highest NPV and IRR
2,400,000 + 1,200,000 +,600,000 +,1,800,000 = 6,000,000
