In outcomes one, two, and three you created a marketing plan, project plan, and risk management plan for a hypothetical project. In outcome five, you will compare that project with an alternative and mutually exclusive project (see attached for additional information) and identify which project should be funded by comparing net present values (NPVs).
In order to do this, you will need to provide an estimate of the net income generated by your hypothetical project. It is quite acceptable to use a rough estimate for net income. You will be graded on your ability to determine NPV from a given income stream and use that to guide your decision between two mutually exclusive projects. You will not be graded on creating the estimated net income of your project.
The easiest way to calculate NPV is through excel. Once you have calculated the NPV of both projects, you will provide a brief narrative that states which project provides the most value for the firm and explain how that can be shown through the NPV calculations.
You’ll submit 2 files:
- An Excel file with ALL calculations. Please make sure you use formulas to arrive at your final numbers.
- A Word document with narrative discussing which project will provide the most value.
Make sure you use formulas in your Excel sheet. If you simply type in numbers, we won’t know how you arrived at your calculations.
Projects are almost never viewed in isolation. Firms have limited resources and competing uses for these resources. In Outcome Five you will compare the expected financial benefits of your project against a competing, mutually exclusive project.
In order to compare your project against the competing project, you will need to apply forecasting techniques to estimate probability and amount of future expected cash flows, then discount these cash flows using a discount rate that reflects the firm’s weighted cost of capital to identify the project with the superior Net Present Value.
https://www.youtube.com/watch?v=BLRU318Ih1
Answer preview
Outcome 5: Multi-Project Comparison
The paper compares Mark Meal fast food project with an alternative project. The primary focus of evaluation is on the Net present value (NPV) and the internal rate of return (IRR) of the two projects making a recommendation for the project with the best return. Consideration is that although the two projects have a basis for profitability they are competing for the for the same resources and investors need to settle for the most profitable (Elango et al., 2015). The comparison involves three scenarios. The first scenario considers the primary outcome. The second is a reduction of price to determine the response, and the third is an adjustment of price,…
