Capital Project Evaluation Using Budgeting Tools to Maximize Shareholder Value

Overview

This assessment requires a financial analyst to evaluate three proposed capital projects for ABC Healthcare Corporation using capital budgeting tools including NPV, IRR, payback period, and profitability index. The analysis aims to determine which project will generate the most shareholder value based on forecasted cash flows and provide a comprehensive evaluation report with recommendations to senior leadership.

What this coursework covers

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Assessment 2

Evaluation of Capital Projects

InstructionsResourcesActivity

InstructionsResourcesActivity

Use capital budgeting tools to determine the quality of three proposed investment projects, and prepare a 6–8 page report that analyzes your computations and recommends the project that will bring the most value to the company.

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Introduction

This assessment is about one of the basic functions of the finance manager, which is allocating capital to areas that will increase shareholder value and add the most value to the company. This means forecasting the projected cash flows of the projects and employing capital budgeting metrics to determine which project, given the forecast cash flows, gives the firm the best chance to maximize shareholder value. As a finance professional, you are expected to:

  • Use capital budgeting tools to compute future project cash flows and compare them to upfront costs.
  • Evaluate capital projects and make appropriate decision recommendations.
  • Prepare reports and present the evaluation in a way that finance and non-finance stakeholders can understand.

Scenario

Senior leadership has now called upon you to analyze three capital project requests based on forecasted cash flow as they relate to maximizing shareholder value.

Your Role

You are one of Maria's high-performing financial analyst managers at ABC Healthcare Corporation, and she trusts your work and leadership. Senior leadership was impressed with your previous work, and they are tasking you with the analysis of these three proposed capital projects based on forecasted cash flow. You have completed forecasting the projected cash flows of the projects as reflected in the Project Cash Flows spreadsheets.

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