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 page report that analyzes your computations and recommends the project that will bring the most value to the company.
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:
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.
You are a finance manager at Drill Tech, Inc., who plays a major role in reviewing capital project requests.
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:
For this assessment, create two deliverables:
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies through corresponding scoring guide criteria:
Please make sure that you follow the guidance that I posted for this assignment. Please refer to a guidance Excel file that I have posted. I have attached it to an announcement. There is also a word file that contains instructions for this assessment. Please do NOT change the overall layout and design of the tables. When you resubmit, please make sure that you highlight or color the new/revised sections.
Analyze financing strategies to maximize stakeholder value.
Evaluate the capital projects using data analysis and applicable metrics that align to the business goals.
Same as above. Please use the template provided.
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.
This will be revisited after you have fixed the analysis.
Communicate financial information with multiple stakeholders. Prepare an appropriate evaluation report for requestors, using sound research and data to defend the decision
This will be revisited after you have fixed the analysis.
she said here are some helpful things to help you correct assessment 2.
I have posted in an earlier announcement a template for the Video Game. I am attaching with this announcement another template. This one is directly related to assessment 2. I am showing detailed solution for part A as well as final cash flows for parts B and C. I hope that this will help.
Here is what I suggest, try to replicate Part A as shown in my attachment. Then, try parts B and C until you get the same cash flow. Remember that Parts A, B, and C are not identical. Some have marketing, some have depreciation, some have changing revenues. Finally, my work reflect a few assumption that do not necessarily need to be identical to yours. If you reach a point with a cash flow close to mine, that would still fine AS LONG AS I can see your assumption and they make good business and economic sense.
For project 2 (Expansion). Base COGS = $12k. This will increase in year 1 by 10%. This is one-time increase i.e. year 2, 3, 4, and 5’s COGS are equal to year 1.
For project 3 (Marketing). Base COGS = $12k. This will increase in year 1 by 15%. This is a one-time increase i.e. year 2, 3, 4, and 5’s COGS are equal to year 1.
Remember, a good approximation is also acceptable because everyone will make his/her own assumptions. As long as these assumptions are sound, I am fine.
I have created a template for assessment 2. It is attached to this announcement.
It shows the solution for the Video Game case which is part of the reading for this assessment. I am keeping all the functions and formulas. I hope that this will show you how to set up the spreadsheet and calculations for the Drill Tech case.
I also attached some things she sent that she is looking f
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