Evaluate the capital investment | ACC 556 – Financial Accounting for Managers | Strayer University

Overview

Part of a manager’s role is to evaluate capital investment projects to choose the best return on investment. In this assignment, you will use capital budgeting techniques to make an investment decision and present your findings in a PowerPoint presentation.

Scenario

For this assignment, you will take on the role of a manager for Shoals Corporation. Shoals is a company that uses backhoes to complete its work. You will analyze the information provided here and then create a presentation to communicate your recommendation to company leaders.

The Shoals Corporation puts significant emphasis on cash flow when planning capital investments. The company chose its discount rate of 8 percent based on the rate of return it must pay its owners and creditors. Using that rate, Shoals Corporation then uses different methods to determine the most appropriate capital outlays.

This year, Shoals Corporation is considering the following capital investment: buying five new backhoes to replace the backhoes it now owns. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes.

Use the following information in deciding whether to purchase the new backhoes:

Backhoes

Old Backhoes

New Backhoes

Purchase cost when new

$90,000

$200,000

Salvage value now

$42,000

Investment in major overhaul needed in next year

$55,000

Salvage value in 8 years

$15,000

$90,000

Remaining life

8 years

Net cash flow generated each year

$30,425

$43,900

Instructions

Complete a PowerPoint presentation in which you calculate different measures of return on investment, analyze how the results influence a proposed investment decision, and make a recommendation based on your findings. You may download the Week 5 Assignment Template Download Week 5 Assignment Template or create your own PowerPoint presentation.

(Hint: For the old machine, the initial investment is the cost of the overhaul. For the new machine, subtract the salvage value of the old machine to determine the initial cost of the investment.)

Slide 1. Use Excel to calculate the net present value of the old backhoes and the new backhoes. Save your Excel file and then insert the Excel file into the PowerPoint presentation. (Use the video linked in the Resources or follow these commands in Excel: Insert>Object>Create from File>Browse: Select your saved Excel file.)

Slide 2. Evaluate the results of the net present value calculations and how they influence the decision about purchasing new backhoes or keeping the old backhoes. Double-check that your calculations on Slide 1 are correct.

Slide 3. Use Excel to calculate the payback period for keeping the old backhoes and purchasing the new backhoes. (Hint: For the old machines, evaluate the payback of an overhaul.) Save your Excel file and then insert the Excel file into the PowerPoint presentation. (Use the video linked in the Resources or follow these commands in Excel: Insert>Object>Create from File>Browse: Select your saved Excel file.)

Slide 4. Evaluate the results of the payback period calculations and how they influence the decision about whether the company should purchase new backhoes or continue using the old backhoes. Double-check that your calculations on Slide 3 are correct.

Slide 5. Using Excel, calculate the profitability index for keeping the old backhoes and purchasing new backhoes. Save your Excel file and then insert the Excel file into the PowerPoint presentation. (Use the video linked in the Resources or follow these commands in Excel: Insert>Object>Create from File>Browse: Select your saved Excel file.)

Slide 6. Evaluate the results of your profitability index calculations and how they influence your decision about whether the company should purchase new backhoes or continue using the old backhoes. Double-check that your calculations on Slide 5 are correct.

Slide 7. Explain at least 3 intangible benefits that influence the decision to purchase new backhoes.

Slide 8. Recommend whether the company should purchase new backhoes or keep the old backhoes. Your recommendation should be consistent with your calculations and analysis in Slides 1-6 and intangibles in Slide 7.

Continue to order Get a quote

July 1, 2023

11) Refer to Figure 19-10. Europe suffers a recession. Assuming all else remains constant, this would be represented as a movement from ________.

A) D to A

B) C to D

C) B to C

D) A to D

E) A to B

12) Refer to Figure 19-10. Currency speculators believe that the value of the euro will increase relative to the dollar. Assuming all else remains constant, how would this be represented?

A) Supply would decrease, demand would decrease and the economy moves from B to C to D.

B) Supply would increase, demand would decrease and the economy moves from C to B to A.

C) Supply would decrease, demand would increase and the economy moves from A to D to C.

D) Supply would increase, demand would increase and the economy moves from D to A to B.

13) Refer to Figure 19-10. Suppose that the U.S. government deficit causes interest rates in the United States to rise relative to those in the European Union. Assuming all else remains constant, how would this be represented?

A) Supply would decrease, demand would decrease and the economy moves from B to C to D.

B) Supply would increase, demand would decrease and the economy moves from C to B to A.

C) Supply would decrease, demand would increase and the economy moves from A to D to C.

D) Supply would increase, demand would increase and the economy moves from D to A to B.

14) Refer to Figure 19-10. The appreciation of the dollar is represented as a movement from

A) B to A.

B) D to C.

C) C to B.

D) C to A.

15) Refer to Figure 19-10. The depreciation of the euro is represented as a movement from

A) D to A.

B) C to D.

C) B to C.

D) B to A.

16) Refer to Figure 19-10. Italians cut back on smoking and cut their demand for American cigarettes in half. Assuming all else remains constant, this would be represented as a movement from

A) B to A.

B) D to C.

C) B to C.

D) A to D.

17) Refer to Figure 19-10. Europe experiences an economic boom. Assuming all else remains constant, this would be represented as a movement from

A) D to A.

B) D to C.

C) C to B.

D) B to A.

18) Refer to Figure 19-10. Currency speculators believe that the value of the euro will decrease relative to the dollar. Assuming all else remains constant, how would this be represented?

A) Supply would decrease, demand would decrease and the economy moves from B to C to D.

B) Supply would increase, demand would decrease and the economy moves from C to B to A.

C) Supply would decrease, demand would increase and the economy moves from A to D to C.

D) Supply would increase, demand would increase and the economy moves from D to A to B.

19) Refer to Figure 19-10. Suppose that the U.S. government deficit decreases, causing interest rates in the United States to fall relative to those in the European Union. Assuming all else remains constant, how would this be represented?

A) Supply would decrease, demand would decrease and the economy moves from B to C to D.

B) Supply would increase, demand would decrease and the economy moves from C to B to A.

C) Supply would decrease, demand would increase and the economy moves from A to D to C.

D) Supply would increase, demand would increase and the economy moves from D to A to B.

20) If there is currently a surplus of dollars, which of the following would you expect to see in the foreign exchange market?

A) The dollar will appreciate.

B) The dollar will depreciate.

C) There will be a decrease in the demand for dollars.

D) There will be a decrease in the supply of dollars.

July 1, 2023

The Tip Left column in the Friday worksheet contains a fill color and number formatting. You want to fill these formats to the other daily worksheets.

Group the Friday through Monday worksheets, staring with the Friday worksheet. Fill the format only for the range E5:E24.

Now you want to insert column totals for the five worksheets simultaneously.

With the worksheets still grouped, insert SUM functions in the range B25:E25 and apply the Totals cell style. Ungroup the worksheets.

The Week worksheet is designed to be a summary sheet. You want to insert a hyperlink to the Total heading in the Monday worksheet.

On the Week worksheet, in cell A5, insert a hyperlink to cell A25 in the Monday worksheet with the ScreenTip text Monday’s Totals. Test the hyperlink to ensure it works correctly.

In cell A6 on the Week worksheet, insert a hyperlink to cell A25 in the Tuesday worksheet with the ScreenTip text Tuesday’s Totals. Test the hyperlink to ensure it works correctly.

In cell A7, insert a hyperlink to cell A25 in the Wednesday worksheet with the ScreenTip text Wednesday’s Totals. Test the hyperlink to ensure it works correctly.

In cell A8, insert a hyperlink to cell A25 in the Thursday worksheet with the ScreenTip text Thursday’s Totals. Test the hyperlink to ensure it works correctly.

In cell A9, insert a hyperlink to cell A25 in the Friday worksheet with the ScreenTip text Friday’s Totals. Test the hyperlink to ensure it works correctly.

Now, you are ready to insert references to cells in the individual worksheets. First, you will insert a reference to Monday's Food Total.

In cell B5 on the Week worksheet, insert a formula with a 3-D reference to cell B25 in the Monday worksheet. Copy the formula to the range C5:E5.

The next formula will display the totals for Tuesday.

In cell B6, insert a formula with a 3-D reference to cell B25 in the Tuesday worksheet. Copy the formula to the range C6:E6.

In cell B7, insert a formula with a 3-D reference to cell B25 in the Wednesday worksheet. Copy the formula to the range C7:E7.

In cell B8, insert a formula with a 3-D reference to cell B25 in the Thursday worksheet. Copy the formula to the range C8:E8.

In cell B9, insert a formula with a 3-D reference to cell B25 in the Friday worksheet. Copy the formula to the range C9:E9.

Now you want to use a function with a 3-D reference to calculate the totals.

In cell B10 on the Week worksheet, insert the SUM function with a 3-D reference to calculate the total Food purchases (cell B25) for the five days. Copy the function to the range C10:E10.

The servers are required to share a portion of their tips with the Beverage Worker and Assistants. The rates are stored in another file.

Open the Exp_Excel_Ch09_Cap_Assessment_Rates.xlsx workbook. Go back to the Exp_Excel_Ch09_Cap_Assessment_Tips.xlsx workbook. In cell F5 of the Week worksheet, insert a link to the Beverage Worker Tip Rate (cell C4 in the Rates workbook) and multiply the rate by the Monday Drinks (cell C5). Copy the formula to the range F6:F9.

Next, you will calculate the tips for the assistant.

In cell G5 in the Tips workbook, insert a link to the Assistant Tip Rate (cell C5 in the Rates workbook) and multiply the rate by the Monday Subtotal (cell D5). Copy the formula to the range G6:G9. Close the Rates workbook.

Note: The tip is a monetary value in the Week worksheet. It should be formatted for Accounting Number Format.

You noticed a circular error when you first opened the Tips workbook. Now you will find and correct it.

On the Week worksheet, check for errors and correct the formula with the circular reference.

You want to create a validation rule to prevent the user from accidentally entering a negative value. For now, you will create a validation in the Friday worksheet.

Select the range E5:E24 in the Friday worksheet, create a validation rule to allow a decimal value greater than or equal to zero. Enter the input message title Tip and the input message Enter the amount of tip. (including the period). Use the Stop alert with the error alert title Invalid Number and the error alert message The tip must be zero or more. (including the period). Test the data validation by attempting to enter -20 in cell E5 and then cancel the change.

Now you will copy the validation settings to the other daily worksheets.

Copy the range E5:E24 in the Friday worksheet. Group the Monday through Thursday worksheets, select the range E5:E24, and use Paste Special Validation to copy the validation settings.

You want to unlock data-entry cells so that the user can change the tips in the daily worksheets.

Group the Monday through Friday worksheets. Select the ranges E5:E24 and unlock these cells.

Create footer with your name on the left side, the sheet name code in the center, and the file name code on the right side of all worksheets.

Now that you unlocked data-entry cells, you are ready to protect the worksheets to prevent users from changing data in other cells. Individually, protect each sheet using the default allowances without a password.

Mark the workbook as final.

Note: Mark as Final is not available in Excel for Mac. Instead, use Always Open Read-Only on the Review tab.

Save and close Exp19_Excel_Ch09_Cap_Assessment_Tips.xlsx. Exit Excel. Submit the file as directed.