Baldwin Corporation is a public corporation listed on New York Stock Exchange (NYSE) market. The company researches, develops, manufactures, and sells various products in the health care industry worldwide. Baldwin Inc. operates in three main segments: consumer, pharmaceutical, and medical devices segments. The primary corporate objective of the company is to maximize the value of the owners’ equity by increasing the price of its shares in the stock market. Unfortunately, the company’s stock price has been declining over the past year because of declining sales, cash flow uncertainties, and weak financial ratios. The board of directors have hired a new CFO, Jeff Warren to turnaround the fortunes of the company. Jeff earned his PhD in Finance from UC in 2018. After his MBA he worked for five years as sales and marketing consultant for a pharmaceutical company. As a result, Jeff does not have much work experience in corporate finance, although in his graduate finance courses, he learnt about time value of money and its applications in financial and investment decisions.
Despite his lack of experience in corporate finance, Jeff wants to create value for the company through efficient management of working capital, and prudent capital budgeting activities by expanding the company’s products into new markets. He is considering a capital investment either in the State of Ohio or North Dakota because of growing market demand for the company’s products in both States and the recent changes to the States’ tax legislations that give tax incentives to new companies. The company has announced plans to invest about $2.2 million in its medical devices and pharmaceutical segments. Jeff believes that decisions such as these, with price tags in the millions, are obviously major undertakings, and the risks and rewards must be carefully weighed. Jeff knows that good financial decisions increase the value of a company’s stock, and bad financial decisions decrease the value of the stock. Jeff is working hard to make Baldwin Inc. one of the leading firms in the health care industry.
Jeff has been reading articles in financial journals on capital budgeting decisions and risk analysis. He has written down the following ideas on project evaluation techniques from book chapters and peer-reviewed articles:
- The most popular capital budgeting techniques used in practice to evaluate and select projects are payback period, net present value (NPV), and internal rate of return (IRR).
2.Payback period is the number of years required for a company to recover the initial investment cost.
- Net Present Value (NPV) technique: NPV is found by subtracting a project’s initial cost of investment from the present value of its cash flows discounted using the firm’s weighted average cost of capital. It shows the absolute amount of money in dollars that the project is expected to generate.
Decision Criteria of NPV
If NPV > 0, accept the project
If NPV < 0, reject the project
The decision rule for mutually exclusive project is to select the project with the highest NPV.
- Internal Rate of Return (IRR)is the intrinsic rate of return the project is likely to generate. The IRR is the discount rate or the rate of return that will equate the present value of the cash outflows with the present value of the cash inflows (i.e., NPV = 0).
Accept the project if IRR > cost of capital
Reject the project if IRR < cost of capital
Exhibit 1: The expected cash flows in US$ from the project in Ohio and North Dakota.
Cash flow (Ohio)
Cash flow (ND)
*note: The year 1 cash flow includes government stimulus payment of $100,000 to support business projects.
The company’s policy is to select projects using NPV technique.
- You have been hired as a financial consultant to help evaluate the project. Baldwin Inc. wants you to do the following:
a. Calculate the payback period for the two projects.
b. Calculate the IRR of both projects.
c. Use the NPV technique to recommend which investment project it should accept, assuming the cost of capital of financing the Ohio project is 12% and 10% for the North Dakota project?
- Jeff knows how bad forecast can ruin capital budgeting decisions. If the cost of capital changes from 12% to 13% for Ohio project and remains the same for ND project, does the company have to pursue the project?
- Jeff wants to analyze the risk of the project using sensitivity analysisandMonte Carlo simulation.
a. Explain to Baldwin Inc. how the two risk analysis models can be used to analyze risk of the project.
- Jeff has estimated the fixed costs (including depreciation) of the Ohio project to be $2.5 million, sales price is $200, and the variable cost is $120, giving a contribution margin of $80. What is the accounting profit break-even quantity for this project?
- Baldwin Inc. wants to know the likely effect of the capital budgeting decision on its stock price (increase, decrease, no change, or not sure). Choose one and explain why.
Compelling correspondence is essential to the achievement all things considered but since of the changing idea of the present working environments, successful correspondence turns out to be more troublesome, and because of the numerous impediments that will permit beneficiaries to acknowledge the plan of the sender It is restricted. Misguided judgments.In spite of the fact that correspondence inside the association is rarely completely open, numerous straightforward arrangements can be executed to advance the effect of these hindrances.
Concerning specific contextual analysis, two significant correspondence standards, correspondence channel determination and commotion are self-evident. This course presents the standards of correspondence, the act of general correspondence, and different speculations to all the more likely comprehend the correspondence exchanges experienced in regular daily existence. The standards and practices that you learn in this course give the premise to additionally learning and correspondence.
This course starts with an outline of the correspondence cycle, the method of reasoning and hypothesis. In resulting modules of the course, we will look at explicit use of relational connections in close to home and expert life. These incorporate relational correspondence, bunch correspondence and dynamic, authoritative correspondence in the work environment or relational correspondence. Rule of Business Communication In request to make correspondence viable, it is important to follow a few rules and standards. Seven of them are fundamental and applicable, and these are clear, finished, brief, obliging, right, thought to be, concrete. These standards are frequently called 7C for business correspondence. The subtleties of these correspondence standards are examined underneath: Politeness Principle: When conveying, we should build up a cordial relationship with every individual who sends data to us.
To be inviting and polite is indistinguishable, and politeness requires an insightful and amicable activity against others. Axioms are notable that gracious “pay of graciousness is the main thing to win everything”. Correspondence staff ought to consistently remember this. The accompanying standards may assist with improving courtesy:Preliminary considering correspondence with family All glad families have the mystery of progress. This achievement originates from a strong establishment of closeness and closeness. Indeed, through private correspondence these cozy family connections become all the more intently. Correspondence is the foundation of different affiliations, building solid partners of obedient devotion, improving family way of life, and assisting with accomplishing satisfaction (Gosche, p. 1). In any case, so as to keep up an amicable relationship, a few families experienced tumultuous encounters. Correspondence in the family is an intricate and alluring marvel. Correspondence between families isn’t restricted to single messages between families or verbal correspondence.
It is a unique cycle that oversees force, closeness and limits, cohesiveness and flexibility of route frameworks, and makes pictures, topics, stories, ceremonies, rules, jobs, making implications, making a feeling of family life An intelligent cycle that makes a model. This model has passed ages. Notwithstanding the view as a family and family automatic framework, one of the greatest exploration establishments in between family correspondence centers around a family correspondence model. Family correspondence model (FCP) hypothesis clarifies why families impart in their own specific manner dependent on one another ‘s psychological direction. Early FCP research established in media research is keen on how families handle broad communications data. Family correspondence was perceived as an exceptional scholastic exploration field by the National Communications Association in 1989. Family correspondence researchers were at first impacted by family research, social brain science, and relational hypothesis, before long built up the hypothesis and began research in a family framework zeroed in on a significant job. Until 2001, the primary issue of the Family Communication Research Journal, Family Communication Magazine, was given. Family correspondence is more than the field of correspondence analysts in the family. Examination on family correspondence is normally done by individuals in brain science, humanism, and family research, to give some examples models. However, as the popular family correspondence researcher Leslie Baxter stated, it is the focal point of this intelligent semantic creation measure making the grant of family correspondence special. In the field of in-home correspondence, correspondence is normally not founded on autonomous messages from one sender to one beneficiary, yet dependent on the dynamic interdependency of data shared among families It is conceptualized. The focal point of this methodology is on the shared trait of semantic development inside family frameworks. As such, producing doesn’t happen in vacuum, however it happens in a wide scope of ages and social exchange.
Standards are rules end up being followed when performing work to agree to a given objective. Hierarchical achievement relies significantly upon compelling correspondence. So as to successfully impart, it is important to follow a few standards and rules. Coming up next are rules to guarantee powerful correspondence: clearness: lucidity of data is a significant guideline of correspondence. For beneficiaries to know the message plainly, the messages ought to be sorted out in a basic language. To guarantee that beneficiaries can without much of a stretch comprehend the importance of the message, the sender needs to impart unmistakably and unhesitatingly so the beneficiary can plainly and unquestionably comprehend the data.>