Complete Worksheet and 5 page executive summary.[shortposting]
The Genesis Energy 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:
Following the example of the operations management team, do the following:
- Use the excel sheet attached -the Capital Budgeting spreadsheet, and compute the WACC for Genesis Energy.
- Using the information provided in the spreadsheet, analyze Genesis Energy’s project options. Then, calculate the periodic and cumulative net cash flows for each potential project and its associated options. Please note that there are five 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 the 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 (1 page for each project).