Week 7 - Assignment: Evaluate a Capital Budgeting Case Study Week 7 - Assignment: Evaluate a Capital Budgeting Case Study InstructionsPart I:One duty of a financial manager is to choose investments with satisfactory cash flows and rates of return. Therefore, a financial manager must be able to decide whether an investment is worth undertaking and be able to choose intelligently between two or more alternatives. To do this, a sound procedure to evaluate, compare, and select projects is needed. This procedure is called capital budgeting.Virtually all general managers face capital-budgeting decisions in the course of their careers. The most common of these is the simple “yes” versus “no” choice about a capital investment. Regardless of the type of project, however, certain principles of capital budgeting should always be considered. The most important of these principles are:Focus on cash flows, not profits.Focus on incremental cash flows.Account for time.Account for risk.Write an essay discussing the meaning and importance of each of these principles as they apply to capital budgeting. Evaluate the importance of each principle and discuss the consequences of ignoring any of these principles.You must use a minimum of 3 scholarly sources to support your discussion.Part II:A private school is considering the purchase of six school buses to transport students to and from school events. The initial cost of the buses is $600,000. The life of each bus is estimated to be five years, after which time the vehicles would have to be scrapped with no salvage value. The school’s management team has derived the following estimates for annual revenues and cost for the next five years.Year 1Year 2Year 3Year 4Year 5Revenues$330,000$330,000$350,000$380,000$400,000Driver costs$33,000$35,000$36,000$38,000$40,000Repairs & maintenance$8,000$13,000$15,000$16,000$18,000Other costs$130,000$135,000$140,000$136,000$142,000Annual depreciation$120,000$120,000$120,000$120,000$120,000The buses would be purchased at the beginning of the project (i.e., in Year 0) and all revenues and expenditures shown in the table above would be incurred at the end of each relevant year.Because schools are exempt from taxes, the school’s corporate tax rate is 0 percent. A business consultant has advised management that they should use a weighted average cost of capital (WACC) of 10.5 percent to evaluate this project.Prepare a table showing the estimated net cash flows for each year of the project. Explain all steps involved in your calculation of the Year 1 estimated net cash flow.Calculate the project’s Payback Period. Explain in your own words, all steps involved in the calculation process.Calculate the project’s Internal Rate of Return (IRR). Explain in your own words, all steps involved in the calculation process.Calculate the project’s Net Present Value (NPV). Explain in your own words, all steps involved in the calculation process.Which is the three evaluation techniques that you computed (i.e., payback period, IRR and NPV), should the firm use to make its decision of whether or not to accept this project? Why? Is one of these techniques better than the others and if so, why?Finally, what are some risk factors inherent in this capital budgeting analysis? That is, make a list of at least three items that could cause the outcome of this project to be substantially worse than management currently expects (as reflected in their revenue and cost estimates, WACC estimate, etc.). Fully explain each of the risk factors you identify.Length: 4-5 pages not including title page and referencesYour response should demonstrate thoughtful consideration of the ideas and concepts presented in the course and provide new thoughts and insights relating directly to this topic. Your response should reflect scholarly writing and current APA standards.Websites to visit for help with Assignments: http://accountingexplained.com/managerial/capital-... http://study.com/academy/lesson/how-to-calculate-p...

Case 2: Having completed your case analysis on your first hospitality company now choose a hospitality company in another sector of the industry that you are interested in but have not previously explored. Note: no duplication of company choices are permitted within your Cohort Group. In other words, everyone in your group MUST choose a different company. This includes all choices from the first case study as well.Case Study Analysis is the practical application of the strategic management process. Working on case studies provides a structure to develop and practice the research and analytic skills you will use in business. A comprehensive and thorough analysis should include, but not be limited to the following: the company's mission/vision, internal strengths and weaknesses (including financial and stock market analysis), a description of elements in the external environment (opportunities and threats), a problem and possible solutions for this problem. For more information on case study analysis, review the following:What is Case Study Analysis?Writing a Case Study AnalysisSome suggestions before you begin: Be practical - make reasonable assumptions and supplement the information you find in the case with additional research.Be realistic - recognize that there is never one single best solution, so justify your recommendations. Consider what will best benefit the company.Be specific - avoid generalities, use numbers and exact data when possible.Be original - make logical managerial decisions and assessments.Case Study Analysis FormatSection One – BackgroundBriefly state the salient facts of the case in narrative form – include history and pertinent background information. Be concise and precise. Approximately 1 page. 10 points.Section Two – Problem StatementBriefly state the central problem in narrative form, and then list the symptoms of the problem. Approximately 1 page. 10 points.Section Three – SWOT AnalysisBullet and list in rank order - the strengths, weaknesses, opportunities and threats relating to the case. Label the bullets using the information in the text and related Power Points. Four lists with a minimum of 4 points in each. 20 points.Section Four – Financial AnalysisGenerate a minimum of 2 financial ratios to assess the financial performance of the company. For each ratio provide:ratio name, ratio definition, report the ratio result (product) of the most recent 2 years, report whether or not the findings for this ratio are poor, satisfactory or excellent. Explain. 10 points.Section Five – Alternative SolutionsList a minimum of 3 alternative solutions. Assign a strategy name to each solution (see: illustrations in Weeks 3-6). Include at least 3 benefits and consequences (pros/cons) for each potential solution. Note – “do nothing” is NOT a solution! 1-2 pages. 25 points.Section Six – Conclusion and Recommendations Out of the proposed solutions, choose one that you believe is best. Explain. Design an action plan for the solution. Explain how it would solve the original problem within the case. 1-2 pages. 25 points.Helpful Hints (How to Get an A)All work must be word processed.All work must be error free.All work must be on time.Content and style are BOTH important.Label each section.Include a title page, table of contents, reference page, etc.Give credit where it is due.

Parables are written to illustrate principles or to ask timeless questions. In writing up the Parable of the Sadhu, it is not a case study, but a short paper which should answer three questions: What does the mountain represent?What does the Sadhu represent?What is the life principle or timeless question in the parable?