Assignment -
1. Download the Capital Budgeting spreadsheet, and compute the WACC for Genesis Energy.
2. Using the information provided in the spreadsheet, analyze Genesis Energy's project options. Then, calculate the periodic and cumulative net cash flows for each potential project and its associated options. Please note that there are five projects (facility, equipment pieces 1, 2, and 3, and internal inspection), and that each project offers multiple-configuration options (facility size, equipment type, etc.).
3. Evaluate, rank, and recommend a specific option for each capital project according to beneficial value to the organization, using the evaluation tools NPV, payback, and IRR.
4. Identify the full cost of the facility.
Some additional notes to consider for the calculations:
Looking at the spreadsheet, A/P is 300,000 which is 7.5% of the 4,000,000 total. Let's assume 8% for the A/P interest rate (short term loan rate taken from an earlier module for this project). Then, the weight that this A/P carries (weighted rate, column e) would be 7.5% of the 8% which is .60%. Similar calculations would complete the column.
Additionally, you will want to review other needed rates: Available short-term annual interest rate is 8 percent, long-term debt rate is 9 percent, and long-term equity is 10 percent. All funds would be available the first month when the firm encounters a deficit.
Essentially, column e is a breakdown of the WACC calculations. The column is designed to help you walk through the steps. The WACC would have been easier calculated without the column and
There has been confusion about the line in the directions referring to 5 projects. As you see on the spreadsheet, there are only projects a, b, and c which is 3. The five projects come about by counting project facility choice, equip 1, equip 2, equip 3, and inspection. It is poorly worded in that regard.
The amounts on the spreadsheet are cash flows in/out. Outflows are negative.
The amounts for equipment and inspection are their own and not included in the projects a, b, and c facilities. You will need to select these. See step 4 of the directions ("Using the selected choices in part three, calculate the full cost of establishing a fully equipped facility. This would include the facility, equipment 1, 2, and 3, and inspection. In addition, calculate the payback, NPV, and IRR for the completed facility.") -- You need to choose: one overall project choice comprised of: a, b, or c; one equipment 1 type; one equipment 2 type; one equipment 3 type; and one inspection type. This is five items together. As you see, there are many options and configurations within.
Attachment:- Assignment Files.rar