You are to consider a capital budgeting project, collect relevant data, and research information regarding the implementation of the project. Possible examples include: restaurant, clothing store, coffee shop, gym, retail store, hobby shop, franchise (individual store), service provider (mechanic, plumber, carpenter, lawn care, etc.) and many others. Choose something you are interested in, and perhaps something that you may want to do in the future.

I just need some ideas for what to for a sensitivity project, anything helps!

Post an outline of the initial cash flow, operating cash flows, and terminal cash flows. This does not need to be complete. The post should discuss the estimated initial cost of the project, what the operating cash flows will consist of (revenue, expenses, taxes, insurance); and should discuss the cash flows associated with the projects termination (terminal cash flow in which the business is sold or exited (shut down)). These cash flows can be estimates that you update later, but the post should talk about what type of cash flows will occur and other details that are relevant to your analysis.

Post your summary to Quantitative Summary of MY Capital Budgeting Project in Week 8 Discussion Board.

An example (your example cannot be an apartment building).

Initial Cash Flows

A multifamily apartment building is for sale in Lincoln Nebraska and is currently available to buy for $400,000. The building would require an initial investment of $3,000 in various supplies and would require improvements of another $10,000 immediately.

Operating Cash Flows

The units rent for $450 a month and the area has a vacancy rate of around 5%. The costs associated with the units include water, common water heater (gas), insurance, pest control, snow removal, lawn care, upkeep, depreciation, maintenance, management fees, and a capital budget for major improvements. I will also need to determine my opportunity cost (labor and other inputs that owner is expected to contribute to the project). (The exact amount of the revenues and expenses will need to be determined at some point they are not required for this summary).

The building will be financed with 80% debt and 20% equity. The cost of debt is 6% fixed for 5 years (based on bank information) and the cost of equity is 12% (based on the risk associated for this asset class). The WACC for the project is 7.2%. The cash flow analysis will not include interest expense because it is already in the cost of capital.

The building is depreciated over 27.5 years. The land value cannot be depreciated.

Terminal Cash Flows

The assumption is that in 10 years the building can be sold for same price that it was purchased for.