Final Project: Proposed Strategies FIN – 630
Overview
Analyzing capital investments to compare portfolios viability, financial profitability, risks, and future successes is an important skill for multiple roles in a modern
corporate world. Organizations are looking for research and analytical skills in aspiring practitioners of finance. As future decision makers, this project serves as a
real–world example of capital investment strategy and decision–making. You will be able to immediately apply the practical skills gained in this final assessment
in your workplace.
The final project for this course is a capital budgeting case report centered on a fictional firm (the New Heritage Doll Company). You will assume the role of a research analyst presented with two different, competing capital investment options.
Specifically, you will evaluate different capital budgeting methods and then apply those methods to analyze the two options. Additionally, you must complete a risk assessment for each of the projects. Ultimately, you will recommend one of the two options and defend your proposal for the senior management of the company. The product of your inquiry will be a capital budgeting case report intended for your executive–level audience.
In this assignment, you will demonstrate your mastery of the following course outcomes:
Employ appropriate financial tools for accurately assessing the strategic value of various capital investments
Apply the perspective of senior management for properly examining resource allocation within corporations
Evaluate different capital budgeting methodologies for their potential to promote sound, data–driven decision making in different business contexts
Apply risk management practices for making informed capital budgeting decisions through appropriate quantification, mitigation, and pricing of risk
Develop coherent capital budgeting strategies reflecting the strengths and weaknesses of various capital budgeting opportunities
Prompt
Considering the strategic objectives of your organization, which of the two capital investment options do you think is best?
Specifically, the following critical elements must be addressed:
I. Executive Summary: Summarize your approach and highlight your key findings. Be sure to concisely and coherently communicate the details that would be most relevant to your senior management audience.
II. Background
A. Describe the organization, including its mission, vision, and values. Specifically, you should clearly identify the strategic objectives of your firm,
as those will be important to reference in your recommendations.
B. Additionally, summarize the two capital investment options. Specifically, explain all legal, ethical, or professional standards that apply to both
using, specific examples to illustrate.
III. Evaluation of Methodologies
A. Explain the different methods and tools available for evaluating capital budgeting options. Specifically, indicate their uses in different business contexts using specific examples.
B. Next, evaluate each of the methods in terms of its strengths and limitations for supporting sound, data–driven decision making. Cite specific evidence to support your claims.
C. Finally, identify which methods are the most meaningful for your particular organization and this case. Cite specific evidence to support your claims.
IV. Analysis of the Capital Investment Options
A. Analyze each of the projects with regard to their alignment to the mission, vision, and values of the company. Which of the two options has the
strongest alignment and why? Use specific evidence to support your claims.
B. Analyze each of the projects for their financial implications. Include your calculations and results for each of the following evaluation methods:
i. Discounted cash flow and payback
ii. NPV, IRR, and EBIT
iii. Be sure that all of your calculations are complete, accurate, and precise.
V. Risk Assessment
A. Identify the risks to your firm for each of the projects. For example, you should consider possibilities such as cannibalization of current products,
new software, issues with development, customer impact, and so on. Use specific examples to illustrate.
B. Next, quantify the identified risks in terms of their potential financial impacts (i.e., price the risks). Justify your estimations and values with specific evidence.
C. For each of the identified risks, select appropriate methods for mitigating those risks. Illustrate your recommended strategies with specific
examples.
VI. Proposed Strategies: Using your analysis and risk assessment, indicate which of the two options you believe is best for the firm, and justify your selection in the following ways:
A. Defend the viability of the project. Use specific examples of the project’s strengths in your defense.
B. Additionally, include strategies for appropriately addressing any potential weaknesses of the project.
C. Close your report by articulating the strategic value of the project for the firm as a whole using evidence that would be persuasive for your senior management audience.
Milestones
Milestone One: Company Background and Initial Calculations
In Module Three, you will assume the role of Emily Harris, the company’s financial analyst, and begin your analysis of the New Heritage Doll Company’s two
proposed capital projects. You will evaluate the company’s background and perform initial calculations to determine the projects’ merits.
Milestone Two: Analysis of Key Methodologies and Final Calculations
In Module Five, you will continue your analysis of the New Heritage Doll Company case study. Assuming the role of Emily Harris, the firm’s financial analyst, your
next step in the process is to perform the final calculations and explain the drawbacks and limitations of the six different methodologies. Why might some of
these tools have more (or less) application to the capital budgeting decision for this company?
Milestone Three: Risk Analysis
In Module Seven, your next step in the process is to perform a risk assessment of the two capital budgeting projects being considered. Risk can be identified and
quantified, and this is a crucial step in the evaluation of any capital investment project. For this project involving the New Heritage Doll Company, we will focus
on the relevant internal (business) risks that may be present. These risks include marketing, distribution, or technical issues that may compromise the two
projects’ success. For the purpose of weighing each project’s merit, how might these risks be measured and mitigated?
Final Submission: Capital Budgeting Case Report
In Module Nine, you will submit your final project. It should be a complete, polished artifact of the three milestone pieces, containing all of the critical elements
of the final product and an APA-formatted list of all the references used in the project. It should reflect the incorporation of feedback gained throughout the
course.
