Individual Project Rubric

Grading Criteria	Percentage
Deliverable requirements addressed; understanding of material and writer's message and intent are clear.	40%
Calculation methods, where required, are contextually appropriate, fully explained, and presented in a manner that is easy to understand.	10%
External research incorporated in the paper, if any, supports the writer's position and is properly acknowledged, and cited direct quotations may not exceed 10% of the word count of the body of the assignment deliverable (excluding title page, abstract, table of contents, tables, exhibits, appendices, and reference pages). Inclusion of plagiarized content will not be tolerated and may result in adverse academic consequences.	5%
Critical thinking: Position is well-justified, there is logical flow, and there are examples.	20%
Structure: Includes introduction and conclusion, proper paragraph format, and reads as a polished, academic paper or professional presentation, as appropriate for the required assignment deliverable.	10%
Mechanical: No spelling, grammatical, or punctuation errors.	10%
APA: Deliverable is cited properly according to the APA Publication Manual (6th ed.).	5%

Capital Expenditure Planning & Budgeting for Universal Parts Company Universal Parts Company - Estimated Cash Flows (CF) for Projects A & B (in thousands of dollars): CFA Year 0 1 2 3 CFB ($1,000) $100 $600 $800 ($1,000) Assumme that tax effects, depreciation, salvage $700 values, and all operating costs have been included in $500 the cash flows $200 Net Present Value (NPV) (1) Determine each project's NPV. WACC = Activity: Choose both projects if two projects are independent, and their NPVs are positive 10.00% Activity: Choose the project with the higher positive NPV if the two projects are mutually exclusive NPVA = NPVB = $187.83 $199.85 Internal Rate of Return (IRR) (1) Determine each project's IRR. The internal rate of return (IRR) is that discount rate which forces the NPV of a project to equal zero. n NPV $0 t 0 CFt (1 IRR ) t Activity: Double-click on the equation to find out how you can insert an equation. The solution to this equation can be found using Excel's IRR function. IRRA = Activity: Choose both projects if two projects are independent, and their 18.1% IRRs are higher than the WACC IRRB= Activity: Choose the project with the higher IRR in excess of WACC if the 23.6% projects are mutually exclusive Crossover Rate (1) Draw NPV profiles for Projects A and B. At what discount rate do the profiles cross? Project NPV Profiles WACC A NPV ($) $187.83 0% 12 Project A 5% 10 Crossover rate = 8.68% 10% 8 15% Project B 6 20% 4 25% 2 0 0% 5% 10%WACC 15% IRR = crossover rate = 20% 8.68% 25% Year 0 1 2 Project B $199.85 CFDifference $0 ($600) $100 3 $600 Modified Internal Rate of Return (MIRR) (1) Find the MIRRs for Projects A and B. Activity: MIRR is the internal rate of return for a series of a project's cash flows, taking into account the cost of investment and interest on reinvestment of cash. Activity: Projects A and B's modified IRRs can be solved for by using Excel's MIRR function, entering their cash flows and using the WACC as both the discount rate and the reinvestment rate. MIRRA = 16.5% By the MIRR criteria, Project B is preferred to Project A, which is MIRRB = 16.9% consistent with the NPV decision. Payback Period (1) Find the paybacks for Projects A and B. Payback Calculations Project A Years Cash Flow Cumulative Cash Flow Payback A = 2 + 300/800 = Project B Years 1 + 300/500 = 1 2 3 | -1,000 -1,000 | 100 -900 | 600 -300 | 800 500 0 1 2 3 | -1,000 -1,000 | 700 -300 | 500 200 | 200 400 2.4 Cash Flow Cumulative Cash Flow Payback B = 0 1.6 Type:Individual Project Unit: Introduction to Capital Planning Deliverable Length: 400 to 600 words, plus 1 Excel spreadsheet Assignment Objectives Explain risk management techniques on the CAPEX decision-making process. Evaluate the tools used in evaluating and prioritizing capital projects for decision making. Download the Excel file for this assignment. The director of finance has discovered an error in his WACC calculation. He did not factor in the tax rate when determining the cost of debt. UPC has a line of credit at 4% interest, and the company is taxed at 30%. Further, assume that UPC's required rate of return on equity is 14%, and its capital structure is 40% debt and 60% equity. Additionally, the budget committee question and answer session revealed that UPC has discovered a technology that will increase its product life span by 1 year. The new technology will add $120,000 and $130,000 to projects A and B's initial capital outlay, respectively. Further, the finance department has determined that cash flows for years 1, 2, and 3 will be unchanged. However, net cash flows for year 4 will be $300,000 and $150,000 for projects A and B, respectively. Using the attached Excel file, the UPC scenario, and the new information above, calculate the NPV, IRR, MIRR, and payback periods from projects A and B. You must input all of your data into an Excel spreadsheet and show all formulas. Using MS Word, explain any risk factors inherent in the budgeting for the 2 projects. Capital Expenditure Planning & Budgeting for Universal Parts Company Universal Parts Company - Estimated Cash Flows (CF) for Projects A & B (in thousands of dollars): CFA ($1,000) $100 $600 $800 Year 0 1 2 3 CFB ($1,000) Assumme that tax effects, depreciation, salvage $700 values, and all operating costs have been included in $500 the cash flows $200 Net Present Value (NPV) (1) Determine each project's NPV. WACC = Activity: Choose both projects if two projects are independent, and their NPVs are positive 10.00% Activity: Choose the project with the higher positive NPV if the two projects are mutually exclusive NPVA = NPVB = $187.83 $199.85 Internal Rate of Return (IRR) (1) Determine each project's IRR. The internal rate of return (IRR) is that discount rate which forces the NPV of a project to equal zero. n NPV $0 t 0 CFt (1 IRR ) t Activity: Double-click on the equation to find out how you can insert an equation. The solution to this equation can be found using Excel's IRR function. IRRA = Activity: Choose both projects if two projects are independent, and their 18.1% IRRs are higher than the WACC IRRB= Activity: Choose the project with the higher IRR in excess of WACC if the 23.6% projects are mutually exclusive Crossover Rate (1) Draw NPV profiles for Projects A and B. At what discount rate do the profiles cross? Project NPV Profiles WACC A NPV ($) $187.83 0% 12 5% Project A 10 10% Crossover rate = 8.68% 8 15% 6 Project B 20% 4 25% 2 0 0% 5% 10%WACC 15% IRR = crossover rate = 20% 8.68% 25% Year 0 1 2 3 Modified Internal Rate of Return (MIRR) (1) Find the MIRRs for Projects A and B. Activity: MIRR is the internal rate of return for a series of a project's cash flows, taking into account the cost of investment and interest on reinvestment of cash. Activity: Projects A and B's modified IRRs can be solved for by using Excel's MIRR function, entering their cash flows and using the WACC as both the discount rate and the reinvestment rate. MIRRA = 16.5% By the MIRR criteria, Project B is preferred to Project A, which is MIRRB = 16.9% consistent with the NPV decision. Payback Period (1) Find the paybacks for Projects A and B. Payback Calculations Project A Years Cash Flow Cumulative Cash Flow Payback A = 2 + 300/800 = Project B Years 1 + 300/500 = 1 | 100 -900 2 | 600 -300 3 | 800 500 1 | 700 -300 2 | 500 200 3 | 200 400 2.4 Cash Flow Cumulative Cash Flow Payback B = 0 | -1,000 -1,000 0 | -1,000 -1,000 1.6 arts Company housands of dollars): depreciation, salvage ts have been included in flows ndependent, and their ve NPV if the two project to equal zero. equation to find out how an equation. ndependent, and their excess of WACC if the Project B $199.85 CFDifference $0 ($600) $100 $600 s, taking into account the MIRR function, entering stment rate. red to Project A, which is decision