PLEASE ANSWER THIS ASAP CORRECTLY

The NextGen project is an example of how the financial appraisal of an investment project is conducted at Cengage Learning. The NextGen drive incremental revenue or contribute toward revenue preservation. Instructions: Review the following stages of the financial appraisal process for this project and complete missing information as needed. Project Overview The innovation team proposed a digital learning platform that will create a personalized learning experience for each students a set of flexible tools that will allow students to customize the technology to suit their personal learning needs. The executive the value proposition offered by the NextGen project will be one of a kind in the digital learning space and give the company a first-mover a the finance team conducted the financial appraisal of the project to evaluate if and to what extent the project would incremental contribute toward revenue preservation. Relevant Cash Flows and Operations, Dikran Yapoujian, Vice President, Finance and other members of the finance-decision support team held a series of discussions excerpts from their discussions follow: We would need to immediately approve a capital allocation of $1.70 million to jump-start the project. In addition, we need to capitalize another $20.5 million almost equally for the next three years. These expenses in year of the project is unlikely to bring any additional revenues, but from second year, we should see reven $1. 800 million. Our preliminary estimates also show revenues growing to $9.700 million in year 2 , $19.300 million in year 3 , 22.800 million in year 4 , and $24.600 million in year 5. I am also attaching some information the team used for the cash flow valuation. See you later to go over the numbers. Cheers, Dikran Attachment: Data.x/s (Als dollar values in mimons) The analysts on the team created pro forma estimates of the expected cash flows that the project is likely to generate and also discussed some assumptions: - Revenue estimates are based on the expectation of a higher price point resulting from a more robust product. - Operating expenses include internal labor, maintenance, overhead expense, and cost avoidance from being able to ramp down spending on existing platforms. - The capitalized expenses include the costs of platform development, content creation, internal and extemal labor, computers, facility investment, and so on. These expenses are amortizable and depreciable over the first three of the six years of the project's expected life. They are recognized separately from the normal depreciation and amortization expenses. - These capital expenses will be deducted from the project's annual cash flow from operations to derive at the project's total expected cash flows. Complete the following cash flow analysis based on the information provided. (Note: Express all values in millions of dollars and round all values to three decimal places. Use a minus (-) sign to indicate any negative amount.) Financing Costs the missing word or words. DIKRAN: Should we use the company's WACC or use the beta of a comparable project when applying a cost of capital to this project? SANFORD: We calculate our WACC on an annual basis based on the company's capital structure for the fiscal year. All of our investments are treated as cash investments so that we can fairly compare all initiatives based on their value proposition. This is a one-of-a-kind project in the ed tech space, and we believe that it will drive incremental revenues and contribute to the preservation of revenue for Cengage's existing products. The project also seems to align with the reinvestment objectives of our private equity owners. The finance team got together to disoes the finanoing coets of the projoct. The following ti an ewoerpt or their dezussion. fucad the dialogut and fill in the missing nord or words. DIKRAN: Should we use the company's WACC or use the bota of a comparable profect when applying a cost of capital to this projoct? SANFORD: We calculate eur WACC en an annual bacis basad an the cempany's captal structure fer the fiscal yeaf. All of cur imvestments aren treated as cash imwestments so that ae can fairly compare all infisthes based on their value propostion. Ths is a one-of-a-kind project in producte. The project also seems to sign with the ranvestrent objectlves or our plvete eculty owners. DIKRAN: Sounds gcod. We also calculste our applicable tax rates snrualh, and considering the dgital landszape of this project, we necessarily need to use dfferent tax rates based on the different states in which we operate. I guess it is fair to apply a standard tax rate in the valuation of the project cash flaws. Project Evaluation The andlysts in the team run the numbers and hsnd ower the evaluation to Sisniord, Complete the data in the report, (Mote: Hound your input values to three docimal places and your eutput values to two cecimal places. Use a minus (-) sign to indicate any negathe amount? The Accept / Reject Rencammendatian boand is mast Jkey to the projact because of which of the following reasons? Check av that aggiy. The project has a positive NPV. The project generates an IFR. grester than the company's Wace (hurde rste;. Managemert is not confident about the digital innovation team's track record. The project has a shelf-lie shorter than the paybsck period of the investment. The NextGen project is an example of how the financial appraisal of an investment project is conducted at Cengage Learning. The NextGen drive incremental revenue or contribute toward revenue preservation. Instructions: Review the following stages of the financial appraisal process for this project and complete missing information as needed. Project Overview The innovation team proposed a digital learning platform that will create a personalized learning experience for each students a set of flexible tools that will allow students to customize the technology to suit their personal learning needs. The executive the value proposition offered by the NextGen project will be one of a kind in the digital learning space and give the company a first-mover a the finance team conducted the financial appraisal of the project to evaluate if and to what extent the project would incremental contribute toward revenue preservation. Relevant Cash Flows and Operations, Dikran Yapoujian, Vice President, Finance and other members of the finance-decision support team held a series of discussions excerpts from their discussions follow: We would need to immediately approve a capital allocation of $1.70 million to jump-start the project. In addition, we need to capitalize another $20.5 million almost equally for the next three years. These expenses in year of the project is unlikely to bring any additional revenues, but from second year, we should see reven $1. 800 million. Our preliminary estimates also show revenues growing to $9.700 million in year 2 , $19.300 million in year 3 , 22.800 million in year 4 , and $24.600 million in year 5. I am also attaching some information the team used for the cash flow valuation. See you later to go over the numbers. Cheers, Dikran Attachment: Data.x/s (Als dollar values in mimons) The analysts on the team created pro forma estimates of the expected cash flows that the project is likely to generate and also discussed some assumptions: - Revenue estimates are based on the expectation of a higher price point resulting from a more robust product. - Operating expenses include internal labor, maintenance, overhead expense, and cost avoidance from being able to ramp down spending on existing platforms. - The capitalized expenses include the costs of platform development, content creation, internal and extemal labor, computers, facility investment, and so on. These expenses are amortizable and depreciable over the first three of the six years of the project's expected life. They are recognized separately from the normal depreciation and amortization expenses. - These capital expenses will be deducted from the project's annual cash flow from operations to derive at the project's total expected cash flows. Complete the following cash flow analysis based on the information provided. (Note: Express all values in millions of dollars and round all values to three decimal places. Use a minus (-) sign to indicate any negative amount.) Financing Costs the missing word or words. DIKRAN: Should we use the company's WACC or use the beta of a comparable project when applying a cost of capital to this project? SANFORD: We calculate our WACC on an annual basis based on the company's capital structure for the fiscal year. All of our investments are treated as cash investments so that we can fairly compare all initiatives based on their value proposition. This is a one-of-a-kind project in the ed tech space, and we believe that it will drive incremental revenues and contribute to the preservation of revenue for Cengage's existing products. The project also seems to align with the reinvestment objectives of our private equity owners. The finance team got together to disoes the finanoing coets of the projoct. The following ti an ewoerpt or their dezussion. fucad the dialogut and fill in the missing nord or words. DIKRAN: Should we use the company's WACC or use the bota of a comparable profect when applying a cost of capital to this projoct? SANFORD: We calculate eur WACC en an annual bacis basad an the cempany's captal structure fer the fiscal yeaf. All of cur imvestments aren treated as cash imwestments so that ae can fairly compare all infisthes based on their value propostion. Ths is a one-of-a-kind project in producte. The project also seems to sign with the ranvestrent objectlves or our plvete eculty owners. DIKRAN: Sounds gcod. We also calculste our applicable tax rates snrualh, and considering the dgital landszape of this project, we necessarily need to use dfferent tax rates based on the different states in which we operate. I guess it is fair to apply a standard tax rate in the valuation of the project cash flaws. Project Evaluation The andlysts in the team run the numbers and hsnd ower the evaluation to Sisniord, Complete the data in the report, (Mote: Hound your input values to three docimal places and your eutput values to two cecimal places. Use a minus (-) sign to indicate any negathe amount? The Accept / Reject Rencammendatian boand is mast Jkey to the projact because of which of the following reasons? Check av that aggiy. The project has a positive NPV. The project generates an IFR. grester than the company's Wace (hurde rste;. Managemert is not confident about the digital innovation team's track record. The project has a shelf-lie shorter than the paybsck period of the investment