Memorandum of Recommendations from the Business Committee
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
Financial Management I (JWI 530)
Cost-Benefit Analysis (Assignment 2)Overview
In this assignment, you will play the part of a senior financial team member who is in charge of a healthcare equipment manufacturer’s investment committee. Your team is weighing the pros and cons of a make vs. buy option that has the potential to boost the company’s competitiveness but would necessitate a large capital investment in new equipment. The task is divided into two sections:Part A: Data computations based on scenario information; Part B: Recommendations based on calculations
Information about the opportunity
Your organization would be able to manufacture a vital component in-house rather than purchasing it from a supplier using the new equipment. This ability would aid in the stabilization of your supply chain (which has suffered from some irregularities and quality issues in the past). Because this new machine will have plenty of extra capacity, it may also have a favorable influence on profitability through the absorption of fixed expenses. It’s also possible that the corporation may use this skill to generate fresh external revenue by giving services to other businesses.The company has been gradually increasing for the previous five years, and the financials and future prospects appear to be promising. Your boss has requested that you run the figures. You have obtained information on the following after doing some research into the company:
The cost of the equipment needed to bring the business in-house is projected to be $900,000. Additional net working capital to support production (in the form of cash used in Inventory, AR net of AP) in the amount of $40,000 per year would be required starting in year 0 and continuing through all years of the project to support production as raw materials will be required to run the new equipment and produce components to replace those purchased from the vendor in year o and all years.This component’s current spending (i.e. annual spend pool) is $1,500,000. Bringing the process in-house is expected to save 20% in cash flow, or $300,000. This includes the costs of increased labor and overhead.
Finally, because a new wave of technology is on the horizon, the equipment required is expected to have a relatively short useful life. As a result, the equipment is expected to be sold for $50,000 at the end of the project (the last year of generated cash flow). (i.e. the value at the end).
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2nd Assignment
Stakeholder feedback
You solicited feedback from a variety of stakeholders as part of your research. Each has brought up crucial aspects that you should think about in your analysis and recommendations. Some of the ideas and assumptions are solely based on financial considerations. Others discuss more issues and possibilities.Albert, your Accounting colleague, suggests applying the following assumptions: 5-year project life, flat annual savings, and a 12-percent discount rate. Because of technological improvements, Albert does not believe the equipment will have any long-term worth.
Betty from Sales believes that this capability will generate a new revenue stream that will help to offset operating costs. She advises annual savings: a 5-year project life, a 12% discount rate, and a 10% annual savings growth rate in years 2 through 5. In other words, instead of assuming that savings remain unchanged in year 2, expect that they will increase by 10% in year 2, and then by another 10% in year 3, and so on. Betty thinks the $50,000 stated terminal value is reasonable, so he utilized it in his calculations.
Because of the danger of this type of project, Cassie from Engineering believes we should utilize a larger Discount Rate. As a result, she advises a 5-year project life and a flat annual savings rate. Even though the equipment is spanking new, Cassie believes that the modified manufacturing process will have a detrimental impact on other aspects of the overall manufacturing expenses. She claims that, while quantifying the potential negative effects is challenging, a 15% discount rate should be employed to account for the risk. Cassie, an engineer, believes the stated terminal value is too low based on her experience, and she recommends a terminal value of $75,000 instead.
David, the Product Manager, is confident that the new capability will improve quality control and on-time delivery, and that it will last more than five years. He suggests utilizing a 7 Year Equipment Life (which means the project will last 7 years and the savings will last 7 years), a flat yearly savings rate of 12 percent, and a 7 Year Equipment Life (which means the project will last 7 years and the savings will last 7 years). To put it another way, imagine the machine will last two more years and save you money for two more years. David also believes that the equipment will have a terminal value of $25,000 at the conclusion of its 7-year useful life because it will be used for longer, resulting in less value and savings at the end of the project.
Ellen, the head of operations, is afraid that rather than stabilizing the supply chain, it would simply add another process to oversee, diverting attention away from the company’s key skills. She believes the company should focus on improving communication and supply chain management with its current vendor, and she is confident that if she informs him that they are considering taking over this step of the process, he will negotiate a 2% discount off the annual outsourcing cost of $1,500,000. Because Ellen’s idea carries little risk due to the lack of upfront capital requirements, a risk-free discount rate of 7% would be adequate. Any price reductions from the existing provider, Ellen believes, will persist for five years. (NOTE: Because no investment is made, the Payback and IRR metrics are meaningless; instead, supply the NPV of the Savings cash flows.)
Strayer University is a private university in New York City. All Rights Reserved by the Author. This document contains secret and proprietary information about Strayer University and may not be copied, distributed, or otherwise disclosed, in whole or in part, without Strayer University’s express written consent. This course guide may be modified depending on the needs of the class.
2nd Assignment
PART A: COMPUTATIONS OF DATA
Calculate each of the following (where relevant) for this profit and supply chain improvement project using the data supplied above (while disregarding the unnecessary information):
Internal Rate of Return Nominal Payback Discounted Payback Net Present ValueAlbert
Betty
Cassie
David
N/A N/A N/A N/A N/A N/A N/A N/A N/A
Scenario
Nominal Punishment
Payback with a Discount
Net Present Value (NPV) is a term used to
Return on Investment (IRR)
Requirements for Submission
Create an Excel spreadsheet or a Word document to present your calculations and results (using tables and headers to organize the information in a way that is clear and easy to read). Make sure to include all of your calculations. Even if you make a mistake, you might be able to earn partial credit.
Strayer University is a private university in New York City. All Rights Reserved by the Author. This document contains secret and proprietary information about Strayer University and may not be copied, distributed, or otherwise disclosed, in whole or in part, without Strayer University’s express written consent. This course guide may be modified depending on the needs of the class.
Page 3 of 5 of JWI 530 Assignment 2 (1214)
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Financial Management I (JWI 530)
2nd Assignment
Recommendations (Part B)
Create a concise note to the CEO summarizing your committee’s suggestions after you’ve completed the computations for all possibilities. You may arrange the note as you choose, but it must include the following information:
A straightforward beginning remark stating whether you support or oppose the proposal.
Describe the processes and causes that led to your recommendations in a few sentences. o Where did you acquire your information, and how did you get it?o Who did you seek advice from, and why?
o Highlights of the important data points that support your perspective o A description of the strategic benefits and dangers of implementing (or not pursuing) this initiative, including:
o Acknowledgement of data points that contradict your position
o Identifying items that are still outstanding or unresolved
An identification of the scenario that, from a purely financial standpoint, represents the most accurate assessment of the expected results, as well as your justification for doing so.
A list of non-financial factors that should be considered in the recommended scenario.
In project economics, any assumptions can have a big impact on the outcome. In your study, identify three financial elements/assumptions that would make this project financially unfavorable. As much as possible, be open and honest with your BOD. To be a negative investment, what would have to be true?
Submission Requirements include an overview of your recommendation and essential action items.
Your message should be two pages long, single-spaced, and in a 10- or 12-point typeface.
Concentrate on the reasoning behind your suggestions. Include relevant figures to back up your recommendations, but don’t repeat all of your computations. Strayer University All Rights Reserved by the Author. This document contains secret and proprietary information about Strayer University and may not be copied, distributed, or otherwise disclosed, in whole or in part, without Strayer University’s express written consent. This course guide may be modified depending on the needs of the class.
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. They 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
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