allocating capital to areas that will increase shareholder value and 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 finance professional, you are
expected to:
~ Use capital budgeting tools to compute future project cash flows and compare them fC
upfront costs. in
Evaluate capital projects and make appropriate decision recommendations. =
are reports and present the evaluation i in a way that finance and non-fi na
olders can understand.
â€˜proposed capital projects based on forecasted cash flow. You have completed orecash
~ projected cash flows of the projects as reflected | in 1the Alinched Spreadsheets, Proje :
Cash Flows [XLSX]. You now need to condu
e most shareholder value to the organi:
| Requirements
pute future project cash flows and compare them to
upfront costs. Remember to only e
valuate the incremental changes to cash flows.
Employing capital budgeting metrics, determine which project, given the forecast cash
flows, gives the organization the best chance to maximize shareholder value.
Demonstrate knowledge of 3 variety
of capital budgeting tools including net present
value (NPV), internal rate of return (IRR)
RR), payback period, and profitability index (PI). The
analysis of the capital projects will need to be Co
ectly computed and the resulting
decisions rational. fii |
Evaluate capital projects and make appropriate decision recommendations. Accurz
compare the indicated projects with co
ect computations of capital budgeting
then make rational decisions based on the findings. :
Select the best capital project, based on data an
value for the company. Prpvide a ratio
ial analysis
ject A: E Mater Equip Y ent Wrchase
will 05 t $10 million; however, it is projected ti
alue estimated to be $500,000 at
e of return of the Projectis is 8%.
7 ens schedule.
VAC R
sales for year 1 are Brojscted at $20 mili |
The marginal corporate tax rate is presumed to be 25%.
fm 0 1)
Being a risky investment, the required rate of return of the prdject is 12%.
E | 0 i nn |
ect C- Morkatine 7A ration Carns ton