Provide 1 response to each student post. Each response should be 150 words each. Turnitin and Waypoint is being used to check for plagiarism and Please use APA format. Please pay close attention to plagiarism, and it's not tolerated.
3:41pm Jul 31 at 3:41pm
The prospect of implementing a new computer network system to decrease the time between customer order and delivery is of great importance to the company I’ve chosen for my final assignment: Uber. There are a few important factors that make the implementation of this new system important. Factors such as system reliability and consistency are important when many of our consumers have both the Uber and Lyft applications on their device and can switch from one to the other within seconds. Being able to deliver on customer requests in 2 minutes as opposed to seven is often time the difference between a consumer using our product or a competitor’s. As a software company the reliability and consistency of our systems is what will make the most lasting impression on consumers and is very significant in terms of our ability to deliver reputable service.
Of the available criteria by which to rank potential capital investment projects, what is likely to be the most highly ranked will be the impact on revenue. As Uber has never been nor is projected to be a profitable business, the ability to improve assets with minimal incremental costs will go a long way towards improving the organization’s financial position.
As there are no profits currently, we will estimate an ROI using the NPV method and based on a cost of 250,000 and incremental revenue of 150,000 per year with a discount rate of 6%. Based on this information, the NPV of the project is $269,765.
12:09pm Jul 31 at 12:09pm
Imagine you are a representative of management in the company you have selected for your Week 6 Assignment and you must make a capital budgeting decision. The decision is to implement a new computer network system to decrease the time between customer order and delivery. The cost will be 10% of last year’s profits. You are charged with describing the important considerations in the decision-making process to upper management. In your response, be sure to include the following:
A description of the important factors, in addition to quantitative factors, that were considered when making this capital budgeting decision. A summary of how you will determine the criteria to rank capital budgeting decisions and whether some criteria are more important than others.
An important process when making investment decisions on projects is ranking the projects based off the information gathered from rates of returns. The ratio given determines how attractive the investment is, the higher the ratio the better. There are four capital investment evaluation methods: net present value method (NPV), internal rate of return method (IRR), payback period method, accounting rate of return method. According to Schneider (2017) net present value and internal rate of return utilize the time value of money. Another important process when making investment decisions on the network is ranking possible decisions based off the information gathered from formulas. I believe the best method of ranking is the profitability index, which divides present value of net cash inflow by net initial investment. The ratio given determines how attractive the investment is, the higher the ratio the better. Commonly in my organization we use the wording of “return on investment” (ROI), which is gain from investment - cost investment/cost of investment. Therefore, to move forward with my investment, it must make financial sense for Walmart.
An explanation of how these factors are significant to the company.
Capital budgeting is an important intricate process for organizations. A project or decision needs to show relevance (why is it needed), cost, risk, operational impact (if we do or don’t), how does project fit in with long term goals of organization. Just because a project is relevant and could move forward does not mean the investment will be approved. Large organizations have multiple projects requested and only a certain amount of capital for spending. For approval the relevance and organization impact must be relevant above others being proposed.
A calculation of the proposed return on investment based on criteria you select and justification for that ROI.
3 years of cash flows
Year Cash Flow (A)
0 (667,000) Up front Investment
1 275,000
2 275,000 NPV IRR
3 275,000
Discount rate is: 8% $41,701.67 Solution 11.43%
Byrd, J., Hickman, K., & McPherson, M. (2013). Managerial Finance [Electronic version]. Retrieved from
https://content.ashford.edu/(Links to an external site.)
Schneider, A. (2017). Managerial Accounting: Decision making for the service and manufacturing sectors (2nd ed.) [Electronic version]. Retrieved from
https://content.ashford.edu/