2023-07-15T07:16:50+00:00

Role of CFO and capital budgeting decision

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Role of CFO and capital budgeting decision

I need assistance with the attached two part assignment. I have also attached an example Spreadsheet.

References:
http://www.12manage.com/methods_npv.html

Do you think finance departments are the best place to train future CEOs?
Include a discussion of both the pros and cons of hiring a CFO to be CEO. Try to cite at least three articles in your paper in support of your arguments in favor of and against hiring a CFO to be a CEO. Remember to include a reference list and to refer to the articles you use in the body of your paper.
Please read the articles below, which are both available in Proquest.
Brewis, J., (1999), How a CFO can graduate to CEO, Corporate Finance; London.
Picker, I., (1989), Do CFOs Really Make Good CEOs, Institutional Investor; New York.
Concepts of present value and application to certainty cash flow
Note: It is recommended that you use a spreadsheet such as Excel in order to solve the following problems. See example for the computations using Excel spreadsheet here.
1. Suppose you have two bank accounts, one called Account A and another Account B. Account A will be worth $4,700.00 in one year. Account B will be worth $7,900.00 in two years. Both accounts earn 3.8% interest. What is the present value of each of these accounts? What is the present value of the two accounts together?
2. Suppose you just inherited an oil field. This oil field mine is believed to have three years worth of oil deposit. The net income this oil filed is projected to bring you each year for the next three years:
Year 1: $26,000,000
Year 2: $64,000,000
Year 3: $57,000,000
Compute the present value of this stream of income at a discount rate of 6%. You are to arrive at the present value for a whole stream of income, i.e. the total value of receiving all three payments. This is actually the value of the oil filed.
You compute this by computing the present value of each component of the cash flow (each year`s proceeds) with regard to the time you receive the amount, and then add together the three present values in order to get the present value of the oil field. (See the example in the spreadsheet).
Now re-compute the present value of the income stream from the gold mine, or the value of the oil field at a discount rate (or cost of capital of the company) of 12%. Re-compute it again using a discount rate of 10%, then at 8%, 6%, 4% and 2%. Compare the present values of the income stream under the different discount rates.
Show your calculations and write a short paragraph with conclusions from the computations


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