MT480M4: Assess investment options based upon cost of capital and expected returns.
Assessment Part 1:
Read the scenario and address all of the checklist items.
Scenario: A new product manager presents to you, the Chief Financial Officer, a proposal to expand operations that includes the purchase of a new machine. The product manager is certain that the positive cash flows, which exceed the initial outlay by $20,000 by the end of year 4, will bring both praise and approval. You explain the company uses a 12% discount rate for cash flows and project related budgeting. You take the time to present the details of the Net Present Value (NPV) model used to assess product proposals. The data is below.
Project Outflows to Buy Machine
Day 1 Cash Out -$70,000 12% discount rate applied.
End Year 1 Cash Repayment $10,000
End Year 2 Cash Repayment $20,000
End Year 3 Cash Repayment $30,000
End Year 4 Cash Repayment $30,000
To educate the new manager, and as CFO, you take the time to evaluate the following:
Evaluate how the Time Value of Money concept results in a discounted cash flow in year 4 (an amount less than $30,000).
Assess the investment option using a 12% cost of capital discount rate by applying the NPV model. Include values in your assessment. Provide the NPV at a 12% cost of capital discount rate. Include values in your assessment.
Assess the investment option when a 7% cost of capital discount rate, versus a 12% cost of capital discount rate is applied. Include values in your assessment. Provides the NPV at a 7% cost of capital discount rate.
Assessment part 2 :
GEL- 7.02: Apply ethical reasoning to ethical issues within the field of study.
As legal considerations in the financial world are often changing, the managers need to be aware of current as well as pending legislation to stay up-to-date with compliance issues. In addition, consumers and executive boards are scrutinizing ethical considerations more rigorously. In this Assessment you will review legislation as well as examine ethical considerations to apply them to a scenario.
Prior to the passing of the Tax Cuts and Jobs Act (2017) some of America’s largest corporations were able to apply questionable, yet legal, schemes to book profits in offshore accounts to avoid (not evade) higher levels of tax expense. These tax savings were substantial; it is estimated multinational corporations had been able to avoid an estimated $90 billion in federal income taxes each year.
Scenario: The Board of Directors, shareholders, and stakeholders are just now learning that the corporation employed offshore banking transactions to minimize tax burdens.
Checklist: As the Chief Financial Officer (CFO) address the following items:
Explain to what extent the corporation’s shareholders might feel the corporation breached any measures of an entity of the highest ethical standards.
Explain to what extent the corporation’s Board of Directors might ever feel that you as CFO breached any measures of an entity of the highest ethical standards.
Use at least two of the ethical viewpoints as presented in “ethical approaches” to provide the ethical reasoning you would use to address your company’s offshore profits issue (also specify the approaches you use).
In total submit a minimum 825 word paper with an additional title page in APA format.
Tax Cuts and Jobs Act. 115 Cong., P.L. 115-97 (2017). Retrieved from https://www.congress.gov/bill/115th-congress/house-bill/1
Ethical approaches link –
Minimum Submission Requirements
Address all the checklist items.
The main points of the response should be developed and explained clearly with appropriate financial and accounting terminology.
Support all arguments (no errors in logic) in responding to checklist items.
Your content should follow proper APA citation style. Review the APA formatting and citation style found in the Writing Center. APA formatting dictates that your paper includes a cover sheet, the paper is double spaced, in Times New Roman 12-point font, with correct citations, and uses Standard English with no spelling or punctuation errors.
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