Short Answer Assignment ? Unit 3

Assignment Background Unit 3 will expand on how a firm?s primary objective is to maximize its shareholders? value by investing in projects that earn more than their cost of capital. In this unit, you will calculate the weighted average cost of capital, forecast net cash flows, and project option values. By applying budgeting concepts to case studies, you will learn more about the decision-making process as it applies to financial management.

Assignment Description For this assignment, you will provide responses to the below questions regarding the differences between cash flow, accounting income, and how these two areas tie into capital budgets.

Questions

• In regard to capital budgeting, why do we tend to focus on cash flows rather than net income?
• Explain the difference between accounting income and cash flow.
• In a capital budgeting analysis, explain why opportunity costs and external factors are included in the analysis but sunk costs are not.
• In a capital budgeting analysis, why are interest charges not deducted when a project?s cash flows are calculated?
• Is it worth the effort to estimate daily project cash flows? Would doing so be helpful in the investment analysis? How would the results be negatively or positively affected?

Assignment Guidelines Answer the above questions using proper punctuation, capitalization, and grammar. Support your answers with at least 3 sources (articles/journals) written/published in the United States of America within the last 5 years. Consult the attached grading rubric to ensure you are meeting the assignment's criteria.

WRITING ASSIGNMENT GRADING RUBRIC A B C D Outstanding Good Average Below Average 75% Possible Assignment Objectives Comprehension 15% Possible Writing Mechanics Delivery 67.5% - 75.0% Paper demonstrates conceptual understanding, presents arguments, defends rationale, and integrates multiple viewpoints for each assignment objective with exceptional support from at least three reputable sources (other than course text or materials) and incorporates a real world application. Comments: 13.5% - 15.0% Paper has a clear and specific thesis, focuses on relevant and specific ideas using smooth and logical transitions, excellent writing voice, flawless grammar, and correct spelling. 60.0% - 67.4% Paper demonstrates conceptual understanding, presents arguments, defends rationale, and integrates multiple viewpoints for each assignment objective with strong support from at least two reputable sources (other than course text or materials). 12.0% - 13.4% Paper has a clear and specific thesis, focuses on relevant and specific ideas using smooth and logical transitions, strong writing voice, with only a few minor grammatical or spelling errors. 52.5% - 59.9% 45.0% - 52.4% Paper demonstrates conceptual understanding, presents arguments, defends rationale, and integrates multiple viewpoints for each assignment objective with adequate support from at least two reputable sources (other than course text or materials). Paper may not meet word count minimum or may demonstrate partial conceptual understanding, or presentation of arguments and defense of rationale have inadequate support from reputable sources (other than course text or materials). 10.5% - 11.9% Paper has a clear and specific thesis, focuses on relevant and specific ideas but may lack consistent organization and have distracting writing traits, noticeable grammatical errors and incorrect spelling. F Unacceptable 0 Demonstrates little effort or understanding of concepts. 9.0% - 10.4% Paper does not focus on a single idea, falls short of expected SCPS writing competencies, ideas are masked by a saturation of grammatical errors or incorrect spelling. 0 Paper lacks a unifying claim or idea, shows little effort, or is incomplete. Comments: 10% Possible APA Formatting Clarity 9.0% - 10.0% Paper is formatted correctly according to APA standards using a title page, in-text citations, introduction, major section headings for each assignment objective, conclusion, and a reference page. 8.0% - 8.9% Paper has only a few minor APA formatting errors and provides a title page, in-text citations, introduction, major section headings for each assignment objective, conclusion, and a reference page. 7.0% - 7.9% Paper has several APA formatting errors but provides a title page, in-text citations, introduction, major section headings for each assignment objective, conclusion, and a reference page. 6.0% - 6.9% 0 Paper is saturated Paper is not in APA with APA formatting format and/or fails errors and may not to cite sources. provide a title page, in-text citations, introduction, major section headings for each assignment objective, conclusion, or a reference page. Comments: Total Percentage __________ x Assignment Value __________ = Score __________