Define Important Stakeholders and Assess Capital Budgeting Problems – Expansionary Project
Assess the relevant cash flows used to form a capital budgeting decision model. For this assignment, focus on an expansionary problem.
Evaluate the cost of capital for use in a capital budgeting decision model. Make sure to define each component of the formula. Explain how the resulting cost of capital is used within a capital budgeting model. How can the Capital Asset Pricing Model contribute to this analysis? Explain.
Weigh each of the following decision metrics that can be used within a capital budgeting decision model: net present value, internal rate of return, modified internal rate of return, payback period, and discounted payback period.
Explain how each metric is formed and discuss the critical value of each when forming conclusions within a capital budgeting decision model. Discuss which method has the strongest basis for being used and under which conditions each might be the preferred method.
Develop a capital budgeting decision model that displays cash flows, cost of capital, and decision metrics Then, form a conclusion based upon the analysis. What are some problems with the payback period? Is NPV better than IRR? Develop your analysis within an Excel spreadsheet-based on this information:
Assume for a project a company’s units sold are 3,500,000 in the year 2019, and they are projected to grow each subsequent year at 5% until the end of the project in year 2023.
