# draft of the Capital Budgeting Data section of the final project

For this milestone, submit a draft of the Capital Budgeting Data section of the final project, along with your supporting explanations. Base your calculations on the data provided in this case study. Be sure to substantiate your claims.Attach please find the rubric and excel sheet (already completed). https://www.sec.gov/Archives/edgar/data/354950/000…
fin_550_milestone_three_guidelines_and_rubric.pdf

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FIN 550 Milestone Three Guidelines and Rubric
Overview: For the final project, you will use this case study to prepare a financial analysis report for Home Depot Inc. You will include in your analysis the
background calculations and managerial analysis for each of the following topics: time value of money, stock and bond valuation, and capital budgeting. You will
also discuss macroeconomic variables that might impact the companyâ??s financial decision making and strategic objectives. These topics will be covered over four
milestones to be submitted throughout the course before you submit the final project. Note that while these elements may seem separate and unrelated,
together they will present a well-rounded view of the companyâ??s finances with regard to the topics.
In this milestone, you will submit a draft of the Capital Budgeting Data section of the final project, along with your supporting explanations.
Prompt: Provide your recommendation on a potential investment project for Home Depot Inc. based on the net present value (NPV) and internal rate of return
(IRR). Compare these calculations for their use in evaluating a potential investment. Complete your calculations on the designated tab in the Final Project Student
Workbook.
Specifically, the following critical elements must be addressed:
IV.
Capital Budgeting Data
A. Suppose the company is considering a potential investment project to add to its portfolio. Calculate the following items:
1. The net present value (NPV) of the project
2. The internal rate of return (IRR) of the project
B. What are the implications of these calculations? In other words, based on each of the calculations, and being mindful of the need to balance
portfolio risk with return, would you recommend that the company pursue the investment? Why or why not? Be sure to substantiate your
claims.
C. What is the difference between NPV and IRR? Which one would you choose for evaluating a potential investment and why? Be sure to support
Guidelines for Submission: Your paper must be submitted as a 2- to 3-page Microsoft Word document, not including your calculations, which should be
completed on the designated tab in the Final Project Student Workbook. Use double spacing, 12-point Times New Roman font, and one-inch margins. Sources
should be formatted according to APA style.
Rubric
Critical Elements
Capital Budgeting Data:
Potential Investment
Capital Budgeting Data:
Pursuing the Investment
Capital Budgeting Data:
Difference
Articulation of Response
Proficient (100%)
Accurately calculates requested figures
Needs Improvement (80%)
Calculates figures, but with gaps in
accuracy or detail
Analyzes the implications of each
Analyzes the implications of each
calculation on the recommendation to
calculation on the recommendation to
pursue the investment, substantiating
pursue the investment, but response or
claims
substantiation is cursory or illogical
Accurately characterizes the difference
Characterizes the difference between
between NPV and IRR and explains which NPV and IRR and explains which would
would be chosen for evaluating a
be chosen for evaluating a potential
potential investment and why,
investment and why, but response is
supporting reasoning with evidence
cursory or inaccurate or evidence is not
supportive
Submission has no major errors related
Submission has major errors related to
to citations, grammar, spelling, syntax, or citations, grammar, spelling, syntax, or
organization
organization that negatively impact
readability and articulation of main ideas
Not Evident (0%)
Does not calculate figures
Value
30
Does not analyze the implications of each
calculation on the recommendation to
pursue the investment
30
Does not characterize the difference
between NPV and IRR and does not explain
which would be chosen for evaluating a
potential investment and why
30
Submission has critical errors related to
citations, grammar, spelling, syntax, or
organization that prevent understanding of
ideas
Earned Total
10
100%
SUMMARY TAB
TAB 1
Note: This process could take up t
1. Time Value of Money
FALSE
TAB 2
FALSE
FALSE
FALSE
PART I – Stock Valuation
FALSE
FALSE
FALSE
PART II – Bond Issuance
Current Bond Value
FALSE
\$9.433,58
New Value %
FALSE
FALSE
5,4375
\$24.634,04
New Value – 5%
FALSE
FALSE
0,4375
\$3.528,32
ote: This process could take up to 20 seconds
TAB 3
Capital Budgeting
FALSE
FALSE
FALSE
TAB 4
Interest Rate Implication
FALSE
FALSE
\$9.785.570,71
50%
Milestone Three: Capital Budgeting Data (please fill in the shaded YELLOW cells)
Initial Outlay
(\$65.000.000)
Cash Flows (Sales)
– Operating Costs (excluding Depreciation)
– Depreciation Rate of 20%
Operating Income (EBIT)
– Income Tax (Rate 35%)
After-Tax EBIT
Depreciation
Cash Flows
(\$65.000.000)
CF1
CF2
\$50.000.000
\$25.500.000
(13.000.000)
37.500.000
13.125.000
24.375.000
13.000.000
37.375.000
\$45.000.000
\$25.500.000
(13.000.000)
32.500.000
11.375.000
21.125.000
13.000.000
34.125.000
NPV
Select from drop
downs below:
\$9.785.570,71 ACCEPT
IRR
50% ACCEPT
WACC 8%
CF3
\$65.500.000
\$25.500.000
(13.000.000)
53.000.000
18.550.000
34.450.000
13.000.000
47.450.000
CF4
\$55.000.000
\$25.500.000
(13.000.000)
42.500.000
14.875.000
27.625.000
13.000.000
40.625.000
CF5
\$25.000.000
\$25.500.000
(13.000.000)
12.500.000
4.375.000
8.125.000
13.000.000
21.125.000
Capital Budgeting Example Set-up
Initial investment \$65,000,000
Straight-line Depreciation of 20%
Income Tax @35%
WACC of 8% approximately. (HD WACC was abou
Cash Flow (which in this case are Sales Revenues
CF1: \$50,000,000
CF2: \$45,000,000
CF3: \$65,500,000
CF4: \$55,000,00
CF5: \$25,000,000
Operating Costs
CF1: \$25,500,000
CF2: \$25,500,000
CF3: \$25,500,000
CF4: \$25,500,000
CF5: \$25,500,000
WACC- why do we use WACC rate for new proje
doesnâ??t earn more percent than WACC, the corp
abandon the project and invest money elsewher
Initial Investment – always negative. Corporation
money (“lose” it till they recover it via sales) in o
benefit.
ng Example Set-up
nt \$65,000,000
preciation of 20%
ACCEPT
REJECT
proximately. (HD WACC was about 8.83%)
h in this case are Sales Revenues) are as follows:
we use WACC rate for new projects? If the project
ore percent than WACC, the corporation should
oject and invest money elsewhere.
nt – always negative. Corporation has to invest
t till they recover it via sales) in order to gain future

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