This is an assignment that focuses on the Evaluation of Capital Projects using budgeting tools. The paper also requires making of appropriate decisions.
Evaluation of Capital Projects using budgeting tools
Create an Excel spreadsheet in which you use capital budgeting tools to determine the quality of 3 proposed investment projects, as well as a 6-8 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 to:
Firstly, use capital budgeting tools to compute future project cash flows and compare them to upfront costs.
Secondly, evaluate capital projects and make appropriate decision recommendations.
Thirdly, prepare reports and present the evaluation in a way that finance and non-finance stakeholders can understand.
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 she notes in each project scenario, all other costs will remain constant. Also, you should remember to only evaluate the incremental changes to cash flows.