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The major focus of this introductory week is the introduction of Capital Planning Capital Expenditure theories, concepts and applications covering the principal topics:

 

Budgets

Time Value of Money Concepts

Project Financing

Cost of Capital Analysis

Forecasting

Weighted Average Cost of Capital (WACC)

 

We will review Bruner, Case # 1-4 & 23. Make sure to download the excel file and be familiar with the set up as well as the equations as we move through our discussions and assignment for the week.

 

Our principal discussion will revolve around the following:

 

Based on your risk assessments of each project, you concluded that each project has risk characteristics that are similar to UPC’s average project. Further, the director of finance instructed you to use a WACC of 10%. Your task is to determine whether project A, project B, or both projects should be accepted, and make a presentation to a budget committee.

Using the attached Excel file and UPC information, explain your department’s plan for analyzing, selecting, and financing the projects to the budget committee. Additionally, respond to the following questions in your presentation:

 

-       Assuming that UPC can raise $2,000,000 for the proposed projects, are projects A and B independent or mutually exclusive projects? Based on your answer, determine which project should be accepted. Explain the basis for your selection to the committee.

 

-       Assuming that UPC can raise $1,900,000 for the proposed projects, are projects A and B independent or mutually exclusive projects? Based on your answer, determine which project should be accepted. Explain the basis for your selection to the committee.

 

In your own words, please post a response to the Discussion Board, and comment on at least two other postings. A response to the primary question should be not less than 500 words, response to the instructor’s or fellow classmates posts should be not less than 3 paragraphs. All responses must be completed no later than Sunday evening for grading with at least one post no later than Wednesday. You will be graded on the quality of your postings.

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