1. The equipment has a delivered cost of $205,000. An additional $4,000 is required to install and test the new system.

2. The new pumping system is classified by the IRS as 5-year property, although it has an 8-year estimated service life. For assets classified by the IRS as 5-year property, the Modified Accelerated Cost Recovery System (MACRS) permits the company to depreciate the asset over 6 years at the following rates: Year 1 = 20 percent, Year 2 = 32 percent, Year 3 = 19 percent, Year 4 = 12 percent, Year 5 = 11 percent, Year 6 = 6 percent. At the end of 8 years, the salvage value is expected to be around 5 percent of the original purchase price, so the best estimate of salvage value at the end of the equipment’s service life is $5,300, with removal costs of $1,200.

3. The existing pumping system was purchased at $45,000 eight years ago and has been depreciated on a straight-line basis over its economic life of 10 years. If the existing system is removed from the well and crated for pickup, it can be sold for $3,500 before tax. It will cost $1,000 to remove the system and crate it.

4. At the time of replacement, the firm will need to increase its net working capital requirements by $4,500 to support inventories.

5. The new pumping system offers lower maintenance costs and frees personnel who would otherwise have to monitor the system. In addition, it reduces product wastage because of a higher cooling efficiency. In total, it is estimated that the yearly savings will amount to $25,000 if the new pumping system is used.

6. The firm has its target debt ratio of 30 percent, and its cost of new debt is 10 percent. Its expected dividend per share next year, D1, is $2.00 with a future growth rate of 6 percent per year. The firm’s current stock price, P0, is $40.00. The firm uses its overall weighted average cost of capital in evaluating average risk projects, and the replacement project is perceived to be of average risk.

7. The firm’s federal-plus-state tax rate is 30 percent, and this rate is projected to remain fairly constant into the future.

QUESTIONS (Please show all your work either through Excel formulas/equations on the Cash Flow Estimation Worksheet or in separate tables at the bottom of your spreadsheet)

1. Compute the firm’s weighted average cost of capital given the info/data in the case. What other approaches/methods can be used to measure the firm’s cost of equity and thus its WACC? To that end, what additional info/data would you need? (Hint: A firm’s weighted average cost of capital is equal to ???????? = ????????(????????)(1 – t) + ????????????????, where ???????? and ???????? are the weights of debt and equity in the capital structure; ???????? and ???????? are the respective costs of debt and equity; and t is the corporate tax rate; Do no round up your WACC figure.)

2. Develop a capital budgeting schedule using the attached Cash Flow Estimation Worksheet (Excel spreadsheet) that should list all relevant cash flow items and amounts related to the replacement project over the 8-year expected life of the new pumping system.

3. Based on the capital budgeting schedule, evaluate the replacement project by computing NV, IRR, MIRR, and Payback Period. Would you recommend to accept or reject the replacement project based solely on your DCF analysis so far?

4. Before you make the final accept/reject decision, what other factors and approaches would you consider further? Discuss also how to PRACTICALLY take into account those factors and approaches in the capital budgeting decision process, whenever applicable

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"

Developing Strategic KPIs Assignment: The Key to Successful Marketing Metrics

MSM Program 2020

For strong, successful marketing, you need to connect your goals with the outcomes of various marketing activities so that you can measure your degree of success on a regular basis. To accomplish this, you need to design measurable objectives and specific key performance indicators (KPIs) that will help you to (1) stay on track with your marketing plans and (2) inform you if you are achieving your goals in the timeframe you desire.

Assignment – Part A – Developing KPIs

For a company in your area of expertise or interest (it could be your current employer), consider several business/marketing needs, problems, and/or pain-points. (NOTE: The scenario for this assignment cannot be associated to your Marketing Plan assignment.) Develop a set of interconnected goals, objectives, and KPIs that will help the company achieve success. Specifically, please deliver the following:

· Write a short description (1-2 paragraphs) of the industry, the company, and some pertinent marketing needs, problems, and/or pain-points.

· List and explain 2 or more higher-level conceptual goals (and how the achievement of these goals would help the company be successful). To mirror what we often find in the marketplace, these goals should be somewhat ambiguous.

· List and detail 2 or more SMART objectives for each goal that help to define that goal.

· List and detail 2 or more KPIs for each objective that you list (some KPIs may be direct measurements and others may be indirect measurements).

· Create a visual that illustrates how the KPIs, objectives, and goals are interrelated.

· Create a timeline (weekly for 2 months; monthly or quarterly for 12 months) showing periodic performance expectations for each objective and KPI, as well as when particular KPIs will be measured, observed, and assessed. (Consider whether and how your KPIs need to change each period to meet the final objectives.)

Assignment – Part B – Testing KPI Integrity

One potential problem with “managing by KPIs” is that some KPIs can be manipulated in a way that KPI targets are achieved even though the ultimate objectives and goals are not. Consider all of your KPIs, objectives, and goals and then come up with at least one scenario in which employees or outsourced staff could reach a particular KPI target in a way that does not reach the objectives and/or goals. Write a several paragraphs explaining how this could occur and what you might be able to do to prevent it.

Assignment – Part C – Reflection Questions

Answer each of the following questions in a separate paragraph and use numbers or headings to identify them.

1. How did the exercise of connecting KPIs to objectives, objectives to goals, and goals to success influence how you think about marketing planning?

2. How would you determine the balance between measuring a multitude of performance details versus allowing your management teams to have flexibility in reaching objectives and goals?

3. How can this exercise help you with reaching your own personal and professional goals? (Give at least two detailed examples.)

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"