Capella University MBA-FPX5010__Assessment4-Attempt1

EXPANSION RECOMMENDATION MBA-FPX 5010 This PowerPoint is created to fulfill the requirements of Assessment 4Analysis of financial information ■ In order to analyze the companies financial information, I will calculate the Net Present Value of the investment proposal ■ “The resulting net present value will tell you whether you can expect to get a positive or negative return on your investment, based on looking at the assets projected cash flows” (2019, August 26) ■ To do this I will “take each year and divide their after tax cash flows under MACRS dep. And their PV factors @ 12% pa. (1+discount rate)*number of periods )” (NPV Formula ) ■ The Net Present Value results for ZXY company are listed in the next slideYear After tax cash flows under MACRS dep. PV factors @12% Present Value of Cash Flows 1 -42,733 0.89 -38,154 2 -121,460 0.8 -96,827 3 -740,944 0.71 -527,389 4 762,725 0.64 484,725 5 1,719,693 0.57 975,799 6 1,955,930 0.51 1,011,200 7 2,284,549 0.45 1,033,413 8 3,121,335 0.4 1,260,654 9 3,948,831 0.36 1,423,988 10 4,411,100 0.32 1,420,256 Present value of total cash flows 6,947,667Analysis of financial informationContinued ■ After finding the total net present value of cash flows, I will now add the total present value of residual value at the end of the year 10, (1,000,000 listed in the scenario x 0.32 PV factor at year 10) Add: Present value of residual value at the end of the year 10( x 0.32) 321,973 Present value of total cash inflows from the investment 7,269,641Analysis of financial informationContinued ■ After finding the present value of total cash inflows from the investment will now subtract the initial investment of (7,000,000 listed in the scenario), which will give me the total Net Present Value (NPV) ■ The companies investment in this project would result in profit since their NPV is positive at $269,641 Present value of total cash inflows from the investment 7,269,641 Less: Initial investment 7,000,000 Net Present value 269,641Identification of risks associated with the investment How risky the project app