Chat with support 24/7


Professional Custom Essay Writing Service

Order from the best essay help service in the whole world!

...content here............



Assignment 2: LASA 1—Capital Budgeting and Dividend Policies

Cramer Industries has identified several investment opportunities that will become available over the next year and would like you to evaluate these projects. They have asked that you use the NPV and IRR methods to determine if these independent projects are acceptable.  For the NPV, use a required rate of return of 8%..



Cash Flows/Year
(in thousands)

Length of Project

Cost and Date when Cost is incurred


 $ 2,300.00

5 years

 $ 8,000.00 @t=0


 $ 3,000.00

5 years

 $ 10,000.00 @t=0


 $ 2,800.00

5 years

 $ 9,000.00 @t=0


 $ 2,100.00

5 years

 $ 8,500.00 @t=0

Cramer currently has 2,000,000 shares outstanding and pays a dividend of $2 per share.

With a high degree of certainty, Cramer has projected their income for the next four years as follows, which includes the annual cash flows from the investments selected above:



Income After Taxes










  1. What is the NPV for each project at the time the investment would be made? Explain your findings.
  2. What is the IRR for each project at the time the investment would be made?  Explain your findings
  3. Which investments should be selected?  Justify your conclusions.
  4. What will the dividends per share and the external financing required, if the current dividend per share is maintained?  If the projects meet the NPV and IRR tests, assume that Project ‘A’ is implemented in Year 1, Project ‘B’ in Year 2, Project ‘C’ in Year 3 and Project ‘D’ in Year 4.Justify your conclusions.
  5. Assuming the same investment patterns as in Part 4, what will be the dividends and the external financing required, if the dividend per share payout ratio of 50% is maintained?  Explain your answers.
  6. Assuming the same investment patterns as in Part 4, if the dividend policy is considered a residual decision, what will be the dividends and external financing requirement in each year?  Explain your answers.
  7. Under which policy will external financing be minimized?  Justify your conclusions.

Present your analysis of the assigned problems in Excel format. Enter non-numerical responses in the same worksheet using textboxes.

Need a Professional Writer to Work on Your Paper and Give you Original Paper? CLICK HERE TO GET THIS PAPER WRITTEN

Place a custom essay order similar to this or any related topic. NB: The assignment paper will be written from scratch as per your instructions and it will be 100% original. It will pass all plagiarism check.

endwhile; ?>

Check Our Prices

Free Quote



All kinds of papers in all subject areas

We can successfully deal with all kinds of school assignments corresponding to various academic disciplines. Among these school papers are:

  • Custom essays
  • Dissertations and theses (undergraduate, Master's, PhD)
  • Research and term papers
  • Courseworks and case studies
  • Admission essays and personal statements, etc.
University of Nairobi