FIN515: Week 6 Signature Assignment – Capital Budgeting Analysis

Once again, your team is the key financial management team for your company. The company’s CEO is now looking to expand its operations by investing in new property, plant, and equipment. calculate the WACC for your company(Costco), which will now be useful in evaluating the project’s effectiveness. You are now asked to do some capital budgeting analysis that will determine whether the company should invest in these new plant assets.

The parameters for this project are:

Your team will be using the same company (Costco) for this project

https://www.sec.gov/Archives/edgar/data/909832/000090983217000014/cost10k90317.htm#s2960e74129804ad79a675bc789ef1246

The company is now looking to expand its operations and wants you to do some analysis using key capital budgeting tools to do this. The parameters for this project are as follows.

The firm is looking to expand its operations by 10% of the firm’s net property, plant, and equipment. (Calculate this amount by taking 10% of the property, plant, and equipment figure that appears on the firm’s balance sheet.)

The estimated life of this new property, plant, and equipment will be 12 years. The salvage value of the equipment will be 5% of the property, plant and equipment’s cost.

The annual EBIT for this new project will be 18% of the project’s cost.

The company will use the straight-line method to depreciate this equipment. Also assume that there will be no increases in net working capital each year. Use 35% as the tax rate in this project.

The hurdle rate for this project will be the WACC that you are able to find on a financial website, such as Gurufocus.com.

Deliverable for this Project

Prepare a Financial repot that will highlight the following items.

· Your calculations for the amount of property, plant, and equipment and the annual depreciation for the project

· Your calculations that convert the project’s EBIT to free cash flow for the 12 years of the project.

· The following capital budgeting results for the project

· Net present value

· Internal rate of return

· Discounted payback period.

· Your discussion of the results that you calculated above, including a recommendation for acceptance or rejection of the project

Once again, you may embed your Excel spreadsheets into your document. Be sure to follow APA standards for this project.

Grading Rubric

	Possible Points	Criteria and Point Range
Calculation of Cost of Project	16	0-3	4-7	8-12	13-16
		All calculations are incorrect, or not presented.	Calculation of PP&E, salvage value, or annual depreciation is incorrect.	Cost of PP&E is mostly correct with some minor calculation errors.	Cost of Property, plant and Equipment and annual depreciation correctly calculated.
Estimation of Cash Flows	24	0-6	7-12	13-18	19-24
		All aspects of the cash flow calculation are incorrect, or not presented.	Significant, but identifiable errors are presented in the calculation to convert income to cash flows..	Cash flows are properly converted from accrual-based net income to cash flows from the project, with minor errors.	Cash flows are properly converted from accrual-based net income to cash flows from the project.
Capital Budgeting Analysis	24	0-6	7-12	13-18	19-24
		All of the capital budgeting calculations are incorrect, or not presented.	Two errors noted in the NPV, IRR, and Discounted Payback Period calculations.	One error noted in the NPV, IRR and Discounted payback period calculations.	All of the NPV, IRR, and Discounted Payback period calculations are correct.
Form	16	0-3	4-7	8-12	13-16
		Poor writing and presentation skills, or no presentation provided.	Several problems noted in regard to writing and presentation skills.	Writing and presentation done well with a few minor errors	Virtually no errors in writing or presentation.

FIN515: Week

Signature Assignment

–

Capital Budgeting Analysis

Once again, your team is the key financial management team for your company.

The

company’s

CEO

now

looking

expand

its

operations

investing

new

property,

plant,

and

equipment.

calculate

the

WACC

for

your

company

(Cost

co)

which

will

now

useful

evaluating

the

project’s

effectiveness

You

are

now

asked

some

capital

budgeting

analysis

that

will

determine

whether

the

company

should

invest

these

new

plant

ssets.

The parameters for this project are:

Your team will be using the same company

(

Costco)

for this project

https://www.sec.gov/Archives/edgar/data/909832/000090983217000014/cost10k90317.htm#s2960e7

4129804ad79a675bc789ef1246

The company is now looking to expand its operations and wants you to do some analysis using key

capital budgeting t

ools to do this. The parameters for this project are as follows.

The firm is looking to expand its operations by 10% of the firm’s net property, plant, and equipment.

(Calculate this amount by taking 10% of the property, plant, and equipment figure that a

ppears on the

firm’s balance sheet.)

The estimated life of this new property, plant, and equipment will be 12 years.

The salvage value of the

equipment will be 5% of the property, plant and equipment’s cost.

The annual EBIT for this new project will be 1

8% of the project’s cost.

The company

will use the straight

–

line method to depreciate this equipment

. Also assume that there

will be no increases in net working capital each year. Use

35% as the

tax rate

in this project

The hurdle rate for this project

will be the WACC

that you are able to find on a financial website, such as

Gurufocus.com

Deliverable

for

this Project

Prepare a

Financial

repot

that will highlight the following items.

Your calculation

s for the amount of property, plant, and equipment and the annual depreciation

for the project

Your calculations that convert the project’s EBIT to free cash flow for the 12 years of the project.

The following capital budgeting results for the project

Net

present value

Internal rate of return

Discounted payback period.

Your discussion of the results that you calculated above, including a recommendation for

acceptance or rejection of the project

Once again, you may embed your Excel spreadsheets into your

document. Be sure to follow APA

standards for this project.

FIN515: Week 6 Signature Assignment – Capital Budgeting Analysis

Once again, your team is the key financial management team for your company. The company’s CEO is

now looking to expand its operations by investing in new property, plant, and equipment. calculate the

WACC for your company(Costco), which will now be useful in evaluating the project’s effectiveness. You

are now asked to do some capital budgeting analysis that will determine whether the company should

invest in these new plant assets.

The parameters for this project are:

Your team will be using the same company (Costco) for this project

https://www.sec.gov/Archives/edgar/data/909832/000090983217000014/cost10k90317.htm#s2960e7

4129804ad79a675bc789ef1246

The company is now looking to expand its operations and wants you to do some analysis using key

capital budgeting tools to do this. The parameters for this project are as follows.

The firm is looking to expand its operations by 10% of the firm’s net property, plant, and equipment.

(Calculate this amount by taking 10% of the property, plant, and equipment figure that appears on the

firm’s balance sheet.)

The estimated life of this new property, plant, and equipment will be 12 years. The salvage value of the

equipment will be 5% of the property, plant and equipment’s cost.

The annual EBIT for this new project will be 18% of the project’s cost.

The company will use the straight-line method to depreciate this equipment. Also assume that there

will be no increases in net working capital each year. Use 35% as the tax rate in this project.

The hurdle rate for this project will be the WACC that you are able to find on a financial website, such as

Gurufocus.com.

Deliverable for this Project

Prepare a Financial repot that will highlight the following items.

 Your calculations for the amount of property, plant, and equipment and the annual depreciation

for the project

 Your calculations that convert the project’s EBIT to free cash flow for the 12 years of the project.

 The following capital budgeting results for the project

o Net present value

o Internal rate of return

o Discounted payback period.

 Your discussion of the results that you calculated above, including a recommendation for

acceptance or rejection of the project

Once again, you may embed your Excel spreadsheets into your document. Be sure to follow APA

standards for this project.

FIN515: Week 6 Signature Assignment – Capital Budgeting Analysis