Programming Models and Capital Budgeting †Free Samples to Students

Question: Discuss about the Programming Models and Capital Budgeting. Answer: Introduction: The decisions associated to the capital budgeting has been seen to include several projections for the given scenario. The evaluations depicted above have been seen to be related to the estimation of the various types of the free cash flow for the project. The application of the other techniques has been evident with the inclusions of payback period and ARR which may used to determine the risk in the project (Hall Westerman, 2013). The calculations projected above have been able to consider the various considerations for the positive NPV and PI of 191.89%. The positive NPV has been further indicated with the project viable to be undertaken based on the considered investments. The Cost benefit ratio has been discerned with the PI value of 191.89%, which has been recognized with future cash flow, which is seen to be more than the initial investment amount considered by an organization. The decision for the rejection and the acceptance has been observed with the consideration of Capital budgeting technique like ARR and payback period (Batra Verma, 2017). The preparation of the report has been seen with the APN outdoor capital structure which has been seen to be duly listed in the ASX. The main consideration of the report has been further seen to include the calculation based on the WACC and determination of the important financial ratios for the organization. The WACC for APO has been calculated with an amount of 8.32%. The extra amount has been discerned with $181.8 equity which has been considered with rising by APN in year 2016 for capital structure establishment. The Group has been further seen to intend the reduction in cost of capital by maintaining a minimum amount of the capital structure. The total cost of capital for APN can be further reduced by the increased proportion of the debt value. Based on the annual report evaluation in the year 2016, the debt proportion in the capital structure has decreased (Daunfeldt Hartwig, 2014). The main rationale for this has been seen with the total equity which has increased and the different types of the interest bearing liabilities has been seen to be decreasing in nature. The total value of equity has increased considerably from $ 461525 in year 2015 to $ 836465 in the same FY. The D/E has been discerned as 38.1 in the year 2016 and total debt of 27.61 (Nurullah Kengatharan, 2015). Computation of After-Tax WACC: The net operating cash flow for the entity has been decreased in the previous three years. In the three years, the total amount of the earnings for the group has been identified as 19% less than the target. This has been the case mainly for the strategic initiatives in the present year which has been computed as 0.29. The decrease in the earnings per share has been evaluated as 44.4 in year 2015 to 31.4 in year 2016. The total P/E in 2017 has been observed as 16.92 (Durnev, Morck, Yeung, 2004). The liquidity positioning of the company has been discerned based on the cash ratio, quick ratio and current ratio. The total amount of cash ratio for the company is 0.38 and current ratio of 1.90 with 1.89 as the quick ratio. The total amount of interest coverage ratio is 25.96 and the D/A for the same is 0.23 (Dellavigna Pollet, 2013). Ooh Media is identified as one of the main rival of APN Outdoor group. The capital structure for the organization has been seen to compose of borrowings and equity. The total value of the equity has increased with the borrowings. The capital structure for the APN outdoor has been considered with the combination of both debt and equity in the capital structure of the company. Despite of this, the dependency in the equity is seen to be more than the debt value (Li, Peng, Li, 2015). The capital structure for APN has transformed with time for a period of more than three years, but this has not increased as per the equity financing. Henceforth, the capital structure for the organization has been identified with the mix of components for financing the assets which are seen as debt as well as the equity. APN outdoor has changed over the year, which is not increasingly related to the borrowing for the equity finance. Henceforth, it can be said that the capital structure for both Ooh Media a nd APN Outdoor group has the same mix of financing assets which is composed of both debt and equity. APN outdoor has been able to experience a stronger cash flow which has been able to assist in investment funding activity and favorable return to the shareholder (Baker English, 2013). Capital structure of APN Outdoor group: The capital structure for the organization has been considered to be based on the various types of the depiction which has been based on the equity and debts as capital for earning as an alternative for the total value made for the investments with the equivalent risk. WACC is directly imposed with the financial decision and any change in the capital structure has been directly influenced as per the WACC. With a higher WACC, there will be increased market value for the organization and vice versa. The increased value of the market is seen to be essential for the company to reduce the cost of capital (Brunzell, Liljeblom, Vaihekoski, 2013). The company has been able to decrease the cost of capital by increasing the funds based on least costly source. The cost of capital may be reduced by the company through restructuring of the capital which cannot exceed the rate of return. The lower amount for the cost of capital will be able to fund new projects in a cheaper way. The reduction on the cost of capital can be considered with formulation of new credit line and the common debt loan utilized for financing the assets including the bank loan, card debt and bonds (Welch Levi, 2013). Conclusion: The main analysis of the capital structure for APN comprise of equity and debentures. It has been further seen that the company has been able to provide a satisfactory return for the shareholders and the increased dividend for the shareholders. The earnings and the revenues before taxed and interest has been seen with an upward trend in generating a satisfactory return to the shareholders. References Baker, H. K., English, P. (2013). Capital Budgeting: An Overview. In Capital Budgeting Valuation: Financial Analysis for Todays Investment Projects (pp. 116). https://doi.org/10.1002/9781118258422.ch1 Batra, R., Verma, S. (2017). Capital budgeting practices in Indian companies. IIMB Management Review, 29(1), 2944. https://doi.org/10.1016/j.iimb.2017.02.001 Brunzell, T., Liljeblom, E., Vaihekoski, M. (2013). Determinants of capital budgeting methods and hurdle rates in Nordic firms. Accounting and Finance, 53(1), 85110. https://doi.org/10.1111/j.1467-629X.2011.00462.x Daunfeldt, S.-O., Hartwig, F. (2014). What Determines the Use of Capital Budgeting Methods? Evidence from Swedish Listed Companies. Journal of Finance and Economics, 2(4), 12. https://doi.org/10.12691/jfe-2-4-1 Dellavigna, S., Pollet, J. M. (2013). Capital Budgeting versus Market Timing: An Evaluation Using Demographics. Journal of Finance, 68(1), 237270. https://doi.org/10.1111/j.1540-6261.2012.01799.x Durnev, A., Morck, R., Yeung, B. (2004). Value-enhancing capital budgeting and firm- specific stock return variation. The Journal of Finance, 59(1), 65105. https://doi.org/10.1111/j.1540-6261.2004.00627.x Hall, J. H., Westerman, W. (2013). Basic Risk Adjustment Techniques in Capital Budgeting. In Capital Budgeting Valuation: Financial Analysis for Todays Investment Projects (pp. 215239). https://doi.org/10.1002/9781118258422.ch12 Li, H., Peng, J., Li, S. (2015). Uncertain programming models for capital budgeting subject to experts estimations. Journal of Intelligent and Fuzzy Systems, 28(2), 725736. https://doi.org/10.3233/IFS-141353 Nurullah, M., Kengatharan, L. (2015). Capital budgeting practices: evidence from Sri Lanka. Journal of Advances in Management Research, 12(1), 5582. https://doi.org/10.1108/JAMR-01-2014-0004 Welch, I., Levi, Y. (2013). Long-Term Capital Budgeting. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2327807