Answer & Explanation:Please don’t plagarize and provide Apa reference
Resource: Capital Budgeting Worksheet
Read the scenarios below and select one to review and analyze:
Determine the proposal’s appropriateness and economic viability. For
all scenarios, assume spending occurs on the first day of each year and
benefits or savings occurs on the last day. Assume the discount rate or
weighted average cost of capital is 10%. Ignore taxes and depreciation.
Prepare a 500-word report explaining your calculations and conclusions. Answer the following in your report:
Explain the effect of a higher or lower cost of capital on a firm’s long-term financial decisions.
Analyze the use of capital budgeting techniques in strategic financial management.
What are major areas of risk in financial management? Which risk management techniques would you recommend? Why?
Proposal A: New Factory
A company wants to build a new factory for increased capacity.
Considering the information below, please identify the major areas of
risk in financial management. Which risk management techniques might be
important for this company? Why?
Using the net present value (NPV) method of capital
budgeting, determine the proposal’s appropriateness and
economic viability with the following information:
Building a new factory will increase capacity by 25%.
The current capacity is $10 million of sales with a 5% profit margin.
The factory costs $15 million to build.
The new capacity will meet the company’s needs for 8 years.
The factory is worth $13 million over 10 years.
Proposal B: New Equipment
A company wants to buy a labor-saving piece of equipment.Considering the
information below, please identify the major areas of risk in financial
management. Which risk management techniques might be important for
this company? Why?
Using the NPV method of capital budgeting, determine the proposal’s
appropriateness and economic viability with the following information:
Labor content is 12% of sales, which are annually $10 million.
The new equipment will save 20% of labor annually.
The new equipment will last 5 years.
The new equipment will cost $200,000.
Proposal C: New Advertising Program
A company wants to invest in a new advertising program. Using the NPV
method of capital budgeting, determine the proposal’s appropriateness
and economic viability with the following information:
The new program will increase current sales, $10 million, by 20%.
The new program will have a profit margin is 5% of sales.
The new program will have a 3-year effect.
The new program will cost the company $200,000 in the first year.
scenario from the Capital Budgeting Worksheet to review and analyze.
Using net present value, determine the proposal’s appropriateness and
economic viability.
Format your report consistent with APA guidelines.
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