Assignment 2: Genesis Capital Plan Report

Assignment 2: Genesis Capital Plan Report
The Genesis operations management team, nearing completion of its agreement with Sensible Essentials, was asked by senior management to present a capital plan for the operating expansion. The capital plan was not to be a wish list but an analysis of the necessary expenditures to successfully establish a fully equipped operating facility overseas.
In addition, senior management requested meaningful financial and operating metrics to ensure that the performance objectives for the facility were being met. The operations management team was given five days to accomplish the following:
Calculate the firm’s WACC.
Prepare and analyze each planned capital expenditure.
Evaluate, rank, and recommend the capital expenditures according to beneficial value to the organization, using evaluation tools NPV, payback, and IRR. Evaluation, ranking, and recommendations should be by category of expenditures. For example, facility, equipment 1, 2, and 3, and inspection.
Using the selected choices in part three, calculate the full cost of establishing a fully equipped facility. This would include the facility, equipment 1, 2, and 3, and inspection. In addition, calculate the payback, NPV, and IRR for the completed facility.
Construct and recommend between three and five metrics to measure the performance of the organization. At least one metric should be dividend decision-making driven.
Prepare an executive summary along with a separate document showing the calculations.
Following the example of the operations management team, do the following:
Download the Capital Budgeting spreadsheet, and compute the WACC for Genesis.
Using the information provided in the spreadsheet, analyze Genesis’s project options.
Using the information provided, calculate the periodic and cumulative net cash flows for each potential project and its associated options. Please note that there are 5 projects (facility, equipment pieces 1, 2, and 3, and internal inspection) and that each project offers multiple configuration options (facility size, equipment type, etc.).
Evaluate, rank, and recommend a specific option for each capital project according to beneficial value to the organization, using evaluation tools NPV, payback, and IRR.
Construct and recommend between three and five metrics to measure the performance of the new operating strategy. At least one metric should reflect dividend policy as it relates to rewarding shareholders.
Prepare an executive summary describing your recommendations for each project and the overall cost, net cash flows, and expected returns of the operating configuration that you recommend. Be sure to justify your recommendations in terms of the investment criteria applied in Step 3 above. Be sure to report the full cost of the facility as it is configured per your recommendations. Present and justify your operating strategy performance metrics.
Your complete report should include all of your calculations as appendices (5 pages, or 1 page for each project).
Write a 5–6-page report in Word format. Apply APA standards to citation of sources











Cash Flow Cash Flow

Cash Flow

200 400


-200 -200 100 400 400


-300 -400



-100 100 200 400 200


-100 200 200 300 600

150 150 150 150 150 750


200 250 250 300 700

1500 -100

325 325 1500

700 -200

250 300

600 -175 -100 175 175 175

750 -300 -200 300 400 400

100 500 500 300 300 800

200 200 200 100 100

Genesis WACC
Item Amount ($000) % Interest Weighted
Total Rate
Accounts Payable 300 7.50%
Short-term Note Payable 100 2.50%
Total Current Liabilities 400
Long-term Note Payable 10.00%
Mortgage Payable 1,

200 30.00%
Total Liabilites 1,

Common Stock Equity 1,

500 37.50%
Operating Equity 12.50%
Total Liabilities and Equity 4,000,000 100.00%
Genesis Captial Projects
Initial Investment Cash Flow Cash flow Cashflow
Y1 Y2 Y3 Y4 Y5 Y6-10
Project A: 25-emp facility 2000 -200 -300 -400 1000
Project B: 40-emp facility 250 150
Project C: 75-emp facility 3000 -100 700
Equipment 1 – fully automatic 1500 800
Equipment 1 – semi-automatic -50
Equipment 1 – manual 750
Equipment 2 – Standard

Equipment 2 – top of line 275 325
Equipment 3 – 3-man machine -150 350
Equipment 3 – 2-man machine
Equipment 3 – 5-man machine
In-house inspection 1800
Contract inspection
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