WACC-NPV-IRR (1) - INSTRUCTIONS The major point of this...

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Unformatted text preview: INSTRUCTIONS The major point of this assignment is for you to realize there are three separate alternatives presented in the case verbiage. Using the budget figures and projection assumptions given, you are to calculate a 5 year projected income statement and cash flow as well as the WACC for each alternative. As in a real corporation, you can take each alternative, calculate the decision-making capital budgeting analyses (NPV and IRR) using a discount rate and risk factors (sometimes referred to as the hurdle rate and/or required rate of return). Then, a decision can be made as to which alternative would be best for the organization. As you will see, each alternative not only has a different projection, but a different level of risk that is built into the NPV calculations. Of course, all possible variables are not accounted but this exercise will give you a flavor of what is used in the real-world in regards to capital budgeting. Clicking on the tabs below are the three scenarios from the case along with additional assumptions in order for you to fulfill the requirements of this assignment. Note -- please realize that the assumptions in the three below scenarios are just that -- "assumptions". They are given to create an example of the decision making process used in conjuction with capital budgeting tools. Please note the different worksheet tabs below: (further note -- the colored cells indicates areas that will NOT have any numbers/calculations....
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This note was uploaded on 04/01/2012 for the course ECON 101 taught by Professor Doc during the Spring '11 term at Yale.

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WACC-NPV-IRR (1) - INSTRUCTIONS The major point of this...

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