Mr. Verdin: I have recommended four capital projects out of the eleven submitted for you to propose to the board of directors, they are the follwing: 1. Expansion of the plant in Nuremberg, Germany 2. Effluent-water treatment at 4 plants 3. Eastward expansion 4. Strategic Acquisition Before I analyzed the financial data, there were a couple assumptions that I had to make. • The southward market expansion and eastward market expansion are mutually exclusive. • The southward market expansion could not be done without the new plant in Dijon, France. • Each project should have a different risk level. A risk adjustment should be added to the WACC. The 10.6% provided is the company’s WACC, and all projects have a different risk level. • …show more content…
1. Strategic Acquisition 2. Southward Expansion 3. Eastward Expansion 4. Artificial Sweetener 5. Inventory Control System 6. Snack Foods 7. Plant Expansion 8. Automation and Conveyor 9. New Plant 10. Truck Fleet Expansion 11. Water Treatment After ranking the projects, you will notice that the #2 and #3 projects are mutually exclusive. The southward market expansion is the better of the two choices of market expansions, but it is not the better choice when you determine that it requires the new plant in Dijon, France. The new plant in Dijon, France Is #9 out of 11. So the eastward market expansion was selected, and the plant expansion had to be picked because of the increase in product that was necessary. Appendix A has the financial details for the combination of these projects. Each project must meet a minimum acceptable IRR and a maximum acceptable payback period. Two projects selected do not meet both of the management committees’ minimum requirements. That project is the plant expansion in Germany. The reason is because this project is necessary for the eastward market expansion, so their financials had to be considered in a consolidated manner. The eastward market expansion and the strategic acquisition both meet the requirements. The other is the effluent-water treatment at four plants, but it is mandatory since it is a regulatory requirement. The other two projects meet the minimum requirements. SECTION B Risk, size and life of the
The first project proposal is Match My Doll Clothing line expansion consisted of expanding matching doll and child’s clothing and accessories. The second project proposal is Design Your Own Doll by creating customizable “one of a kind” doll features through the company’s website. The project selection criteria would base on quantitative and qualitative analysis. The quantitative analysis would base on the evaluation of discounting cash flow forecasts to determining the Net Present Value (NPV), Internal Rate of Return (IRR), and the Payback period of each proposed project. The qualitative analysis would include the potential project value of the company’s overall strategy, innovation, key project risks, and the project interdependencies to the whole company.
Finally, we should adjust the WACC with its risk score. Because everything is calculated in U.S. dollar, the U.S. risk score is 0. So the U.S. projects WACC is constant. The Pakistan risk premium is 1.425. So the change is 1.425 * 500= 705bp = 7.05%. Therefore, we get the final Pakistan WACC, which is 23.08% (15.93%+7.05%).
592 Week 1 DQ 1 WBS Construction PROJ 592 Week 1 DQ 2 Project Cost Estimates and Assumptions PROJ 592 Week 2 DQ 1 Cost Components PROJ 592 Week 2 DQ 2 Estimating Processes PROJ 592 Week 3 DQ 1 Project Schedules PROJ 592 Week 3 DQ 2 Sensitivity Analysis PROJ 592 Week 4 DQ 1 Resource Allocation and Leveling PROJ 592 Week 4 DQ 2 Advanced Schedule Techniques PROJ 592 Week 5 DQ 1 Earned Value Calculation PROJ 592 Week 5 DQ 2 Project Monitoring and Control & EV PROJ 592 Week 6 DQ 1 Forecasting Project Completion Cost PROJ 592 Week 6 DQ 2 Project Control PROJ 592
Task 1. Summarize each of the above-proposed projects in a simple table format suitable for presentation to top management. Include the name for each project, identify how each one supports business strategies, assess the potential financial benefits and other benefits of each project, and provide your initial assessment of the value of each project.
* To create a presentation with valid proposals and recommendations to be shared with senior leadership team, by the end of February
Production operations played a huge role on whether to allow more production in North America, or more in Europe-Africa. After many decisions, we begun to notice that North America, and Europe-Africa were our main consumers and had stronger demands for our products, we suddenly realized that we should offer the other more compensation to raise the production. We than decided to offer Asia-Pacific, and Latin America a larger discounts, and longer return dates, to increase the demands.
The 1920’s mark the shift in American politics, culture, and economics from traditional to modern. The industrial and economic expansion of the 1920’s created more room for women in the workforce, and a society centered more on consumption than politics. Radios and silent films became widespread, and dissolved physical and cultural boundaries between urban and rural communities. The expansion of advertising alongside the development of the music and film industries exposed citizens to a society held together by consumption. The idea of consumerism was new to Americans. Due to the recent increase of pay and decrease in work hours for blue-collar workers, Americans were able to spend more money on items previously considered luxuries. The prevalence
Overall, I would recommend that PPC recalculate their WACC per each specific division and establish multiple cutoff rates instead of calculating a company wide WACC cutoff rate. This will benefit them the most in accepting and denying projects that will meet the appropriate cutoff rate that each division is susceptible to based off the specific risk each division must overcome. When recalculating their
Our WACC is almost constantly these years – around 5.50% -- via from 5.04% to 5.82%. We also use the scenario analysis for how the WACC and growth rate affect enterprise value and equity value.
Given our recommendation to accept the new investment opportunity, this project will impact the forecasted financial statements from 2010 onwards. Please refer to Exhibits 6 and 7 for the revised projections.
The four measures were net present value (NPV), internal rate of return (IRR), the payback period and increases in earnings per share (EPS). Other strategic factors must be considered that are not reflected in the financial tests. James Fawn and his ICG analyst team must decide which project is the best value for the short-term and the long-term. Utilizing these financial hurdles and contemplating other strategic factors, Victoria Chemicals will choose the project that will give the firm the most value.
Without the ability to rank the projects based off of cash flows solely, we had to use some analytical criteria as a capital budgeting analyst to provide some thorough support and reasoning for how we ranked the four best projects. In this case we are only using quantitative considerations that we deem to be relevant and no other project characteristics are deciding factors in our selection of the best four projects. When coming up with our calculations to rank
All of the 11 projects are primarily ranked based on quantitative measurements. We have to also take into consideration of other quantitative aspects like length of the project, initial investment and anticipated payback period. Moreover, this
1. Is the capital investment proposal described in Exhibit 3 and attractive one for Quality Metal Service Center?
The increase in production capacity followed expansion by some of the many producers and the operation of new producers.