Assignment Content

Page $1$ of $2$

NOTE: For this project you must submit documents supporting your answers in the submission section $-$ showing step$-$by$-$step how you reached your answers. You can use excel to find the IRR only. Everything else must be shown as a calculation.

Module $4$ Assignment

You, as the project manager, have been asked to recommend which project your company should move forward with. Your company has a total of $$350,000$ in debt at $5\%$ interest and $$400,000$ in equity at $12\%$ rate of return.

Project $1$ is to build a medium$-$sized garage for a client over three years. The client will pay $$10,000$ as a deposit immediately, $$40,000$ the year after and $$85,000$ in the final year. Your company has a small loan of $$10,000$ with $5\%$ interest to go towards this project that must be paid back in the end. $$50,000$ of materials will be bought all at once in the first year. As well as a piece of equipment that requires a $$10,500$ down payment and yearly payments of $$1500$ following. Labor for the project is $$15,000$ immediately and $$6000$ per year after. Administration costs including taxes are $$4000$ for set up and $$1000$ per year after.

Project $2$ is the purchase and installation of a new piece of equipment for your company with a life span of $3$ years. The equipment costs $$50,000$ up front and $$9,000$ to run in the following years. You have the same sources of funding $($loan and investor's equity$)$ and administration costs as project $1.$ The equipment will save your company $$25,000$ beginning the year after installation and has a salvage value of $$12,000$ at the end of its lifespan.

Question $1$

Organize a cashflow forecast for each project beginning at time $0.$ Make sure to include the net income for each year.

$\backslash$table$[[$Project $1,$Year $0,$Year $1,$Year $2,],[$Beginning cash,,,,$],[$Cash Receipts$],[$Client Payments,$Blank $1,$$Blank $2,$$Blank $3,],[$Investor Proceeds$],[$Other$,$$Blank $4,,,],[$Total$,$$Blank $5,$$Blank $6,$$Blank $7,],[$Cash Payments$],[$Materials$,$$Blank $8,,,],[\backslash$table$[[$Down and monthly$],[$payments for$],[$equipment$]],$$Blank $9,$$Blank $10,$$Blank $11,$I$],[$Labor Salary,$Blank $12,$$ Blank $13,$$Blank $14,],[$other$,$$Blank $15,$$Blank $16,$$Blank $17,],[$Total$,$$Blank $18,$$Blank $19,$$Blank $20,],[$Net$,$$Blank $21,$$Blank $22,$$Blank $23,]]$

$\backslash$table$[[$Project $2,$Year $0,$Year $1,$Year $2,$Year $3],[$Beginning cash,,,,$],[$Cash Receipts$],[$Savings $($revenue$),,$$Blank $24,$$Blank $25,$$Blank $26],[$Investor Proceeds,,,,$],[$Other$,$$Blank $27,,,$$Blank $28],[$Total$,$$Blank $29,,,$$Blank $30],[$Cash Payments$],[$Materials$,$$Blank $31,$$Blank $32,$$Blank $33,$$Blank $34],[$other$,$$Blank $35,$$Blank $36,$$Blank $37,$$Blank $38],[$Total investment,$Blank $39,,,],[$Net$,$$Blank $40,$$Blank $41,$$Blank $42,$$Blank $43]]$