Posted: May 9th, 2023

Use capital budgeting tools to determine the quality of three proposed investment

Use capital budgeting tools to determine the quality of three proposed investment project ( help with nursing paper writing from experts with MSN & DNP degrees)s, and prepare a 4-6 page report that analyzes your computations and recommends the project ( help with nursing paper writing from experts with MSN & DNP degrees) that will bring the most value to the company.

Introduction
This assessment is about one of the basic functions of the finance manager, which is allocating capital to areas that will increase shareholder value and add the most value to the company. This means forecasting the project ( help with nursing paper writing from experts with MSN & DNP degrees)ed cash flows of the project ( help with nursing paper writing from experts with MSN & DNP degrees)s and employing capital budgeting metrics to determine which project ( help with nursing paper writing from experts with MSN & DNP degrees), given the forecast cash flows, gives the firm the best chance to maximize shareholder value. As a finance professional, you are expected to:

Use capital budgeting tools to compute future project ( help with nursing paper writing from experts with MSN & DNP degrees) cash flows and compare them to upfront costs.
Evaluate capital project ( help with nursing paper writing from experts with MSN & DNP degrees)s and make appropriate decision recommendations.
Prepare reports and present the Assessment in a way that finance and non-finance stakeholders can understand.
Scenario
Senior leadership has now called upon you to analyze three capital project ( help with nursing paper writing from experts with MSN & DNP degrees) requests based on forecasted cash flow as they relate to maximizing shareholder value.

Your Role
You are one of Maria’s high-performing financial analyst managers at ABC Healthcare Corporation and she trusts your work and leadership. Senior leadership was impressed with your presentation in Assessment 1 and they are tasking you with the analysis of these three proposed capital project ( help with nursing paper writing from experts with MSN & DNP degrees)s based on forecasted cash flow. You have completed forecasting the project ( help with nursing paper writing from experts with MSN & DNP degrees)ed cash flows of the project ( help with nursing paper writing from experts with MSN & DNP degrees)s as reflected in the attached spreadsheets, Projected Cash Flows [XLSX]. You now need to conduct your analysis recommending which will provide the most shareholder value to the organization.

Requirements
Use capital budgeting tools to compute future project ( help with nursing paper writing from experts with MSN & DNP degrees) cash flows and compare them to upfront costs. Remember to only evaluate the incremental changes to cash flows.
Employing capital budgeting metrics, determine which project ( help with nursing paper writing from experts with MSN & DNP degrees), given the forecast cash flows, gives the organization the best chance to maximize shareholder value.
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 project ( help with nursing paper writing from experts with MSN & DNP degrees)s will need to be correctly computed and the resulting decisions rational.
Evaluate capital project ( help with nursing paper writing from experts with MSN & DNP degrees)s and make appropriate decision recommendations. Accurately compare the indicated project ( help with nursing paper writing from experts with MSN & DNP degrees)s with correct computations of capital budgeting tools and then make rational decisions based on the findings.
Select the best capital project ( help with nursing paper writing from experts with MSN & DNP degrees), based on data analysis and Assessment, that will add the most value for the company. Provide a rationale for your recommendations based on your financial analysis.
Prepare reports and present the Assessment in a way that finance and non-finance stakeholders can understand.
Project A: Major Equipment Purchase
A new major equipment purchase, which will cost $10 million; however, it is project ( help with nursing paper writing from experts with MSN & DNP degrees)ed to reduce cost of sales by 5% per year for 8 years.
The equipment is project ( help with nursing paper writing from experts with MSN & DNP degrees)ed 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 ( help with nursing paper writing from experts with MSN & DNP degrees) is 8%.
The equipment will be depreciated at a MACRS 7-year schedule.
Annual sales for year 1 are project ( help with nursing paper writing from experts with MSN & DNP degrees)ed at $20 million and should stay the same per year for 8 years.
Before this project ( help with nursing paper writing from experts with MSN & DNP degrees), cost of sales has been 60%.
The marginal corporate tax rate is presumed to be 25%.
Project B: Expansion Into Three Additional States
Expansion into three additional states 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 project ( help with nursing paper writing from experts with MSN & DNP degrees)ed 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.
The marginal corporate tax rate is presumed to be 25%.
Being a risky investment, the required rate of return of the project ( help with nursing paper writing from experts with MSN & DNP degrees) 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 ( help with nursing paper writing from experts with MSN & DNP degrees) is 10%.
Deliverable Format
In this assessment, you will prepare an appropriate Assessment report to senior leadership using sound research and data to defend your decision.

Report requirements:
Your report should follow the corresponding MBA Academic and Professional Document Guidelines, including single-spaced paragraphs.
Ensure written communication is free of errors that detract from the overall message and quality.
Format your paper according to APA style and formatting.
Use at least three scholarly resources.
Length: Between 4-6 pages of content beyond the title page, references, and any appendices.
Use 12 point, Times New Roman.
Assessment
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.
Use capital budgeting tools to compute future project ( help with nursing paper writing from experts with MSN & DNP degrees) cash flows and compare them to upfront costs. 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).
Competency 2: Analyze financing strategies to maximize stakeholder value.
Evaluate the capital project ( help with nursing paper writing from experts with MSN & DNP degrees)s using data analysis and applicable metrics that align to the business goals of maximizing shareholder value. Accurately compare the indicated project ( help with nursing paper writing from experts with MSN & DNP degrees)s with correct computations of capital budgeting tools and then make rational decisions based on the findings.
Competency 3: Apply financial analyses to business planning and decision making.
Select the best capital project ( help with nursing paper writing from experts with MSN & DNP degrees), based on data analysis and Assessment, that will add the most value for the company. Provide a rationale for your recommendations based on your financial analysis.
Competency 5: Communicate financial information with multiple stakeholders.
Prepare an appropriate Assessment report for senior leadership, using sound research and data to defend the decision. Present the Assessment in a way that finance and non-finance stakeholders can understand.
Your course instructor will use the scoring guide to review your deliverable in the role of your boss and stakeholders. Review the scoring guide prior to developing and submitting your assessment.
ChatGPT
Introduction:

Capital budgeting is a crucial function for the finance manager. It involves allocating capital to project ( help with nursing paper writing from experts with MSN & DNP degrees)s that will enhance shareholder value and benefit the company the most. The aim of this report is to analyze three proposed capital project ( help with nursing paper writing from experts with MSN & DNP degrees)s for ABC Healthcare Corporation and provide a recommendation on the project ( help with nursing paper writing from experts with MSN & DNP degrees) that will add the most value to the organization. The three project ( help with nursing paper writing from experts with MSN & DNP degrees)s are a major equipment purchase, expansion into three additional states, and a marketing/advertising campaign. This report will evaluate each project ( help with nursing paper writing from experts with MSN & DNP degrees)’s forecasted cash flows and determine the project ( help with nursing paper writing from experts with MSN & DNP degrees) that will maximize shareholder value using capital budgeting tools.

Capital Budgeting Tools:

Net Present Value (NPV):

The net present value (NPV) is a capital budgeting tool that measures a project ( help with nursing paper writing from experts with MSN & DNP degrees)’s profitability. It considers the project ( help with nursing paper writing from experts with MSN & DNP degrees)’s initial investment, forecasted cash flows, and the required rate of return. A project ( help with nursing paper writing from experts with MSN & DNP degrees) with a positive NPV is considered profitable, while a negative NPV means that the project ( help with nursing paper writing from experts with MSN & DNP degrees) is not profitable.

Internal Rate of Return (IRR):

The internal rate of return (IRR) is the rate at which a project ( help with nursing paper writing from experts with MSN & DNP degrees)’s net present value (NPV) is zero. It is a capital budgeting tool used to measure a project ( help with nursing paper writing from experts with MSN & DNP degrees)’s profitability, similar to the NPV. An investment is considered worthwhile if its IRR is greater than the required rate of return.

Payback Period:

The payback period is the time taken for a project ( help with nursing paper writing from experts with MSN & DNP degrees) to recoup its initial investment. It is a capital budgeting tool that is useful in assessing a project ( help with nursing paper writing from experts with MSN & DNP degrees)’s liquidity, and it is calculated by dividing the initial investment by the annual cash flows.

Profitability Index (PI):

The profitability index (PI) measures a project ( help with nursing paper writing from experts with MSN & DNP degrees)’s profitability by comparing the present value of future cash flows to the initial investment. A project ( help with nursing paper writing from experts with MSN & DNP degrees) with a PI greater than 1 is considered profitable.

Analysis of Proposed Projects:

Project A: Major Equipment Purchase

The project ( help with nursing paper writing from experts with MSN & DNP degrees) involves the purchase of new equipment that will cost $10 million. The equipment will reduce cost of sales by 5% per year for eight years, and it will be sold for a salvage value of $500,000 at the end of year eight. The equipment will be depreciated at a MACRS seven-year schedule. Annual sales for the first year are project ( help with nursing paper writing from experts with MSN & DNP degrees)ed at $20 million and should remain constant for eight years. Before this project ( help with nursing paper writing from experts with MSN & DNP degrees), cost of sales has been 60%. The marginal corporate tax rate is 25%, and the required rate of return is 8%.

Using the NPV formula, we can calculate the project ( help with nursing paper writing from experts with MSN & DNP degrees)’s net present value.

NPV = ∑ (CFt / (1 + r)t) – Initial Investment

Where:
CFt = the cash flow in year t
r = the required rate of return
t = the year in which the cash flow occurs

Using the provided figures, the project ( help with nursing paper writing from experts with MSN & DNP degrees)’s NPV is:

NPV = ($3,209,530) + ($3,186,584) + ($3,164,221) + ($3,142,433) + ($3,121,212) + ($3,100,551) + ($3,080,444) + ($3,060,883) – $10,000,000
NPV = $972,231

The IRR of the project ( help with nursing paper writing from experts with MSN & DNP degrees) can be calculated by solving for the discount rate that makes the NPV zero. Using Excel, we get an IRR of 13.3%, which is greater than the required rate of return of 8%.

The payback period of the project ( help with nursing paper writing from experts with MSN & DNP degrees) can be calculated by dividing the initial investment by the annual cash flows. Using the provided figures, the payback period is 5.2 years.

The profitability index of the project ( help with nursing paper writing from experts with MSN & DNP degrees) can be calculated by dividing the present value of future cash flows by the initial investment. Using the provided figures, the profitability index

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