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Capital Budgeting: Wal-Mart Capital Projects

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Every company has capital projects. Wal-Mart must need something! Be it a new wing to the building, a new product line to be funded, a new piece of equipment, find one new acquisition your company needs.

Once you have identified the new possible investment item, what problems are you going to have in estimating the cash flow that might be emanating from the initial investment and problems in getting it funded? Issues might be:

Risk
Cost
Politics (getting it through committees)
Public Relations
etc.,
Identify a potential capital project for your company describe such a project and write a short summary of the problems you see in getting the funding to see it through.

Assignment Expectations:

This part should be two to three pages in length, and should have references to the background materials or other sources you found for this paper. It must discuss both the estimates of the initial investments and the annual incremental after-tax cash flow that is expected to emanate from the investment.

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Solution Preview

Please find tutorial and help for estimating cash flow in the attached file.

Potential Investment Plan for Wal-Mart
Wal-Mart is a global retail organization, which mainly deals with all sorts of day to day products as well as clothing for different segments such as kids, men and women. The company is planning to roll-out old electronic ID tag to track with radio-frequency ID tag in order to determine better inventory control (Wal-Mart, 2012). With this radio-frequency ID tag, the company would be able to track the garments easily regarding its missing or unavailability. In retail store, many times customers do not find suitable size and color because of unavailability of stock that makes customers to move without making any purchase. With this radio-frequency ID tag, the company would be able to minimize the theft of clothing also. In order to replace the electronic ID tag, the company has planned to order 15 million RFID chips (Roberti, 2003).
The company is planning to invest $300 million to implement this radio-frequency ID. Although the company will not be getting direct return from the investment, but through minimizing the missing and thefts and also increasing sales through better inventory control, it is expected that the investment will provide return of $ 8.4 billion per year after implementing throughout its stores. Apart from this, it is expected the technology will help to reduce 15% of the labor cost to company. In addition to this, company will save pre-tax of $ 8.35 billion after implementing this radio-frequency ID tag (Roberti, 2003). As maximum of organizations fails because of ...

Solution Summary

The solution discusses capital budgeting, in particular a capital project for Wal-Mart.

$2.19