| BUS472 Unit 1 Assignment Template |
| | Instructions: Fill in the only the yellow fields: |
| | 1. Checklist: | | | | First create a checklist: | | Performance on Criteria |
| | | Project A is rated: | | | Project | Criteria | High |
| | | Payoff potential | high |
| | | Lack of risk | low |
| | | Safety | high |
| | | Competitive advantage | medium |
| | | Project B is rated: |
| | | Payoff potential | low |
| | | Lack of risk | medium |
| | | Safety | medium |
| | | Competitive advantage | medium |
| | | Project C is rated: |
| | | Payoff potential | medium |
| | | Lack of risk | medium |
| | | Safety | low |
| | | Competitive advantage | low |
| | | Project D is rated: | | | What is the best choice? |
| | | Payoff potential | high | | Why? |
| | | Lack of risk | high |
| | | Safety | medium | | Which is the worst choice? |
| | | Competitive advantage | medium | | Why? |
| | 2. Scoring Model # 1 | | | | Scoring Model #1 | | Importance Weight | Score | Weighted Score |
| | | | | | Project | Criteria |
| | | Importance Weight: |
| | | Payoff Potential | 4 |
| | | Lack of Risk | 3 |
| | | Safety | 1 |
| | | Competitive Advantage | 3 | | | Total Score |
| | | Criteria Score: |
| | | High | 3 |
| | | Medium | 2 |
| | | Low | 1 | | | Total Score |
| | | | | | | Total Score |
| | | | | | | Total Score |
| | | | | | What is the best choice? |
| | | | | | Why? |
| | 3. Scoring Model # 2 | | | | Scoring Model #2 | | Importance Weight | Score | Weighted Score |
| | | | | | Project | Criteria |
| | | Importance Weight: |
| | | Payoff Potential | 1 |
| | | Lack of Risk | 1 |
| | | Safety | 4 |
| | | Competitive Advantage | 2 | | | Total Score |
| | | Criteria Score: |
| | | High | 3 |
| | | Medium | 2 |
| | | Low | 1 | | | Total Score |
| | | | | | | Total Score |
| | | | | | | Total Score |
| | | | | | What is the best choice? |
| | | | | | Why? |
| | 4. Discount Payback | | | | Set up a discounted cash flow table to calculate the time needed to pay back the initial $50,000 investment. |
| | | Tips: | | | | | Discount Factor | New Inflows | Cumulative Cash Flow |
| | | Discount Rate = 15% | | | Year | Cash Flow |
| | | Discount factor = 1/(1+r)t | | | 0 | (50,000) | 1.00 | (50,000) | (50,000) |
| | | r = discount rate and t = year | | | 1 | 30,000 |
| | | The breakeven year is the last year that the cumulative cash flow is negative. | | | 2 | 30,000 |
| | | | | | 3 | 40,000 |
| | | | | | 4 | 25,000 |
| | | | | | 5 | 15,000 | 0.50 | 7,500 | 47,050 |
| | | | | | In what year will we reach a breakeven point? |
| | 5. Net Present Value |
| | | • Project A: $500,000 invested today will yield an expected income stream of $150,000 per year for 5 years, starting in Year 1. |
| | | • Project B: Investment of $400,000 is expected to produce this revenue stream: Year 1 = 0, Year 2 = $50,000, Year 3 = $200,000, Year 4 = $300,000, and Year 5 = $200,000. |
| | | Assume that a required rate of return for your company is 10% and that inflation is expected to remain steady at 3% for the life of the project. |
| | | Tips: | | | Project A | | Discount Factor | New Inflows |
| | | Discount Rate = Rate of Return + Inflation | | | Year | Cash Flow |
| | | Discount factor = 1/(1+r)t | | | 0 | (500,000) | 1.00 | (500,000) |
| | | r = discount rate and t = year | | | 1 | 150,000 |
| | | | | | 2 | 150,000 |
| | | | | | 3 | 150,000 |
| | | | | | 4 | 150,000 |
| | | | | | 5 | 150,000 |
| | | | | | | | NPV Total: |
| | | | | | Project B | | Discount Factor | New Inflows |
| | | | | | Year | Cash Flow |
| | | | | | 0 | (400,000) | 1.00 | (400,000) |
| | | | | | 1 | - 0 |
| | | | | | 2 | 50,000 |
| | | | | | 3 | 200,000 |
| | | | | | 4 | 300,000 |
| | | | | | 5 | 200,000 |
| | | | | | | | NPV Total: |
| | | | | | Which is the better Investment? |
| | | | | | Why? |
Trayvon1996
BUS472_U1_Assignment_Excel_Template.xlsx
