M7.5 Milestone 2: Investing in Capacity

Milestone 2 Investing in Capacity Rubric Criteria Exemplary Satisfactory Minimally Responsive Unacceptable Weight

Decision to

acquire this CMS

- Weighted

Average Cost of

Capital (WACC)

Student explains why only some component costs of the firm are included when computing financing costs for this project, concentrating on a choice between a project/divisional cost of capital versus a firm-wide cost of capital approach. Student accounts for risk and importance of opportunity costs using rich detail. Focus is given to building the foundation for an investment recommendation.

Student explains why only some component costs of the firm are included when computing financing costs for this project, concentrating on a choice between a project/divisional cost of capital versus a firm-wide cost of capital approach. Student Accounts for risk and the importance of opportunity costs. Focus is given to building the foundation for an investment recommendation, however more details are needed to fill in important gaps.

Information about why only some component costs of the firm are included when computing financing costs for this project is briefly described, with critical issues remain vague or are missing. More information is needed regarding the choice between project/divisional cost of capital versus a firm-wide cost of capital approaches and/or student does not account for risk and importance of opportunity costs. Enough focus is not given to building the foundation for an investment recommendation.

Information regarding component costs of the firm is not included when computing financing costs for this project. Critical issues remain vague or are missing Details are insufficient or focus is not given to the choice between project/divisional cost of capital versus a firm-wide cost of capital approaches. No focus is given to building the foundation for an investment recommendation.

Score 30 24 21 0 30

Decision to acquire this CMS - Cash Flow Estimation (Substitutes and Complements)

A decision to acquire this CMS using Cash Flow Estimation is analyzed critically using multiple perspectives, in detail and with evidence. Focus is given to effect on cash flow of both substitutes and complements on cash flow. Supporting details and evidence to justify claims is relevant, accurate, and specific to the claims.

A decision to acquire this CMS using Cash Flow Estimation is analyzed critically using multiple perspectives, in detail and with evidence. Focus is given to effect on cash flow of both substitutes and complements on cash flow with minor details missing. These claims are supported with evidence and reasons, with minor details missing.

Only a single perspective is

presented and discussed detail and

with evidence regarding a decision

to acquire this CMS using Cash

Flow Estimation

Focus is given to effect on cash flow of both substitutes and complements on cash flow with major details missing. Minimal to no evidence are provided to support claims.

A decision to acquire this CMS using Cash Flow Estimation s not discussed in detail and with evidence. Focus is not given to effect on cash flow of both substitutes and complements on cash flow with major details missing. Issues or items discussed are vague, inappropriate, and/or inaccurate terms.

Score 20 16 14 0 20

Decision to acquire this CMS – Effect of Fixed Assets

The effect of Fixed Assets on Operating Cash Flow is analyzed critically using multiple

The effect of Fixed Assets on Operating Cash Flow is analyzed critically using multiple perspectives.

A single perspective is presented and discussed in detail and with evidence regarding the effect of

The effect of Fixed Assets on Operating Cash Flow is not discussed in detail and/or with evidence

Criteria Exemplary Satisfactory Minimally Responsive Unacceptable Weight

(Operating Cash Flow)

perspectives, in detail and with evidence. Acquisition of Fixed Assets is correctly categorized in terms of its effect on the Statement of Cash Flows. Focus is given to reasons for and effects on changes in operating cash flow, with consideration of: initial effect, depreciation effects, and expected longer term effects due to the assets’ net contribution to cash flow over time. Claim and or reasons for and effects on changes in operating cash flow are accurate. Supporting detail and evidence regarding reasons for and effects on changes in operating cash flow is included to justify claims as relevant, accurate, and specific to the claims. to support claims.

Acquisition of Fixed Assets is categorized in terms of its effect on the Statement of Cash Flows, with minor errors. Focus is given to reasons for and effects on changes in operating cash flow, with consideration of: initial effect, depreciation effects, and expected longer term effects due to the assets’ net contribution to cash flow over time. Minor details are missing. Claims and/or reasons for and effects on changes in operating cash flow are accurate. Claims and/or reasons for and effects on changes in operating cash flow are supported.

Fixed Assets on Operating Cash Flow. Acquisition of Fixed Assets is not categorized or incorrectly categorized in terms of its effect on the Statement of Cash Flows. Focus is not given to reasons for and effects on changes in operating cash flow, with consideration of: initial effect, depreciation effects, and expected longer term effects due to the assets’ net contribution to cash flow over time. Minor details are missing. Claims and/or reasons for and effects on changes in operating cash flow are addressed and are mostly accurate. Evidence of minor misconceptions is present

Acquisition of Fixed Assets is not categorized or incorrectly categorized in terms of its effect on the Statement of Cash Flows. Focus is given to reasons for and effects on changes in operating cash flow, with consideration of: initial effect, depreciation effects, and expected longer term effects due to the assets’ net contribution to cash flow over time. Claims and/or reasons for and effects on changes in operating cash flow are inaccurate, not discussed, or not supported. Evidence of major misconceptions is present.

Score 20 16 14 0 20

Investment Criteria - Application of Investment Decision

Two Investment Decision Criteria are described and

analyzed in detail.

Proposed Investment Recommendation is richly supported with clear, thorough, appropriate, and evidence-based explanations and justifications relevant to Investment Decision Criteria described and analyzed.

Two Investment Decision Criteria are described and

analyzed.

Proposed Investment Recommendation is supported with clear, thorough, and appropriate explanations and justifications relevant to Investment Decision Criteria described and analyzed.

The proposed Recommendation is

inaccurate or not relevant and

specific to an analysis of

Investment Decision Criteria.

Proposed Investment Recommendation is supported with clear, thorough, and appropriate explanations and justifications relevant to Investment Decision Criteria described and analyzed.

No proposed Recommendation is provided using Investment Decision Criteria. Investment Decision Criteria not described and analyzed

or are not described and analyzed

in detail.

Decision rules, if analyzed, are not

used to justify acceptance given

two or more of the following: NPV,

Criteria Exemplary Satisfactory Minimally Responsive Unacceptable Weight

Evidence is offered to

demonstrate that decision rules

analyzed justify acceptance given

two or more of the following:

NPV, project risk in relation to

risk level required by the firm,

project PB and DPB fall within

firm’s required limits, or

circumstances dictate use of a PB

period to accommodate other

circumstances.

Supporting detail and evidence to justify claims is relevant, accurate, and specific to the claims.

Decision rules are analyzed to

justify acceptance given two or

more of the following: NPV, project

risk in relation to risk level required

by the firm, project PB and DPB fall

within firm’s required limits, or

circumstances dictate use of a PB

period to accommodate other

circumstances.

Minor details are missing or arguments could be better detailed, substantiated and supported.

Decision rules are analyzed to

justify acceptance given two or

more of the following: NPV, project

risk in relation to risk level required

by the firm, project PB and DPB fall

within firm’s required limits, or

circumstances dictate use of a PB

period to accommodate other

circumstances.

Major details are missing and

arguments are not sufficiently

detailed, substantiated and

supported.

Proposed justifications are vaguely supported, or not necessarily relevant to use of investment Decision Rules to justify this Investment Decision.

project risk in relation to risk level

required by the firm, project PB

and DPB fall within firm’s required

limits, or

circumstances dictate use of a PB

period to accommodate other

circumstances.

Major details are missing and

arguments are not sufficiently

detailed, substantiated and

supported and/or do not use

investment Decision Rules to justify

this Investment Decision

Score 10 8 7 0 10

Investment Criteria

- Limitations of

Investment

Decision Criteria

Limitations of Investment Decision Rules to evaluate an investment decision are analyzed critically using multiple perspectives in detail and with evidence. Focus is given to limitations of capital budgeting techniques. Supporting detail and evidence to justify claims is relevant, accurate, and specific to the claims.

Limitations of Investment Decision Rules to evaluate an investment decision are analyzed critically using multiple perspectives in detail. Focus is given to limitations of capital budgeting techniques. Claims are generally supported with evidence and reasons, with minor details missing.

Limitations of Investment Decision Rules to evaluate an investment decision are analyzed. Only a single perspective is presented and discussed detail. Insufficient focus is given to limitations of capital budgeting techniques. Minimal evidence is provided to support claims and/or evidence is vague, inappropriate, or inaccurate.

Limitations of Investment Decision Rules to evaluate an investment decision are not discussed in detail and with evidence. Focus is not given to limitations of capital budgeting techniques. Evidence is not provided or is vague, inappropriate, or inaccurate. Minimal to no evidence is provided to support claims and evidence given is vague, inappropriate, or inaccurate.

Score 20 16 14 0 20

TOTAL 100