The Finance Department requires an in-class valuation exercise using excel. As we don’t have normal lecture classes this is a take-home exercise. There was to be an excel exercise on personal finance, but I’d rather have Projects 2 and 3 focus on the more important logical issues of personal financial management than merely crunch more numbers. This exercise thus combines the course’s excel work in to one project worth 10% of the course grade.
Your Project 1 Creative Destruction analysis secured your position at Halliburton. It is now five years since you were hired and, given your abilities, your boss has asked you to develop an example of a corporate project that could be used to train junior managers in capital budgeting procedures.
Given your chosen industry, create a project that would add value to your company. Your project analysis should be supported by the following information.The nature of the project and how it would be expected to add value to your company.Determine whether the project will have an indefinite or finite time line.Specify the initial capital investment and additional additions to capital investment over the life of the project.Project the initial revenues and their growth rateDevelop the types and estimates of variable costs.Calculate the cost of capital using insights from Chapter 14.Assume straight-line depreciation and a tax rate of 21%
Use excel to calculate the projects NPV, IRR, and payback.
You will be evaluated on how well your project explains capital budgeting to the trainee junior managers. Major aspects of the evaluation are:Creativity and realistic nature of your project.Your development and explanation of the elements in the project,Your use of excel to develop the metrics and explain how you arrived at your accept/reject project decision.
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