Calculating the cost of a project is fundamental to helping a company decide which project it is to invest in. Research a publicly held company of your choice, and access the company’s Web page on the Internet to read its most recent annual report.
The annual report is typically found in an “Investor Relations” or “Company Information” section within the company’s Web site. If the company does not provide a full annual report, select another company for your project. Verify that the full annual report includes the following: A letter or report to shareholders from the president of the company A section providing management’s discussion and analysis of the business A report from the auditor The company’s financial statements Supplemental notes to the financial statements Once you have found a full annual report, complete each part of the assignment.
Part 1 Deliverable length: 500–700 words
Explain your rationale in choosing this company. Use the annual report to show data that supports your decision that this is a sound investment.
Part 2 Deliverable length: 800–1,000 words
Using the annual report of the company chosen, complete the following: Determine at least 1 long-term goal based on the managers’ discussion report of the company’s annual report or financial statements. Describe why you think this is a long-term goal of the company. From the long-term goal, determine a potential project that would help the company achieve its long-term goal. Explain your answer.
Research the potential cost associated with the project. Explain your answer. Generate a risk-adjusted discount rate based on the company. Show your work, and explain your answer. Use the risk-adjusted discount rate to discount the cost of the chosen project. Show your work, and explain your answer.
Part 3 Deliverable length: 1,000–1,200 words
Understanding that the entire process of cash flow analysis is essential for putting together a capital budget, complete the following: Identify the sunk costs associated with the project. Explain your answer.
Identify the opportunity costs associated with the project. Explain your answer.
Identify the initial cash layout for the project. Explain your answer.
Project future cash flows for the project. Show your work.
Explain the cash flow payout assumptions. Calculate the project’s net present value using the company’s risk-adjusted rate. Show your work.
Calculate the payback period of the project. Show your work.
Calculate the internal rate of return. Show your work.
Do the 3 tools signal a “yes” or “no” decision for the project?
If there is a discrepancy among the tools, why does this discrepancy exist? Explain your answer.
Should the company accept the project? Explain your answer.