Capital Budget - 887 Words

General Motors Sample Case Study Next Generation C hevrolet Instructions You have 1 hour and 30 minutes to complete the case below, which involves building an Excel model and preparing a written memo. You will walk through your analysis as part of the interview process. The GM team will ensure your case material makes its way to the proper interview room. By the end of the allotted time, you should: Write a memo in Word no longer than one page outlining your analysis of the case problem and your recommendation Be prepared to walk your interviewers through your Excel model and present your recommendation (you can use either the Excel or the Word document as back up for your discussion; no need to†¦show more content†¦Chevrolet has a storied history in the full-size sedan market. The first launched as a 1958 model year vehicle. In its , was the best-selling car in the United States. current 9th generation has market share of ~18% and consistently sold more than 100,000 units per year on average from 2008 to 2009, the latest full year of data availa ble. Property of General Motors Finance June 2, 2014 Page 1 General Motors Sample Case Study Assignment 1: Direct C ash F low A nalysis As an analyst in Operations Finance, your manager has asked you to create an Excel model with a direct cash flow forecast for the next generation using the information below. Prepare yourself to walk your interviewer through your Excel model and calculations. Assumptions: For simplicity, assume all cash flows occur at year end and there are no working capital requirements. 1. Development cycle (design and engineering of the vehicle before going to market) 5 year development cycle Investment in manufacturing equipment and tooling: $450M a. Investment Timing (15% of the total spend in 2010, 20% in 2011, 20% in 2012, 20% in 2013 and 25% in 2014): Engineering budget: $390M (timing same as investment spend) 2. Sales Assume product is launched the year right after the end of the development cycle Life cycle of the product: 5 years of sales after vehicle is launched Total market forShow MoreRelatedCapital Budget : Capital Budgeting Essay1838 Words   |  8 PagesIt is probably safe to assume that most households run on a budget and some amount of forecasting, as there are many individuals who might not have an unlimited supply of money. Decisions are made about paying household bills in relation to the income that has been generated. Then comes a point in time when one realizes a need to invest in a home improvement project, this results in an analysis of the finances such as, the expense and benefit of the project. Company’s do the same thing except onRead Morecapital budget 1831 Words   |  4 Pagesï » ¿Critically reflect on the importance of capital budgeting.   Why is this heated subject in many boardrooms? How does capital budgeting promote the financial health of an organization? How will you use the financial techniques you have learned this week to promote the financial health of your organization? A capital budget is very important for a business. It is a heated subject because a decision about capital budgeting can help the business to determine if the proposed investments or projectRead MoreOptimal Capital Budget995 Words   |  4 PagesOptimal Capital Budget ï  ® Finance theory says to accept all positive NPV projects. ï  ® Two problems can occur when there is not enough internally generated cash to fund all positive NPV projects: Increasing Marginal Cost of Capital ï  ®Externally raised capital can have large flotation costs, which increase the cost of capital. ï  ®Investors often perceive large capital budgets as being risky, which drives up the cost of capital. (More...) ï  ¬An increasing marginal cost of capital. ï  ¬Capital rationing Read MoreCapital Budget Recommendation1037 Words   |  5 PagesCapital Budget Recommendation ACC/543 Capital Budget Recommendation As a dedicated furniture maker and businessman, a clear understanding of the techniques used to assist in capital budgeting is important. 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Capital Cycle In orderRead MoreCapital Budget Process With Expansionary Versus Replacement1273 Words   |  6 PagesCapital Budget Process with Expansionary Versus Replacement This report is a comparative analysis of the capital budget process during making decision of expansionary versus replacement. With the objective it is the goal to maximize the wealth company and its shareholders. This process can include expansion or replacement or replacing them and which ones better show capital budgeting will help in processing the difference. Replacement decision concerns whether an existing asset should replaced byRead MoreCapital Budget1446 Words   |  6 PagesCases and Exercises for Value and Capital Budgeting Corporate Finance Academic Year 2012/2013 1. The treasurer of Amaro Canned Fruits has projected the cash ï ¬â€šows of projects A, B and C as follows (measured in e): Year 0 Project A Project B Project C Year 1 70, 000 130, 000 75, 000 Year 2 70, 000 130, 000 60, 000 −100, 000 −200, 000 −100, 000 Suppose the relevant discount rate is 12% per annum. (a) Compute the proï ¬ tability index for each of the three projects. (b) Compute the NPV for eachRead MoreCapital Budget Recommendation1135 Words   |  5 PagesCapital Budget Recommendation Managerial Accounting and Legal Aspect of Business/ACC 543 May 24, 2010 Capital Budget Recommendation Guillermo Navallez is the owner of Guillermo Furniture, a company thatRead MoreThe Cost Of Capital Budget1469 Words   |  6 PagesThe risk that the company puts itself in within their sector should also give an idea of the capital budget. A higher risk within a specific sector the more that there should be invested. The cause of this was a hurdle rate that was too low. Another point to address is the projects overall contribution to the firms borrowing power. What may occur is the cost of debt ratio to fluctuate with the cost of equity ratio. As the company continues to operate, the process needs to carefully dissect eachRead MoreCapital Acquisitions Budget509 Words   |  2 PagesThe capital acquisitions budget has a number of options available to it. There are a number of different elements that need to be taken into consideration, such as the state of the existing resources and the need within the community. This report will focus on the financial aspects only, however. The first potential acquisition is two garbage trucks to help handle collection as our countys population and business base expands. The trucks each cost $150,000 and have a useful life of 10 years. The