{"id":31197,"date":"2018-02-20T23:50:30","date_gmt":"2018-02-20T23:50:30","guid":{"rendered":"https:\/\/writemyessayfree.com\/capital-budget-analysis"},"modified":"2017-08-16T05:59:35","modified_gmt":"2017-08-16T05:59:35","slug":"capital-budget-analysis","status":"publish","type":"post","link":"https:\/\/www.benedictsol.com\/blogs\/capital-budget-analysis\/","title":{"rendered":"Capital Budget Analysis"},"content":{"rendered":"
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Case Paper \u2013 Capital Budget Analysis Prepare in PowerPoint Format \u2013 Your PowerPoint should include a capital budget analysis, an interpretation of the analysis and
your recommended strategy for the Deluxe Corporation. Your file is due in Blackboard on Sunday February 26 at Midnight. A Paper Rubric will also be provided to <\/p>\n

indicate assessment guidelines for the paper. Deluxe Corporation is a large chain of retail stores operating in the USA. It sells top-of the range, expensive clothes <\/p>\n

to a wealthy clientele throughout the country. Currently, Deluxe only operates in the USA. Its current market capitalization is $760 million and the current market <\/p>\n

value of debt is $350 million. At last month\u2019s management meeting the marketing director explained that sales volume had increased slightly in the previous year, <\/p>\n

largely due to heavy discounting in most of its stores. The finance director expressed concern that such a strategy might damage the image of the company and reduce <\/p>\n

profits over the longer term. An alternative strategy to increase sales volume has recently been proposed by the marketing department. This would involve introducing a <\/p>\n

new range of clothing specifically aimed at the middle-income market. The new range of clothing would be expected to be attractive to consumers in Canada and Europe. <\/p>\n

Assume your represent the financial management of Deluxe and have been asked to evaluate the marketing department\u2019s proposal to introduce a new range of clothing. An <\/p>\n

initial investigation into the potential markets has been undertaken by a firm of consultants at a cost of $100,000 but this amount has not yet been paid. It is <\/p>\n

intended to settle the amount due in three months\u2019 time. With the help of a small multi-department team of staff you have estimated the following cash flows for the <\/p>\n

proposed project: \u2022 The initial investment required would be $46 million: This comprises $30 million for fixed assets and $16 million for net current assets (working <\/p>\n

capital). \u2022 For accounting purposes, fixed assets are depreciated on a straight-line basis over three (3) years after allowing for a residual value of 10%. \u2022 The value <\/p>\n

of net current assets at the end of the evaluation period can be assumed to be the same as at the start of the period. \u2022 Earnings before taxes are forecast to be $14 <\/p>\n

million in 2016, $17million in 2017 and $22 million in 2018. The following information is also relevant: \u2022 The proposed project is to be evaluated over a three-year <\/p>\n

time horizon. The firm uses Net Present Value and Internal Rate of Return methods to evaluate projects. \u2022 Deluxe usually evaluates its investments using an after-tax <\/p>\n

discount rate of 8%. The proposed project is considered to be riskier than average and so a risk-adjusted rate of 9% will be used for this project. Your PowerPoint <\/p>\n

represents a presentation to the Board of Directors of Deluxe Corporation \u2022 The following return analysis should be used: Net Present Value and Internal Rate of <\/p>\n

Return. \u2022 Prepare a Sensitivity risk analysis with three variables of your (Group) choosing. Your margins of variance are plus\/minus 10%, 20%, 30%. Your Sensitivity <\/p>\n

work should include a graph analysis. \u2022 Corporate tax is 25%. \u2022 Ignore inflation. RUBRIC \u2013 Group Case PowerPoint Deluxe Corporation Objective measured: Maximize firm <\/p>\n

value by efficiently allocating financial resources in an environment of uncertainty. Forecast cash flows under different earnings scenarios \u2013 20% Excellent Good <\/p>\n

Satisfactory Unsatisfactory Correctly 1. Initial INVESTMENT CALCULATION 2. Calculate the annual depreciation based on the depreciable part of the investment 3. <\/p>\n

Forecast the net annual cash flows under the given scenarios 4. Allow miscalculating one or two of the requirements Missing one of the requirements Missing more than <\/p>\n

one of the requirements Calculate NPV and IRR to determine capital return analysis \u2013 20% Excellent Good Satisfactory Unsatisfactory Correctly calculate the weighted <\/p>\n

average NPV and IRR based on the given scenarios. One or two arithmetic errors More than two arithmetic errors Not using the probabilities to calculate the weighted <\/p>\n

average NPV Perform sensitivity analysis \u2013 25% Excellent Good Satisfactory Unsatisfactory Correctly 1. Calculate the changes in the NPV & IRR for the average scenario <\/p>\n

for changes of +\/- 10%, +\/- 20%, +\/- 30% with respect to the required variable. 2. Analyze the sensitivity of the NPV and IRR with respect to the required variables. <\/p>\n

Allow miscalculating one or two of the requirements Missing one of the requirements Missing more than one of the requirements<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Case Paper \u2013 Capital Budget Analysis Prepare in PowerPoint Format \u2013 Your PowerPoint should include a capital budget analysis, an interpretation of the analysis and your recommended strategy for the Deluxe Corporation. Your file is due in Blackboard on Sunday Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-31197","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/31197","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=31197"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/31197\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=31197"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=31197"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=31197"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}