A Company Is Planning Its Capital Budget Over the Next

question 6

Essay

A company is planning its capital budget over the next several years.There are eight potential projects under consideration.A calculation has been made of the expected net present value of each project,along with the cash outflow that would be required over the next four years.These data,along with the cash that is available each year,are shown in the table below.(If any of the cash available in a given year is not fully used for these projects,it will be used in other ways and so will not be available in later years.)There also are the following special constraints: (a)at least one of project 1,2,or 3 must be done,(b)project 6 and 7 cannot both be done,and (c)project 5 can only be done if project 6 is done.The objective is to determine which projects should be pursued to maximize the total expected net present value. (a)Formulate a BIP model in algebraic form for this problem.(b)Formulate and solve a BIP model in a spreadsheet for this problem.

Calculate and analyze net working capital changes over a period.

Determine the total tax paid by individuals based on interest income and dividends combining provincial tax rates.

Calculate operating cash flow and cash flow to creditors and stockholders.

Compute depreciation expense under various scenarios including the Capital Cost Allowance (CCA) system.

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Definitions:

Specific

Clearly defined or identified; precise or particular in nature.

Measurable

Capable of being quantified or subjected to measurement, often used to determine the effectiveness or impact of certain actions.

Realistic

Something that is plausible and in line with reality, often referring to expectations or portrayals that are achievable or accurate.

Marketing Objectives

Specific, measurable goals set by a company to guide its marketing strategy and drive its efforts towards achieving business targets.