Assessment 3 – 3 Capital Budgeting The following information is for the Blue Ribbon Restaurant Group. You have been engaged as a Graduate Trainee on the Management team. Your first task has been given...

Assessment 3 – 3 Capital Budgeting
The following information is for the Blue Ribbon Restaurant Group. You have been engaged
as a Graduate Trainee on the Management team. Your first task has been given to you by the
General Manager. She took you aside and confided that she didn’t believe the Capital
Budgeting process was rigorous enough with some poor decisions made in the past.
She has asked you to investigate the investment cost for a major kitchen overhaul in one of
the chair restaurants. She gave you five potential contractors to confidentially speak with.
You nervously approach them all in the full knowledge this task will make or break your
career in management in the industry.
Following your meetings you have the following information to digest. You now need to
analyse the data and make a recommendation to her. Fortunately you remember you did
something like this at LCB during your Degree, you pull out your notes and get to work.
One important piece of information you remember is to set out the data so a comparison is
easy. You also are thankful you know how to use Excel to aid you. You decide to write down
your key objectives in this task. After some consideration you decide on:
1. An Excel tabular format
2. Comparison of as many assessment techniques you can remember, and
3. To write a clear and concise recommendation explaining the reasoning behind your
choice. (You cleverly realise that if you do it this way and circumstances change in
the future, the finger can’t be pointed at you).
After discussing your approach with the GM, she is please and provides you with key pieces
of information:
The company tax rate is 30%, the Discount Rate is 8% and the company has an Internal Rate
of Return target of 18%pa.