Capital Budgeting Investment, Model, and Analysis
Use the company that was selected for the class assignments. This assignment involves development of an Excel-based capital budgeting model and an analysis of a proposed capital budgeting project.
Prepare Capital Budgeting Model and Analysis
Describe a capital budgeting project (i.e., an investment in fixed assets) that might be undertaken by the company that you have selected. Make sure that the project has an initial investment in Year 0, followed by a series of annual cash flows for at least seven (7) years. In addition, determine the discount rate, or hurdle rate, that is appropriate for this project and explain the determination of that rate.
You may find some information about proposed capital budgeting projects in the Form 10K, news releases, or other company information sources. More than likely, it will be necessary to estimate the cash flows associated with the project.
Develop your own Excel spreadsheet model that can be used to determine the Net Present Value (NPV), Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR), and Profitability Index (PI).
The Excel spreadsheet that you develop must use Excel’s automated financial functions for determining the NPV, IRR, MIRR, and PI.
Following the completion of the spreadsheet analysis, explain whether, or not, the project should be implemented and why? Also, discuss what the various indicators (i.e., NPV, IRR, MIRR and PI) mean?
For this assignment, it is necessary to design and develop your own Excel spreadsheet; it needs to be submitted. Beyond the traditional inputs, outputs, and assessment criteria, what new and interesting features can you incorporate into the model?
The analysis needs to include:
1. Description of Proposed Capital Budgeting Project - Describe a capital budgeting project (i.e., an investment in fixed assets) that might be undertaken by the company that you have selected. Make sure that the project has an initial investment in Year 0, followed by a series of annual cash flows for at least seven (7) years. In addition, determine the discount rate, or hurdle rate, that is appropriate for this project and explain the determination of that rate.
2. Explanation of the Excel Capital Budgeting Model - Develop your own Excel spreadsheet model that can be used to determine the Net Present Value (NPV), Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR), and Profitability Index (PI). Explain how the model is constructed and the required inputs. Discuss the outputs of the model.
3. Explanation and Interpretation of Capital Budgeting Criteria - Prepare a written analysis of the results including NPV,IRR, MIRR, PI, and Profitability Analysis.
4. Recommendation About Implementation of Capital Budgeting Project – Develop and defend a recommendation about whether the proposed project should be implemented or not.
Writing Instructions
The discussion portion of the analysis should be three to five pages in length, double spaced, and should employ APA style and format for reference citations. Supporting data (e.g., figures, tables, etc.) and references should be submitted limited to four separate attachments in an appendix after the written portion of the paper.
The paper should begin with a short introduction and then proceed to examine the four topics outlined in the previous section.
The subheadings used in the paper should be:
1. Introduction
2. Description of Proposed Capital Budgeting Project
3. Explanation of the Excel Capital Budgeting Model
4. Explanation and Interpretation of Capital Budgeting Criteria
5. Recommendation About Implementation of Capital Budgeting Project
Evaluation: 12.5% of final course grade.
Completeness of analysis: The analysis must demonstrate a solid understanding of capital budgeting and the analysis of corporate investments. All assumptions used in preparing the projections for the project need to be thoroughly explained.
Organization: The paper should be well-organized and follow a logical pattern of analysis and discussion.
Presentation: Papers should meet professional business standards and meet APA formatting requirements.
Spelling, punctuation, and grammar: There should be few errors in grammar and punctuation. All sentences must be complete and well-structured.
Submission and Format: The completed paper is to be submitted to the “Gradebook” location designated for the assignment. The paper must be in Word format otherwise no credit is earned for the assignment. The Excel capital budgeting model is to be submitted.
The paper is also to be submitted to the Online Classroom. This will allow students to examine and discuss the various projects.
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GRADING RUBRIC FOR CAPITAL INVESTING, BUDGETING, AND ANALYSIS
Student:
Description of Evaluation
Failing,
undeserving of
credit
Passing, but
below standard
Satisfactory,
meets essential
requirements
Superior Work
and clearly
above average
Work of
Distinction
Related Grade
FD-, D, D+C-, C, C+B-, B, B+A-, A, A+
Category
Input
Required Topics
GradePointsWeightScore
1. Introduction - Provide a brief
overview of the assignment
and include a preview of the
contents of the report.
Introduction is
not presented or
undeserving of
credit.
Only a
superficial effort
to develop the
introduction.
Satisfactory
presentation of
the introduction.
Superior
presentation of
the introduction
and clearly
above average.
Distinctive and
very thorough
presentation of
this first section.
A+9815.00%14.70
2. Description of Proposed
Capital Budgeting Project -
Describe a capital budgeting
project (i.e., an investment in
fixed assets) that might be
undertaken by the company
that you have selected. Make
sure that the project has an
initial investment in Year 0,
followed by a series of annual
cash flows for at least seven
(7) years. In addition,
determine the discount rate, or
hurdle rate, that is appropriate
for this project and explain the
determination of that rate.
Virtually no effort
to explain the
capital budgeting
project; or,
section not
completed.
Marginally
passing
development and
presentation of
the description of
the capital
budgeting
project. May be
some significant
weaknesses in
the overall
description and
related financial
data.
Satisfactory
development and
presentation of
the description of
the capital
budgeting project
and its cash
flows.
Superior
development and
presentation of
the description of
the capital
budgeting project
and its cash
flows. The
scope of the
project is
understandable
and the cash
flows seem to be
relatively
realistic.
Distinctive
development and
presentation of
the description of
the capital
budgeting project
and its cash
flows. The
scope of the
project is very
understandable
and the cash
flows are both
realistic and
understandable.
A+9817.00%16.66
3. Explanation of the Excel
Capital Budgeting Model -
Develop your own Excel
spreadsheet model that can be
used to determine the Net
Present Value (NPV), Internal
Rate of Return (IRR), Modified
Internal Rate of Return (MIRR),
and Profitability Index (PI).
Explain how the model is
constructed and the required
inputs. Discuss the outputs of
the model.
Virtually no effort
to explain the
design,
construction, and
operation of the
capital budgeting
model; or,
section not
completed.
Passing
explanation of
the design,
construction, and
operation of the
capital budgeting
model;
presentation may
be lacking in
depth and detail.
Satisfactory
explanation of
the design,
construction, and
operation of the
capital budgeting
model.
Superior
explanation of
the design,
construction, and
operation of the
capital budgeting
model.
Distinctive
explanation of
the design,
construction, and
operation of the
capital budgeting
model. The
model has some
useful and
perhaps special
features.
A+9817.00%16.66
4. Explanation and
Interpretation of Capital
Budgeting Criteria - Prepare a
written analysis of the results
including NPV,IRR, MIRR, and PI.
Virtually no effort
to examine and
explain the
results of the
analysis; or,
section not
completed.
Passing effort to
examine the
results of the
analysis using
the capital
budgeting
criteria. May be
some errors or
inconsistencies
with the
explanation and
interpretation of
the results.
Satisfactory
effort to examine
the results of the
analysis using
the capital
budgeting
criteria. May be
some minor
errors or
inconsistencies.
Superior and
reasonably
comprehensive
effort to explain
and interpret the
capital budgeting
criteria for the
project.
Distinctive and
comprehensive
effort to explain
and interpret the
capital budgeting
criteria for the
project. The
analysis is
careful,
comprehensive,
detailed, and
consistent.
A+9817.00%16.66
5. Recommendation About
Implementation of Capital
Budgeting Project – Develop
and defend a recommendation
about whether the proposed
project should be implemented
or not.
Virtually no effort
to develop a
recommendation
based on the
analytical data;
or, section not
completed.
Passing effort to
offer a
recommendation
based on the
capital budgeting
criteria. May be
some errors
and/or
inconsistencies
in the
recommendation.
Satisfactory
effort to offer a
recommendation
about the capital
budgeting
project. May be
some minor
errors or
inconsistencies.
Superior and
reasonably
comprehensive
effort to offer an
appropriate
recommendation
about the capital
budgeting
project.
Distinctive and
comprehensive
effort to offer an
appropriate
recommendation
about the capital
budgeting
project. The
analysis is
careful,
comprehensive,
and consistent.
A+9817.00%16.66
6. Writing, Grammar, Spelling, &
Presentation - Logical and
Smooth Flowing Transitions
and Relationships Among
Sections of the Written Report.
Avoidance of Personal
Pronouns; Avoidance of
Referring to Company as They,
Their, or Them; etc.
Appropriate use of reference
citations.
Paper is poorly
written and
presented; not
worthy of a
passing
evaluation. May
have failed to
use appropriate
subheadings for
the assignment.
Passing written
presentation;
may have major
weaknesses.
Satisfactorily
written
presentation with
some
weaknesses.
Superior written
presentation with
very limited minor
weaknesses,
omissions, etc.
Distinctively
written
presentation with
no obvious
weaknesses.
A+9817.00%16.66
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