Course Title : Project cost accounting

Case 1 :

XYZ is a multinational manufacturing company that have investment in different countries. XYZ aiming to enter in a new market by initiating a new factory. The capital budget is limited to $200,000,000. XYZ is analyzing its capital expenditure proposals for improving the protability of the company through the new investment. The analyst team in XYZ, is preparing an analysis of the ve different proposals under consideration by Andrews, the CEO of the company. The risk manager estimated that the ination will be an average of 9% for the coming years. Table Q2 show the expected cash flow for the five proposals Table (11 Cash flow for different proposals -_-_ Capital investment 50000000 80000000 Expected cash flow S/year 35000000 3250000 Total annual expenses 5750000 4500000 3450000 6900000 8050000 Market value (end of useful life) 5000000 8000000 7000000 1100000 1000000 Useful life (Year) "\"1... Because the company's cash is limited, Andrews thinks the payback method should be considered as one of the decision methods. However, the company decided to use PW strategies in decision making. After a hot discussion in the executive board, they decided to evaluate each project from the three methods: Payback method, PW and the benet cost method Assumption 1. All cash ows occur at the end of the year except for initial investment amounts will be in the beginning of the year. 2. Use repeatability assumption for different useful life