Managing Projects College Essay Example | Topics and Well Written Essays - 2000 words

Managing Projects College - evidence ExampleCalculation of WACC is non a simple task as many would think, this is because the only art object which is simple is calculation of the debt a firm has, these debt include the bank loan and other borrowing, however this is ordinarily the beginning of the hard task since it known that the equity finance is usually more expensive than damage debt finance, this is due to the fact that equity finance has complex computing of the risk premium making computation of WACC complex. This computation of WACC is made more complex when determining which debts or equity should be used to step-up the returns on capital of the shargon holders. The inclusion of corporate tax- rate in this computation adds more irritate while calculating WACC in view of the fact that interest payment is taxable.From the above facts, I would not agree with the statement that calculation of the WACC is the easiest thing in the world because even though the formulae app ears simple it cannot be interpreted in lay mans language, e.g. the total finance includes all the trade credits and current liabilities which are reflected in the balance sheet of a company, but for the accountants who calculate the investments alternatives and evaluate critically the account of a company whose objective is to maximize the investment returns, it may not be a hard thing. yet I would conclude by disagreeing with the statement.Q2. Determining the replacement of maximus limited machinery using equivalent annual courtyearcapital investmentrunning livescrap comfortgross value kick in value factorpresent value199990999999991999902985504020550.9090911868.182present value11867.182999909999999919999040153100-9150.909091-831.818040153100-9150.826446-756.198present value8410.9833999909999999919999089701080-78900.909091-7172.73089701080-78900.826446-6520.66089701080-78900.751315-5927.87present value-9622.26From the above calculations the machines should be replaced on the t hird year, this is because the light up present value of the machine in the third year is cast out (-9622.26) as compared to the other eld where the net present value is positive. A negative present value means that the machine has negative value. This is a good neb of investment because it considers the time value of m acey and particularly useful for survival of the fittest of a mutually exclusive investment and instrumental in achieving the objective of financial management, however one major factor that needs to be considered while selecting the better investment project is that, this is an absolute measure in that it favors the investment with higher NPV but it is likely that this project has a higher investment cost therefore, its doesnt give best results. Another factor to be considered is the whether the machines have different lives. 3. MARKET EFFICIENCY AND shareholder WEALTH MAXIMISATION ARE TWO SIDE OF THE SAME COIN.Market efficiencies is defined as a market in whi ch all the participants have all the information in the market, that is, all buyer and marketer have know the prices concerning all the products whereas