In summary of the information we have been studying in this course, the final project will evaluate and arrange projects in a four year forecast of capital spend to maximize value for an organization based on a predetermined rate of return and set of requirements for projects.

Please see an attached initial MS Excel draft of a four year capital spending plan. The first draft would request $586MM but you only have $489 million to spend over four years.

Parameters for revised capital spending plan:

1. You cannot spend less than $110MM per year nor more than $135MM per year.
2. You must also spend at least $6MM per year in expense projects (0% ROI) and a total of $28MM in expense projects in the four year term.
3. The T projects total project values $102MM; $157MM; $90MM and $44MM, respectively, cannot change. (NOTE this is correct - the syllabus description has incorrect values)
4. The T projects, with 25% ROI, only count in the YEAR THEY FINISH.
5. T projects cannot shift any no more than 25% of any one years dollars of planned T spend can shift one year in either direction forward or backward.
6. Every other project/line can be decreased on an annual or total basis, however you see fit.

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Shifting T example:

Planned spend = $36MM project,

SPEND PROFILE

2023: $ 6MM

2024: $30MM

Max that could move = 20% of total project: 20% * 36MM = $7.2MM

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From 2024: move $7.2MM to 2023 makes 2023 = $6+7.2=$13.2MM

From 2023: move $7.2MM to 2021

New Profile:

2022: $ 7.2MM

2023:$ 6.0 MM

2024: $22.8MM

NET IMPACT: NO change to $36MM in service in 2024 @ 25% ROI

NET IMPACT: Created ability to increase 2024 work in service by $7.2MM from other projects; reduced ability to put work in service in 2022 by $7.2MM

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Why would this be a consideration? $36MM is going into service in 2024 regardless of how much of the project funds are spent in 2024 moving money out allows other money to move into 2024 to increase the total return in 2024.

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Projects OTHER than T projects can mix their dollars across any year OR can be eliminated altogether, k.

Your goal is the maximize the rates of return on capital for the company in each year with an optimal mix the same total return each year regardless of capital spend.

Objectives:

1. Maximum total return without exceeding $489MM, hitting min. $28MM in expense spending
2. Same return per year
3. Same cash spend per year

Submission components:

1. Excel spreadsheet showing planned capital spend (86% of graded elements based on Objectives 1, 2,3, 4 above)

3-5 page paper explaining thought process and priorities in capital spending and lessons learned in capital spend forecasting and planning