Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages To Order 5-10 Pages Description/Paper Instructions
Assessment 2 Instructions: Evaluation of Capital Projects
- Create an Excel spreadsheet in which you use capital budgeting tools to determine the quality of 3 proposed investment projects, as well as a 6-8 page report that analyzes your computations and recommends the project that will bring the most value to the company.
Introduction
This portfolio work project is about one of the basic functions of the finance manager: allocating capital to areas that will increase shareholder value. There are many uses of cash managers can select from, but it is essential that the selected projects are ones that add the most value to the company. This means forecasting the projected cash flows of the projects and employing capital budgeting metrics to determine which project, given the forecast cash flows, gives the firm the best chance to maximize shareholder value.
As a business professional, you are expected to:
- Use capital budgeting tools to compute future project cash flows and compare them to upfront costs.
- Evaluate capital projects and make appropriate decision recommendations.
- Prepare reports and present the evaluation in a way that finance and non-finance stakeholders can understand.
- Scenario
You work as a finance manager for Drill Tech, Inc., a mid-sized manufacturing company located in Minnesota. Three capital project requests were identified as potential projects for the company to pursue in the upcoming fiscal year. In the meeting to discuss capital projects, the director of finance (and your boss), Jennifer Davidson, gives you a synopsis of the projects along with this question: Which one of these projects will provide the most shareholder value to the company?
She also tells you that other than what is noted in each project scenario, all other costs will remain constant, and you should remember to only evaluate the incremental changes to cash flows.
The proposed projects for you to review are as follows.
Project A: Major Equipment Purchase- A new major equipment purchase, which will cost $10 million; however, it is projected to reduce cost of sales by 5% per year for 8 years.
- The equipment is projected to be sold for salvage value estimated to be $500,000 at the end of year 8.
- Being a relatively safe investment, the required rate of return of the project is 8%.
- The equipment will be depreciated at a MACRS 7-year schedule.
- Annual sales for year 1 are projected at $20 million and should stay the same per year for 8 years.
- Before this project, cost of sales has been 60%.
- The marginal corporate tax rate is presumed to be 25%.
- Project B: Expansion into Europe
- Expansion into Western Europe has a forecast to increase sales/revenues and cost of sales by 10% per year for 5 years.
- Annual sales for the previous year were $20 million.
- Start-up costs are projected to be $7 million and an upfront needed investment in net working capital of $1 million. The working capital amount will be recouped at the end of year 5.
- Because of the higher European tax rate, the marginal corporate tax rate is presumed to be 30%.
- Being a risky investment, the required rate of return of the project is 12%.
- Project C: Marketing/Advertising Campaign
- A major new marketing/advertising campaign, which will cost $2 million per year and last 6 years.
- It is forecast that the campaign will increase sales/revenues and costs of sales by 15% per year.
- Annual sales for the previous year were $20 million.
- The marginal corporate tax rate is presumed to be 25%.
- Being a moderate risk investment, the required rate of return of the project is 10%.
- Your Role
You are a finance manager at Drill Tech, Inc., who plays a major role in reviewing capital project requests.
Requirements
Jennifer reiterates that your report is critical for the company to select the project that will bring the most value to shareholders. Your calculations and report should address these items for her and other stakeholders:- Apply computations of capital budgeting methods to determine the quality of the proposed investments.
- Use budgeting tools to compute future project cash flows and compare them to upfront costs. Remember to only evaluate the incremental changes to cash flows.
- Demonstrate knowledge of a variety of capital budgeting tools including net present value (NPV), internal rate of return (IRR), payback period, and profitability index (PI). The analysis of the capital projects will need to be correctly computed and the resulting decisions rational.
- Evaluate the capital projects using data analysis and applicable metrics that align to the business goal of maximizing shareholder value.
- Evaluate capital projects and make appropriate decision recommendations. Accurately compare the indicated projects with correct computations of capital budgeting tools and then make rational decisions based on the findings.
- Select the best capital project, based on data analysis and evaluation, that will add the most value for the company.
- Prepare an appropriate evaluation report for requestors, using sound research and data to defend your decision.
- Justify your decision with a clear analysis showing the findings of the analysis and which project has the best chance to increase shareholder value.
- Use your calculations and data to provide a clear picture of why your recommendation is the right one. This goes beyond just regurgitating the data. Think about how the data can tell the story that will be meaningful to the readers.
- Deliverable Format
For this assessment, create two deliverables:
- An Excel spreadsheet showing the required cash flow forecasts and capital budgeting tool calculations for each project. Use the same spreadsheet but create separate tabs for each project.
- A report providing an analysis of the computations, the project selection decision, and justification for the decision, as well as its impact on the value of the firm. The project selection decision must have an analytical rationale to support it.
- Report requirements:
- Ensure written communication is free of errors that detract from the overall message and quality.
- Use at least three scholarly resources.
- Your report should be between 6 and 8 pages.
- Use 12 point, Times New Roman.
- Related company standards:
- Your report is a professional document and should follow the corresponding MBA Academic and Professional Document Guidelines (found in the MBA Program Resources), including single-spaced paragraphs.
- Use APA-formatted references.
- Evaluation
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies through corresponding scoring guide criteria:- Competency 1: Apply the theories, models, and practices of finance to the financial management of an organization.
- Apply computations of capital budgeting methods to determine the quality of the proposed investments.
- Competency 2: Analyze financing strategies to maximize stakeholder value.
- Evaluate the capital projects using data analysis and applicable metrics that aligns to the business goals.
- Competency 3: Apply financial analyses to business planning and decision making.
- Select the best capital project, based on data analysis and evaluation, that will add the most value for the company.
- Competency 5: Communicate financial information with multiple stakeholders.
- Prepare an appropriate evaluation report for requestors, using sound research and data to defend the decision.
- Faculty will use the scoring guide to review your deliverables in the role of your boss and stakeholders. Review the scoring guide prior to developing and submitting your assessment.
ePortfolio
This assessment shows potential employers and clients that you can analyze capital projects to determine whether and how they can provide value to shareholders. Include this in your personal ePortfolio.
RUBRIC
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. 40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. 50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points: Student failed to submit the final paper. 5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors 10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points: Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. The can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper. GET THIS PROJECT NOW BY CLICKING ON THIS LINK TO PLACE THE ORDER
CLICK ON THE LINK HERE: https://www.perfectacademic.com/orders/ordernow
Do You Have Any Other Essay/Assignment/Class Project/Homework Related to this? Click Here Now [CLICK ME] and Have It Done by Our PhD Qualified Writers!!