Objective: Students demonstrate ability to

1. Utilize several capital budgeting concepts. 2. Complete required calculations. 3. Present oral recommendation to senior management based on resulting data.

Scenario: HW Enterprises is considering building a new warehouse or expanding overseas. Cost will be $20,000 million for building a new warehouse. Cost to expand overseas is $18,500. Discount rate for both projects is 9%.

Cash inflows for each options are below. Shown in millions:

Year	Option A: New Warehouse	Option B: Expand Overseas
1	$ 5,750	$ 2,000
2	7,250	6,000
3	8,500	12,000
4	10,000	12,000

Directions: Utilizing cell references and formulas, use the data in the Excel file provided to prepare

A. Calculations use the tabs provided for details of calculations move final values to summary tab using cell references.

1. Payback period calculation. Textbook page 384 has example. You need to use Excel to make your calculations.

2. Net Present Value work the process step-by-step then utilize the NPV formula under the Formulas, Financials, tab. *See Table 12.4 in text page 386 for example.

Note: you will be calculating the NPV using the two methods shown on Table 12.4. Assume 9% as discount rate.

3. Internal Rate of Return and Modified Internal Rate of Return utilize the IRR and MIRR formulas under the Formulas, Financial, tab in Excel. *See Table 12.5 in text page 388 for example. Assume 2% as the reinvestment rate.

B. Prepare written report of your teams recommendation to senior management of HW Enterprise. Be ready to discuss recommendation in class.

1. State how circumstances have changed related to the baseline case. Describe how that changed the results and why.

2. Recommend a course of action to senior management.

3. Support your recommendation with facts based on your Excel calculations. Refer to computations in Excel file provided as attachment.

4. Close statement by re-stating recommendation.