For this assignment, you will again work within your team structure to develop and analyze a possible

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Question:

For this assignment, you will again work within your team structure to develop and analyze a possible investment opportunity for your chosen firm (from Case #1). Your team will use your project analysis abilities, including cost of capital estimation and capital budgeting techniques. The structure used to cover the assigned material is at the discretion of the team members, and peer evaluations will be made of each individual.

To begin, each team will select a potential investment opportunity for your firm. This project may be either an existing one (as taken from news articles, annual reports, etc.) or it can be completely contrived by the team members as a new potential investment. Once a selection is made, the team will provide an analysis of the estimated cash flows for the project and an evaluation of the project’s merit using appropriate capital budgeting techniques.

Estimated Cash Flows:

Since these values are ‘estimates’, there is no right or wrong here. But, the more support for your numbers that your team can produce, the more effective will be your analysis. You must be sure to include any information or assumptions regarding the initial outlay, incremental revenue and/or savings, and the expected life of the project. This is where I am looking for the most “content”.

Calculating the WACC:

Each team will calculate their company’s cost of capital (WACC). This calculation will be used with the capital budgeting techniques.

Capital Budgeting Techniques:

For this part of the case, your team will be expected to perform payback analysis,NPV analysis, and IRR analysis.

In the end, your team will submit a document that: 1) introduces the project,(1-2 pages) 2) outlines in detail the assumptions built into the cash flow estimation and cost of capital calculations,(2 pages) 3) evaluates the cash flows using the appropriate capital budgeting techniques,(2 pages) and 4) concludes with an ultimate accept/reject decision(1 page).

Your evaluation of this case will be determined by: a) the inclusion of all four of the aforementioned components, b) evidence and support for your assumptions and estimates, c) accuracy of your analysis, and d) the degree of professionalism displayed in the presentation of your industry analysis.