Explore BrainMass
Share

Explore BrainMass

    Genesis Energy- WACC, NPV, payback, and IRR

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Following the example of the operations management team, do the following:

    Download 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.

    © BrainMass Inc. brainmass.com October 10, 2019, 8:06 am ad1c9bdddf
    https://brainmass.com/business/net-present-value/genesis-energy-wacc-npv-payback-irr-608123

    Attachments

    Solution Preview

    Note:

    The question did not specify the cost of debt and cost of equity to be taken for the calculation of WACC. Thus, it has been assumed that the cost of debt is 5% and the cost of equity is 7%. You can change these values in excel to change the answer.

    The response addresses the query posted in 730 words with APA references

    //The five metrics dimensions to be selected for the evaluation and assessment of the most suitable project for Genesis Energy are NPV, discounted payback period, IRR, dividend policy and Return on investment. Thus, the selection of the projects will be evaluated on the basis of these parameters in the below mentioned Executive Summary.//
    In case of facility project option, it has been assessed that the NPV is found to be negative. The negative NPV indicates that the discounted cash flows of the project are less than the initial investment undertaken (Götze, Northcott & Schuster, 2015). Furthermore, the second evaluating factor is discounted payback period (DPBP) that is found to be the highest. As per DPBP, Beyond five years and six will be consumed in the project in order to realize the total initial investment undertaken in the project. The third parameter is IRR, where it was found the IRR ...

    Solution Summary

    The response addresses the query posted in 730 words with APA references and Excel file.

    $2.19