Need calculation for first part (in BOLD for future project cash flows)

Bid only if you can do accurately, will provide remaining calculations completed in excel after selecting tutor

Intro: This assessment is about one of the basic functions of the finance manager, which is allocating capital to areas that will increase shareholder value and add the most value to the company. This means forecasting the projected cash flows of the projects and employing capital budgeting metrics to determine which project, given the forecast cash flows, gives the firm the best chance to maximize shareholder value. As a finance professional, you are expected to:

Use capital budgeting tools to compute      future project cash flows and compare them to upfront costs.

Evaluate capital projects and make      appropriate decision recommendations.

Prepare reports and present the      evaluation in a way that finance and non-finance stakeholders can      understand.

Scenerio: Senior leadership has now called upon you to analyze three capital project requests based on forecasted cash flow as they relate to maximizing shareholder value.

Your role: You are one of Maria’s high-performing financial analyst managers at ABC Healthcare Corporation and she trusts your work and leadership. Senior leadership was impressed with your presentation in Assessment 1 and they are tasking you with the analysis of these three proposed capital projects based on forecasted cash flow. You have completed forecasting the projected cash flows of the projects as reflected in the attached spreadsheets,

Projected Cash Flows [XLSX]

. You now need to conduct your analysis recommending which will provide the most shareholder value to the organization.

Requirements:

Use capital      budgeting tools to compute future project cash flows and compare them to      upfront costs. Remember to only evaluate the incremental changes to cash      flows.

Employing capital budgeting metrics,      determine which project, given the forecast cash flows, gives the      organization the best chance to maximize shareholder value.

Demonstrate knowledge of a variety of      capital budgeting tools including net present value (NPV), internal rate      of return (IRR), payback period, and profitability index (PI). The      analysis of the capital projects will need to be correctly computed and      the resulting decisions rational.

Evaluate capital projects and make      appropriate decision recommendations. Accurately compare the indicated      projects with correct computations of capital budgeting tools and then      make rational decisions based on the findings.

Select the best capital project, based      on data analysis and evaluation, that will add the most value for the      company. Provide a rationale for your recommendations based on your      financial analysis.

Prepare reports and present the      evaluation in a way that finance and non-finance stakeholders can      understand.

PROJECT A: MAJOR EQUIPMENT PURCHASE

A new major equipment purchase, which      will cost $10 million; however, it is projected to reduce cost of sales by      5% per year for 8 years.

The equipment is projected to be sold      for salvage value estimated to be $500,000 at the end of year 8.

Being a relatively safe investment,      the required rate of return of the project is 8%.

The equipment will be depreciated at a      MACRS 7-year schedule.

Annual sales for year 1 are projected      at $20 million and should stay the same per year for 8 years.

Before this project, cost of sales has      been 60%.

The marginal corporate tax rate is      presumed to be 25%.

PROJECT B: EXPANSION INTO THREE ADDITIONAL STATES

Expansion into three additional states      has a forecast to increase sales/revenues and cost of sales by 10% per      year for 5 years.

Annual sales for the previous year      were $20 million.

Start-up costs are projected to be $7      million and an upfront needed investment in net working capital of $1      million. The working capital amount will be recouped at the end of year 5.

The marginal corporate tax rate is      presumed to be 25%.

Being a risky investment, the required      rate of return of the project is 12%.

PROJECT C: MARKETING/ADVERTISING CAMPAIGN

A major new marketing/advertising      campaign, which will cost $2 million per year and last 6 years.

It is forecast that the campaign will      increase sales/revenues and costs of sales by 15% per year.

Annual sales for the previous year      were $20 million.The marginal corporate tax rate is      presumed to be 25%.

Being a moderate risk investment, the      required rate of return of the project is 10%.

Deliverable format: In this assessment, you will prepare an appropriate evaluation report to senior leadership using sound research and data to defend your decision.