Financial Managment worksheet 2 Essay Example | Topics and Well Written Essays - 1250 words

Financial Managment worksheet 2 - Essay ExampleThen the financial psychoanalysis should also incorporate the effect of finishing pop out A (in 5 years) and starting project C (and continuing it for 2 years) while making the decision between project A and B.If your disposal grew by 10% - identify the incremental appeal you would incur. What if your geological formation grew by 100% How/why would the costs differ Discuss this concept in relation to accounting and economic factors.The incremental cost would development in the same proportion (10%) for some time. This is because the existing fixed cost volition not diversity till the entire existing skill is exhausted. Up to this stage, there impart be a count kin between organization growth and increase in incremental costs. However, once the existing capacity is exhausted and there is a need to obtain additional equipment, plant, etc., then the fixed cost will increase as well. In this case, the relationship between increm ental cost and organization growth will no longer be 11.From economic standpoint, the relationship between incremental cost and organization growth may not be direct plane for small growth (10%). This is because there may be other economic factors to consider, for example, potential projects that may redeem to be let go referable to organization growth in one business line.Yes, EVA has an mend on capital ciphering decisions. ... From economic standpoint, the relationship between incremental cost and organization growth may not be direct even for small growth (10%). This is because there may be other economic factors to consider, for example, potential projects that may have to be let go due to organization growth in one business line. Do EVA considerations impact capital budgeting decisions How could a company incorporate the idea of EVA into their capital budgeting decision processYes, EVA has an impact on capital budgeting decisions. EVA is a method to calculate true economi c income of an organization, and should be employed by management in making capital budgeting decisions. Since EVA is the net income of the organization adjusted after incorporating opportunity cost of the invested capital so the capital that will be used to finance a particular budget should be able to generate enough income to meet EVA and not just financial net profits.EVA = realize income - Capital charge (cost of capital x invested capital) CASE STUDYIntroductionThis paper consists of financial analysis of two projects in order to select the project which will benefit the company the most. The financial calculations are provided in Appendix A of the paper. The details of the projects are provided belowProject 1Project 2 address$800,000$650,000Useful Life10 years8 yearsSalvage ValuenoneNoneIncremental Sales$500,000$375,000Cost of Goods Sold49% of gross revenue43%Advertising$50,00010% of salesDepreciationStraight-lineStraight-lineTax rate40%40%Discount rate10%10%The be assumpt ion is that the two projects are equally risky. RecommendationThe results of financial analysis reveal that Project 1 is better of the two