Week 5: Capital Budgeting The famous economist, John Maynard Keynes, commented, “In the long run, we are all dead.” In other words, it is neither prudent nor recommended to plan too much long-term, because it is beyond human control to a large extent. How

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Week 5: Capital Budgeting

The famous economist, John Maynard Keynes, commented, “In the long run, we are all dead.” In other words, it is neither prudent nor recommended to plan too much long-term, because it is beyond human control to a large extent. However, from the corporate finance point of view, you still often have to consider reasonably long-term implications of investment decisions. As a manager or an executive, you want to make sure that your organization not only makes a profit, but also is profitable in a sustainable manner.

Consider the scenarios below:

  1. Your company is not performing well during the operating year and you anticipate lowered profit and maybe even incurring losses at the end of the financial year. However, the top management wants to show higher profits. Therefore, the financial management team decides to sell some fixed assets in order to increase the revenue and thus increase the profit margin. Your management has met the goal of high profit for the current financial year. However, selling the fixed assets to achieve profit may prove detrimental in the coming years.
  2. Your company is planning to go through a major growth as well as a restructuring phase and needs a lot of money for that. As the chief financial officer (CFO), you have been asked to lead a team that will decide how to raise the money from the market. You have various options to raise the money. How do you decide which option to pursue?

This week, you start exploring capital budgeting. You examine various capital budgeting methods. You also conduct financial analysis of an organization and make recommendation that involves capital budgeting.

Learning Objectives

Students will:
  • Evaluate capital budgeting methods
  • Analyze the effect of depreciation on the net income and cash flows of a company
  • Analyze the strengths, weaknesses, opportunities, and threats facing an organization
  • Recommend financial strategies for an organization
  • Identify concepts of capital budgeting relevant to project feasibility
Photo Credit: [Nikada]/[E+]/Getty Images

Learning Resources

Required Readings

Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2017). Essentials of corporate finance (9th ed.). New York, NY: McGraw-Hill Irwin.
  • Chapter 8, “Net Present Value and Other Investment Criteria” (pp. 236-228)
  • Chapter 9, “Making Capital Investment Decisions” (pp. 274-301)
University of Kansas. (2013). Chapter 3, Section 14: SWOT analysis: Strengths, weaknesses, opportunities, and threats. Retrieved from http://ctb.ku.edu/en/table-of-contents/assessment/...
Document: Week 5 Discussion Template (Word document)
Document: Final Paper Template (PDF)

Required Media

Laureate Education (Producer). (2014c). Net present value tutorial. [Video file]. Baltimore, MD: Author.
Note: The approximate length of this media piece is 5 minutes.

Optional Resources

Ward. S. (2014a). How to do SWOT analysis for your business. Retrieved from http://sbinfocanada.about.com/od/businessplanning/...
Ward, S. (2014b). SWOT example. Retrieved from http://sbinfocanada.about.com/od/businessplanning/...

Discussion: Capital Budgeting

Understanding the most common capital budgeting techniques (i.e. NPV, IRR, Payback Period, etc.) is very important for investors and analysts alike. These methods provide a quantifiable value for various projects and investments.

For this Discussion, consider the various capital budgeting methods. Also, consider which capital method you think to be superior to others and why. Finally, consider the effects that depreciation has on net income and cash flow of a company.

By Day 3

Post a 150- to 200-word explanation of one of the capital budgeting methods (NPV, IRR, etc.) that are used to examine potential investments. Explain some of its advantages and disadvantages. Also, explain which capital budgeting method is superior and why. Finally, explain the effects that depreciation has on net income and cash flow of a company.

Be sure to support your work with specific citations from the Learning Resources and any additional sources.

Read a selection of your colleagues' postings.

By Day 6

Response to two or more of your colleagues' postings in one or more of the following ways:

  • Ask a probing question.
  • Share an insight from having read your colleague's posting.
  • Offer and support an opinion.
  • Validate an idea with your own experience.
  • Make a suggestion.
  • Expand on your colleague's posting.

Return to this Discussion in a few days to read the responses to your initial posting. Note what you learned and the insights you gained as a result of your colleagues' comments.

Note: Refer to the Discussion Template in this week’s Learning Resources for your main post and response.

Submission and Grading Information

Grading Criteria
To access your rubric:
Week 5 Discussion Rubric
Post by Day 3 and Respond by Day 6
To participate in this Discussion:
Week 5 Discussion

Assignment:
Final Paper: Financial Analysis of an Organization and Recommendations

Thus far, in the learning activities of this course, you have addressed various concepts and principles of financial management. However, one important criterion for consummating knowledge in any domain is to be able to integrate the learning. This Final Project is an ideal exercise to demonstrate your ability to integrate the knowledge you have attained thus far in this course.

For the Final Paper, select a publicly traded company. Be sure that it is large enough so it contains a lot of easily found financial information. Using the financial information you find, you will develop a report that analyzes the company’s current finances and makes recommendations for the future.

By Day 7

Submit your completed Final Paper. Your Final Paper should be 2,000–2,500 words and follow the Final Paper Template found in this week’s Learning Resources. It should contain the following elements:

  • Executive Summary (250 words)
  • SWOT Analysis (250 words): Use sources such as Yahoo Finance, company annual reports, and other financial sources to develop your SWOT Analysis.
  • Recommendations and Justifications (1,250 words)
  • Concluding Thoughts (250 words): Your concluding thoughts on the future of your chosen company.
Note: See the Final Paper area of the course navigation menu for a detailed explanation of the all the requirements for the Final Paper.

Submission and Grading Information

To submit your completed Assignment for review and grading, do the following:

  • Please save your Assignment using the naming convention “WK5Assgn+last name+first initial.(extension)” as the name.
  • Click the Week 5 Assignment Rubric to review the Grading Criteria for the Assignment.
  • Click the Week 5 Assignment link. You will also be able to “View Rubric” for grading criteria from this area.
  • Next, from the Attach File area, click on the Browse My Computer button. Find the document you saved as “WK5Assgn+last name+first initial.(extension)” and click Open.
  • If applicable: From the Plagiarism Tools area, click the checkbox for I agree to submit my paper(s) to the Global Reference Database.
  • Click on the Submit button to complete your submission.
Grading Criteria
To access your rubric:
Week 5 Assignment Rubric
Check Your Assignment Draft for Authenticity
To check your Assignment draft for authenticity:
Submit your Week 5 Assignment draft and review the originality report.
Submit Your Assignment by Day 7
To submit your Assignment:
Week 5 Assignment


Unformatted Attachment Preview

Week 2 Financial Statements Template Income statement 2015 Sales Net Income Balance sheet as of Dec. 31, 2015 Cash Total Assets Balance sheet as of Dec. 31, 2016 Total Assets Operating Cash Flow for 2015 = Operating Cash Flow for 2016 = tatements Template 2016 heet as of Dec. 31, 2015 Total Liabilities & Equity heet as of Dec. 31, 2016 Total Liabilities & Equity
Purchase answer to see full attachment
Tags: john maynard keynes irr weaknesses opportunities S. A. payback period Westerfield & Jordan from the Attach File area R. W. B. D. (2017). Essentials of corporate finance (9th ed.). New York Week 5: Capital Budgeting The famous economist commented “In the long run we are all dead.” In other words it is neither prudent nor recommended to plan too much long-term because it is beyond human control to a large extent. However from the corporate finance point of view you still often have to consider reasonably long-term implications of investment decisions. As a manager or an executive you want to make sure that your organization not only makes a profit but also is profitable in a sustainable manner. Consider the scenarios below: Your company is not performing well during the operating year and you the top management wants to show higher profits. Therefore the financial management team decides to sell some fixed assets in order to increase the revenue and thus increase the profit margin. Your management selling the fixed assets to achieve profit may prove detrimental in the coming years. Your company is planning to go through a major growth as well as you have been asked to lead a team that will decide how to raise the money from the market. You have various options to raise the money. How do you de you start exploring capital budgeting. You examine various capital budgeting methods. You also conduct financial analysis of an organization and make and threats facing an organization Recommend financial strategies for an organization Identify concepts of capital budgeting relevant to project feasi NY: McGraw-Hill Irwin. Chapter 8 “Net Present Value and Other Investment Criteria” (pp. 236-228) Chapter 9 “Making Capital Investment Decisions” (pp. 274-301) University of Kansas. (2013). Chapter 3 Section 14: SWOT analysis: Strengths and threats. Retrieved from http://ctb.ku.edu/en/table-of-contents/assessment/assessing-community-needs-and-resources/swot-analysis/main Document: W MD: Author. Note: The approximate length of this media piece is 5 minutes. Accessible player Optional Resources Ward. S. (2014a). How to S. (2014b). SWOT example. Retrieved from http://sbinfocanada.about.com/od/businessplanning/a/Swot-Example.htm Discussion: Capital Budgeting Understan etc.) is very important for investors and analysts alike. These methods provide a quantifiable value for various projects and investments. For this D consider the various capital budgeting methods. Also consider which capital method you think to be superior to others and why. Finally consider the effects that depreciation has on net income and cash flow of a company. By Day 3 Post a 150- to 200-word explanation of one of the capit etc.) that are used to examine potential investments. Explain some of its advantages and disadvantages. Also explain which capital budgeting method is superior and why. Finally explain the effects that depreciation has on net income and cash flow of a company. Be sure to support your work with specific citations from the Lea in the learning activities of this course you have addressed various concepts and principles of financial management. However one important criterion for consummating knowledge in any domain is to be able to integrate the learning. This Final Project is an ideal exercise to d select a publicly traded company. Be sure that it is large enough so it contains a lot of easily found financial information. Using the financial info you will develop a report that analyzes the company’s current finances and makes recommendations for the future. By Day 7 Submit your completed Final 000–2 500 words and follow the Final Paper Template found in this week’s Learning Resources. It should contain the following elements: Executive Summary (2 company annual reports and other financial sources to develop your SWOT Analysis. Recommendations and Justifications (1 250 words) Concluding Thoughts (250 words): Your concluding thoughts on the future of your chosen company. Note: See the Final Paper area of the cours do the following: Please save your Assignment using the naming convention “WK5Assgn+last name+first initial.(extension)” as the name. Click the Week click on the Browse My Computer button. Find the document you saved as “WK5Assgn+last name+first initial.(extension)” and click Open. If applicable: F
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Explanation & Answer

Attached.

FINAL PAPER: FINANCIAL ANALYSIS AND RECOMMENDATION OF A COMPANY

Financial Analysis and Recommendation Of A Company
Institutional Affiliation
Date

1

FINANCIAL ANALYSIS AND RECOMMENDATION OF A COMPANY

2

TABLE OF CONTENT
EXECUTIVE SUMMARY ............................................................................................................3
SWOT ANALYSIS........................................................................................................................ 4
RECOMMENDATIONS AND JUSTIFICATIONS...................................................................... 6
CONCLUDING THOUGHTS…………………………………………………………………...10
REFERENCES…………………………………………………………………………………..11

FINANCIAL ANALYSIS AND RECOMMENDATION OF A COMPANY

3

EXECUTIVE SUMMARY
Coca-cola company holds a decade of reputational competencies in its line of business
operation currently operating as a global multinational competitor. The distinct and interactional
scope of its management breeds healthy business stream and plans that persuades other
competitors to join the partnership or act as a subcontractor to distribute its product. Outstanding
history makes it an iconic beverage company globally making huge profitable returns in sets of
its quarterly financial statements. Significant, reinvestment into the diverse business venture and
dividend payment in great expanse define its stable financial reservoir. Similarly, streamlined
policies have bridged financial gaps particular to litigation measures that drain it financially
creating a fluctuating market share which operates at a minimum of $ 76 per share (Selmi, 2002)
The advent of technology puts Coca-Cola at the favorable mainstream of supplying new
product related to its key products of beverages. Series of products shelved into the market
through offers and advertisement, resulted in the best scale of optimal profitable margin in its
quarter rising to 15% of incorporated production. However slow and stagnant market shares, the
optimal scope of good return in future provide expansion space related to outsourcing some of
the services reducing financial burden and liability (Atesci, 2010).

FINANCIAL ANALYSIS AND RECOMMENDATION OF A COMPANY

4

COCA-COLA SWOT ANALYSIS
Strengths in the SWOT analysis of coca cola
In the edge to maintain industrial brands in demand, there is possibly inevitable outcomes
that can either sink companies or act as best wager for them to muscle their way up. Its
undisputed fact that technology is fast pacing globally, compelling companies hid social listening
with an aspiration to give their clientele a long-lasting sense of occasion for brands and services
(Chong 2004). Coca-Cola company investment into brand equity makes it create an appealing
identity towards its market clientele. However, this has presented a challenge to management,
with a feeling that consumers will get accustomed to their products and would wish to change
brand. Intense research and advertisements help create a rebranding texture unique to the
customer making them eager to experience refreshing quench their thirst (Devlin et al., 2006)
Company valuation creates an attractive investment pool especially for potential investors
interested in its key industrial competence.Currently, Coca-cola allures value of approximately
69.2 billion dollars brought about by its expensive brand identity, high returns from its outlets
and asset shelves (Batra & Homer, 2004). Furthermore, based on this amount of asset and
resources it has created a wide clientele base with the only Pepsis as the rival company. Cocacola is market giant based on the series of the brands it annually introduces to the market ranging
from the Sprite, Diet, Coke, Maaza, Fanta amidst o...


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