Question.2805 - Evaluation of Capital Projects
Answer Below:
Executive xxxxxxxxxxx ABC xxxxxxxxxx Corp xxxxx three xxxxxxxx capital xxxxxxxx they xxxxxxxxxx the xxxxxxxxx for x return xx shareholders' xxxxxxxxxxx Item x which xxxxxxxxx purchasing x large xxxxxxxx of xxxxxxxxx yielded x positive xxx Present xxxxx that xxxxxxxx the xxxxxxxxxxx payback xxxxxx Both xxxxxxx B xxxxx deals xxxx the xxxxxxxxx of xxxxx new xxxxxx and xxxxxxx C xxxxx requires x higher xxxxxx rate xxxx the xxxx requirement xxxx a xxxxxxxx net xxxxxxx value xxx a xxxxxx rate xx return xx has xxxx above xxx a xxxxxxx indicator xxxx a xxxxx payback xxxxxx The xxxxxxxxx and xxxxxxxxxxx campaign xxxxxxxxxxx by xxxxxxx C xxxxxxxxxxxx the xxxx significant xxxxxxxxx for xxxxxxxxxx revenue xxxxxxxxx and xxxxxx growth xxx example xx has x positive xxx present xxxxx NPV x higher-than-expected xxx and xx acceptable xxxxxxx period xxxxx on xxxxx findings xxxxxxx C xxx marketing xxx advertising xxxxxxxx should xx implemented xxxxxxx it xxxxxx with xxx company's xxxxxxxxx goals xxx has xxx best xxxxxx of xxxxxxxxxx shareholder xxxxx nbsp xxxx Table xx ContentsIntroduction xxxxxxx Budgeting xxxxx Project x Major xxxxxxxxx Purchase x Description xx the xxxxxxx B xxxxxxxxxxx of xxxx Flows xxx Upfront xxxxx C xxxxxxxxxxx of xxxxxxx Budgeting xxxxxxx D xxxxxxxx Recommendation xxx Rationale xxxxxxx B xxxxxxxxx Into xxxxx Additional xxxxxx A xxxxxxxxxxx of xxx Project x Calculation xx Cash xxxxx and xxxxxxx Costs x Application xx Capital xxxxxxxxx Metrics x Decision xxxxxxxxxxxxxx and xxxxxxxxx Project x Marketing xxxxxxxxxxx Campaign x Description xx the xxxxxxx B xxxxxxxxxxx of xxxx Flows xxx Upfront xxxxx C xxxxxxxxxxx of xxxxxxx Budgeting xxxxxxx D xxxxxxxx Recommendation xxx Rationale xxxxxxxxxx and xxxxxxxxx of xxx Best xxxxxxx A xxxxxxx of xxxxxxxx for xxxx Project x Comparative xxxxxxxx of xxxxxxxx Based xx Capital xxxxxxxxx Metrics x Selection xx the xxxxxxx that xxxx the xxxx Shareholder xxxxx D xxxxxxxxx for xxx Chosen xxxxxxx Conclusion xxxxxxxxxx nbsp xxxx Introduction xxxx Financial xxxxxxxxxx requires xxxxxxx budgeting xx allocate xxxxxxxxx to xxxxxxxx that xxxxxxxx shareholder xxxxx Palepu xx al xxxx evaluation xxxx to xxxxxxxx ABC xxxxxxxxxx Corporation's xxxxx capital xxxxxxxx with xxx highest xxxxxxxxxxx value xxxxxxxxx As x financial xxxxxxx manager x analyze xxxxxxx cash xxxxx and xxxxxx top xxxxxxx using xxxxxxx budgeting xxxxx This xxxx extends xxxxxx mathematics xxxxxxxxx preparing x comprehensive xxxxxxxxxx report xxxx displays xxx financial xxxxxxxx and xxxxxxx explains xxx results xx finance xxx non-finance xxxxxxxxxxxx Vernimmen xx al xxx Healthcare xxxxxxxxxxx CEO xxxxx Gomez xxxxxx this xxxx demonstrating xxx importance xx study xxx recommendations xx strategic xxxxxxxxxxxxxxx The xxxxxxxx capital xxxxxxxx include xxxxx equipment xxxxxxxxx expansion xxxx three xxxxxx and xxxxxxxxx advertising xxxxxxxxx Expected xxxx flows xxxxxxx costs xxx potential xxxxxxx must xxx be xxxxxxxxxx because xxxxx project xxxxxx unique xxxxxxxxxxxxx and xxxxx This xxxxxxxx will xx followed xx examining xxxx project's xxxxxxxxx for xxxxxxx and xxx with xxx company's xxxx objective xx creating xxxxxxxxxxx value xxxx Capital xxxxxxxxx Tools xxxx Capital xxxxxxxxx involves xxxxxxx at xxxxxxxx investment xxxxxxxxxxxxx and xxxxxxxx which xxxxxxxx will xxxx the xxxx returns xxx help xxx organization xxxxx its xxxxxxxxx goals xxxxxx et xx It xx essential xx financial xxxxxxxxxx because xx involves xxxxxxxx the xxxx way xx divide xxxxxxx resources xxxxx different xxxxxxxxxx opportunities xx shareholders xxx the xxxx value xxxx Capital xxxxxxxxx is xxxx to xxxx investment xxxxxxxx by xxxxxxxxxxx net xxxxxxx value xxx internal xxxx of xxxxxx IRR xxxxxxx period xxx profitability xxxxx PI xxx net xxxxxxx value xxx is xxx difference xxxxxxx cash xxxx inflows xxx outflows xxxxxxx et xx This xxxxxxxxxxxx how xxxx the xxxxxxx increased xxxxxxxxxxx wealth xx dollars xxx determines x project's xxxxxxxx discount xxxx This xx the xxxxxxxxx expected xxxxxxxx rate xx return xxx payback xxxxxx indicates xxx long x project xxxx take xx recoup xxx investment xxx profitability xxxxx determines xxxxxxx profitability xx comparing xxx present xxxxx of xxxxxx cash xxxxx to xxx initial xxxxxxxxxx These xxxxx assess xxxxxxx project xxxxxxx risks xxx alignment xxxx the xxxxxxxxx objectives xxxx et xx nbsp xxxxxxx A xxxxx Equipment xxxxxxxx nbsp x Description xx the xxxxxxx nbsp xxx Project x ABC xxxxxxxxxx Corporation xxxx buy xxxx new xxxxxxxxx equipment xxx equipment xxxxx costs xxxxxxx upfront xxxxxx lower xxx cost xx sales xx every xxxx for xxxxx years xxxx investment xxxx to xxxxxxx operational xxxxxxxxxx and xxxxxx healthcare xxxxxxx costs xxxxxxxxx to xxx Modified xxxxxxxxxxx Cost xxxxxxxx System xxxxx -year xxxxxxxx the xxxxxxxxx will xxxx value xxxx time xx the xxx of xxxx it xxxxxx be xxxxx The xxxxxxx needs x minimum xxxx of xxxxxx of xxxxxxx it xxx a xxxx profile xxxxxx et xx B xxxxxxxxxxx of xxxx Flows xxx Upfront xxxxx nbsp xxxx Cash xxxxxxx Cash xxxxxxxx Net xxxx Flow x - x Application xx Capital xxxxxxxxx Metrics xxxx Net xxxxxxx Value xxx To xxxxxxxxx the xxx they xxxxxxxx the xxxxxxxx cash xxxxx from xxx required xxxx of xxxxxx which xx NPV xx the xxxxxxxxxx that xxxxx if xxx project xx a xxxx deal xxx the xxxxxxx by xxxxxxxxxxxxx the xxxxxxx value xx the xxx cash xxxxx the xxxxxxx generates xxxxxxxx Rate xx Return xxx The xxxxxxxx rate xxxxxxxxxx by xxxxxxx the xxxxxxxxx NPV xxxxx to xxxx is xxxxx as xxx issue xxxx yield xxx This xxxxxx is x determinant xx the xxxxxxxxx natural xxxx of xxxxxx and xxxxxxxxx helps xxxx decidedecide xxxxxxx or xxx it xx a xxxx idea xx go xxxxx with xxx project xxxxxxx Period xxxx is xxx number xxxx provides xxx investor xxxx an xxxxxxxx of xxx time xxxxx in xxxxx the xxxxxxx will xxxxx the xxxxxx invested xx them xx should xxxx describe xxxx and xxxxxxxxx Profitability xxxxx PI xxx Profitability xxxxx PI xxxxxxxx the xxxxxxxxxx between xxx initial xxxxxxxxxx and xxx present xxxxx of xxxxxx cash xxxxx Therefore x PI xx and xxxxx is xxx best xxxxxxxxxx nbsp x Decision xxxxxxxxxxxxxx and xxxxxxxxx nbsp xxx NPV xxx payback xxxxxx and xxxxxxxxxxxxx index xxx go xx Project x for xxx most xxxxxxxxxx option xxx study xxxxxxx that xxxxxxx A's xxx is xxxxxxxx the xxxx of xxxxxx is xxxxxx than xxx required xxx the xxxxxxx period xx not xxx long xxx PI xx greater xxxx These xxxxxxx allow xxxxxxx A xx be xxxxxx and xxxxxxx ABC xxxxxxxxxx Corporation xxx lower xxxx of xxxxx also xxxxx operations xxxx efficient xxx profitable xxxxx is xxxxxxx reason xxx investment xxx made xxxxxxx A xxxxxx be xxxx because xx fits xxx company's xxxx of xxxxxxxxxx shareholder xxxxx Graham xx al xxxxxxx B xxxxxxxxx Into xxxxx Additional xxxxxx nbsp x Description xx the xxxxxxx nbsp xx part xx Project x ABC xxxxxxxxxx Corporation xxxx expand xxx business xxxx three xxxx states xxxxx revenues xxx sales xxxxx are xxxxxxxx to xxxx by xxxx year xxx five xxxxx because xx this xxxxxxxxx With xxxxxxx in xxxxx last xxxx the xxxxxxxxx will xxxx advantage xx new xxxxxx opportunities xxx grow xxx company's xxxxxx share xxxxxxxx costs xxx the xxxxxxx will xxxx million xxx the xxxxxxx will xxxx need xxxxxxx in xxx working xxxxxxx At xxx end xx year xxx working xxxxxxx investment xxxx be xxxx back xxx required xxxx of xxxxxx for xxx project xx set xx because xx the xxxxx that xxxx with xxxxxxx a xxxxxx Fridson xxx Alvarez x Calculation xx Cash xxxxx and xxxxxxx Costs xxxx nbsp xxxx Cash xxxxxxx Cash xxxxxxxx Net xxxx Flow x - x Application xx Capital xxxxxxxxx Metrics xxxx Net xxxxxxx Value xxx nbsp xx find xxx NPV xxxxxxxx the xxxxxxxx cash xxxxx by xxx required xxxx of xxxxxx nbsp xxxxxxxx Rate xx Return xxx nbsp xxxx the xxx the xxxxxxxx rate xx which xxx NPV xxxxxx zero xxxx Payback xxxxxx Guess xxx payback xxxxxx which xx the xxxxxxxxx time xx earn xxxx its xxxxxxx investment xxxx Profitability xxxxx PI xxxxxxxxx the xx to xxx how xxxxxxxxxx the xxxxxxx is xxxxxxxx to xxx cost x Decision xxxxxxxxxxxxxx and xxxxxxxxx nbsp xxx NPV xxx payback xxxxxx and xxxxxxxxxxxxx index xxxx all xxxx looked xx and xxxxxxx B xx now xxx best xxxxxx Based xx the xxxxxxxx Project x has x positive xxx present xxxxx NPV x rate xx return xxxxxx than xxx required xxx a xxxxxxxxxx payback xxxxxx Expanding xxxx more xxxxxx creates xxx chances xxx growth xxxxxxx to xxxx sales xxx a xxxx substantial xxxxxxxx in xxx market xxxx though xxx project xxx costs xxx risks xx front xxx possible xxxxxxxxx benefits xxx more xxxxxxxxxxx than xxx initial xxxxxxxxxx Project x should xx done xxxxxxx it xxxx the xxxxxxxxxxxxxx goal xx increasing xxxxxxxxxxx value xxxxxxxxx Project x Marketing xxxxxxxxxxx Campaign xxxx A xxxxxxxxxxx of xxx Project xxxx For xxxxxxx C x significant xxx marketing xxx advertising xxxxxxxx for xxx Healthcare xxxxxxxxxxx must xx started xx will xxxx million x year xx run xxx campaign xxx years xxx campaign xxxx to xxxxx sales xxxxxxxx and xxxxx by xxxxxxxx With xxxxxxx in xxxxx last xxxx the xxxxxxxx seeks xx raise xxxxx awareness xxxxx in xxx customers xxx ultimately xxxxxxxx sales xxx required xxxx of xxxxxx for xxx project xx set xx because xxxxxxxxx investments xxxx with x moderate xxxxxx of xxxx Gitman xx al x Calculation xx Cash xxxxx and xxxxxxx Costs xxxx nbsp xxxx Cash xxxxxxx Cash xxxxxxxx Net xxxx Flow x - x - x - x - x Application xx Capital xxxxxxxxx Metrics xxxx Net xxxxxxx Value xxx The xxx Present xxxxx NPV xx obtained xx discounting xxx expected xxxx flows xx the xxxx of xxxxxxx Internal xxxx of xxxxxx IRR xxxx IRR xxx discount xxxx that xxxxxx NPV xx equal xxxxxxx Period xxxxx the xxxxxxxxx payback xxxxxx when xx will xxxxxxx its xxxxxxxxxx Profitability xxxxx PI xxxxxxxxx the xxxxxxxxxxxxx Index xx to xxxxxxxx whether xxx investment xx profitable xx not xx comparison xx the xxxx nbsp x Decision xxxxxxxxxxxxxx and xxxxxxxxx nbsp xxxxx looking xx the xxx IRR xxxxxxx period xxx profitability xxxxx Project x is x promising xxxxxxx that xxxxxx be xxxxx the xxxxx light xxx result xx the xxxxx reflects xxx fact xxxx Project x has xxx positive xxx present xxxxx NPV xxx higher xxxx of xxxxxx than xxx required xxx the xxxxxxxxxx payback xxxxxx The xxxxxxxxxxx and xxxxxxxxx campaign xxxxx the xxxx the xxxxxxxxxxx to xxxxxxxx sales xxx its xxxx in xxx market xxxx though xxxxx are xxxxx upfront xxx possible xxxxxxxxx benefits xxxx the xxxxxxxxxx worth xx As x result xxxxxxx C xxxx with xxx company's xxxx of xxxxxxxxxx shareholder xxxxx and xxxxxx be xxxxxxx out xxxxxx et xx Comparison xxx Selection xx the xxxx Project xxxx A xxxxxxx of xxxxxxxx for xxxx Project xxxx nbsp xxx projects xxxx positive xxx Present xxxxx NPV xxxxxxx more xxxx their xxx Project x has x short xxxxxxx period xxxxxxxxx the xxxxxxx investment xxxxxx However xxxxxxxx B xxx C xxxx average xxxxxxx periods xxx present xxxxx of xxxxxx cash xxxxx exceeds xxx initial xxxxxxxxxx in xxx projects xxxx Profitability xxxxx PI xxxxxx above xxxxx project xxxx profit xxx help xxx company xxxxxxxx shareholder xxxxx Fridson xxx Alvarez x Comparative xxxxxxxx of xxxxxxxx Based xx Capital xxxxxxxxx Metrics xxxx nbsp xxxxxx Project x Project x Project x NPV xxxxxxxx Positive xxxxxxxx IRR xxxxxxx Exceeds xxxxxxx Payback xxxxxx Short xxxxxxxxxx Reasonable xxxxxxxxxxxxx Index xx gt xx C xxxxxxxxx of xxx Project xxxx Adds xxx Most xxxxxxxxxxx Value xxxx After xxxxxxxxx the xxxxx projects xxxxxxx C xxxxx the xxxxxxxxx Advertising xxxxxxxx mdash xxxxxxxx the xxxx shareholder xxxxx The xxxxxxxx all xxxx positive xxx present xxxxxx NPV xxxxxx rates xx return xxxx required xxx reasonable xxxxxxx periods xxxxxxx C xxx the xxxx significant xxxxx and xxxxxx growth xxxxxxxxx The xxxxxxxxx Advertising xxxxxxxx can xxxxxxxx sales xxx revenues xx annually xxx six xxxxx supporting xxx company's xxxxxxxxxxx value xxxx Finkler xx al x Rationale xxx the xxxxxx Project xxxx Project x has xxx most xxxxxxxxx to xxxx ABC xxxxxxxxxx Corporation xxxxxx more xxxxxxxxxx and xxxxxxxxxx its xxxxxxxx in xxx market xxx campaign xxx bring xx more xxxxx through xxxxxx sales xxxxx are xxxxx more xxxx the xxxxxxx million xxx year xxxxxxxxxx The xxxxxxxx risk xx marketing xxxxxxxxxxx is xxxx lessened xx the xxxxxxxxxx expected xxxxxxx and xxx fit xxxx the xxxxxxxxx long-term xxxxx So xxxxxxx C xx the xxxx option xxx increasing xxxxxxxxxxx value xxx should xx put xxxxx on xxx list xx things xx do xxxxxxxx Conclusion xxxx Oin xxxxxxxxxx our xxxxxxxx analysis xx Projects x B xxx C xxxxxx they xxxxx earn xxxxxxx and xxxxxxxx shareholder xxxxx providing xxx most xxxxxx information xxx estimates xxx project xxxxx internal xxxx of xxxxxx and xxx back xxxxxx are xxx Project x our xxxxxxxxx and xxxxxxxxxxx campaign xxxxxxxx our xxxxxxx is xxxx Project x will xxxxxxx our xxxxxxxxx goals xx increasing xxxxx and xxxxxxxx and xxxxxx performance xxxx these xxxx healthcare xxxxxxx top xxxxxxxx is xxxxxxx C xx ensure xxxx company's xxxxxx share xxx future xxxxxx nbsp xxxx nbsp xxxx References xxxx Berk x DeMarzo x Harford x Ford x Mollica x amp xxxxx N xxxx Fundamentals xx corporate xxxxxxx Pearson xxxxxx Education xx Fundamentals xx Corporate xxxxxxx - xxxxxxxx Berk xxxxx DeMarzo xxxxxx Harford xxx Ford xxxx Mollica xxxxx Finch x Google xxxxx nbsp xxxx S xxxx Financial xxxxxxxxxx Principles xxx practice xxxxx Books xxxxx Financial xxxxxxxxxx Principles xxx Practice x Sudhindra xxxx - xxxxxx Books xxxx Easton x D xxxxxxxx M x Sommers x A xxx Xiao-Jun x nbsp xxxxxxxxx statement xxxxxxxx and xxxxxxxxx Cambridge xxxxxxxx Publishers xxxxxxxxx statement xxxxxxxx amp xxxxxxxxx hoasen xxx vn xxxx Ehrhardt x C xxxx Financial xxxxxxxxxx theory xxx practice xxx USA x wqtxts xxxx cloudfront xxx epdf xxx financial-management-theory-and-practice- xxxxxxx - x enhjdy-libre xxx amp xxxxxxxxxxxxxxxxxxxxxxxxxxxx inline x filename xxxxxxxxxxx USED xxxxxxx pdf xxx Expires xxx Signature xxxxxxxx TzY x Gnja xx b xx kOD xx tHDzvfZ xx pyISRbrUfuOXsFhMCHB xxxxx Zjz x XVmdPhjgcAn xxxxxxxxx bX x Xh xxxxxx dTADkloqVWY xxxx MSidhUlliG xxxxxxxxx tDlauqeuTAsHe-vy xxxxxxxxxxx nX xxxxx c xxx lCJVT xx UdloCtul xx O x eDkY xxxxxx RciX x XwNSxN xxx gaaU-OzVIQHX x dIQ xxxxxxxxxxxxxx SvQCJXwmJBSg xxxxxx IIjYf xxxxxxxx VNA xxx Key-Pair-Id xxxxxxxxx GGSLRBV xx nbsp xxxxxxx S x Calabrese x D xxx Smith x L xxxx Financial xxxxxxxxxx for xxxxxx health xxx not-for-profit xxxxxxxxxxxxx CQ xxxxx Financial xxxxxxxxxx for xxxxxx Health xxx Not-for-Profit xxxxxxxxxxxxx - xxxxxx A xxxxxxx Thad x Calabrese xxxxxx L xxxxx - xxxxxx Books xxxx Fridson x S xxx Alvarez x nbsp xxxxxxxxx statement xxxxxxxx a xxxxxxxxxxxxxx guide xxxx Wiley xxx Sons xxxxxxxxx Statement xxxxxxxx A xxxxxxxxxxxxxx Guide x Martin x Fridson xxxxxxxx Alvarez x Google xxxxx nbsp xxxxxx L x Juchau x amp xxxxxxxx J xxxx Principles xx managerial xxxxxxx Pearson xxxxxx Education xx Principles xx Managerial xxxxxxx - xxxxxxxx J xxxxxx Roger xxxxxx Jack xxxxxxxx - xxxxxx Books xxxx Graham x Adam x amp xxxxxxxxxxx B xxxx Corporate xxxxxxx Cengage xx Corporate xxxxxxx - xxxx Graham xxxxx Adam xxxxxxx Gunasingham x Google xxxxx nbsp xxxxxx K x Healy x M xxxxxx S xxxxxxxx M xxx Coulton x nbsp xxxxxxxx analysis xxx valuation xxxxx financial xxxxxxxxxx Cengage xx Business xxxxxxxx and xxxxxxxxx Using xxxxxxxxx Statements x Krishna x Palepu xxxx M xxxxx Sue xxxxxx Michael xxxxxxxx Jeff xxxxxxx - xxxxxx Books xxxx Parkinson x nbsp xxxxxxxxxx finance xxxxxxxxx https xxx org xxxx Revsine x Collins x W xxx Johnson x B xxxx Financial xxxxxxxxx amp xxxxxxxx McGraw-Hill xxxxxxxxx hoasen xxx vn xxxx Vernimmen x Quiry x amp xx Fur x nbsp xxxxxxxxx finance xxxxxx and xxxxxxxx John xxxxx amp xxxx Corporate xxxxxxx Theory xxx Practice x Pierre xxxxxxxxx Pascal xxxxx Yann xx Fur x Google xxxxxMore Articles From Finance
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