In this assignment, you will be revisiting Wicked Good Cupcakes and their decision to add more expensive technologies to their company. ? Please see attachments for the assig

BUS523 Quantitative Analysis for Managers

CapEx Replacement

Due Date: Sunday by 11:59 p.m. EST of Unit 6 Total Points: 100

Overview:

Wicked Good Cupcakes (WGC) expanded one year ago with the purchase of 3 baking/packaging systems. A vendor, Acme Baking, has suggested that there would be significant cost savings by the purchasing and installation of their newer integrated baking technology. The existing systems and Acme’s proposed integrated baking technology have an expected useful life of 10 years, with no salvage value. The WGC tax rate is 45%, and their IRR is 10%.

Here is a summary of the financials:

Present System Acme Baking

Gross Profit $600,000 $1,200,000

Less Depreciation $300,000 $450,000

Profit before tax $300,000 $750,000

Tax @ 45% $135,000 $338,000

Profit After Tax $165,000 $412,000

Add Depreciation $300,000 $450,000

After Tax cash flow $465,000 $862,000

Instructions:

Based on the unit’s material and what you have read above: 1. Should WGC invest in Acme’s technology? Why or why not? Base your decision

on determining the Net Present Value (NPV) as well as the difference in cash flows

between the present system and Acme’s new technology.

2. Does the increase in Gross Profit alone justify the new technology? Why or why not?

Requirements: .

 Two to three-pages, excluding the Title and Reference pages.

 All questions posed must be addressed completely.

 APA format, including in-text citations for referenced works.

Be sure to read the criteria, by which your assignment will be evaluated,

before you write, and again after you write.

Evaluation Rubric for CapEx Replacement Assignment

CRITERIA Exemplary Proficient Deficient

(14 – 15 Points) (10 – 13 Points) (0 – 9 Points)

Cash Flow and NVP

Comparison

The cash flow

statement is clearly

presented, including

all key details.

The cash flow

statement is

presented, though

key details may not

be clearly or

completely presented.

Does not provide the

cash flow statement,

or the overview is

missing key details.

(23 – 25 Points) (16 – 22 Points) (0 – 15 Points)

Net Present Value

Analysis

The evaluation of net

present value is

clearly presented,

including all key

details.

The evaluation of net

present value is

presented, though

key details may not

be clearly or

completely presented.

Analysis is

inadequate or

missing.

Cash Flows Analysis The evaluation of

cash flows is clearly

presented, including

all key details.

The evaluation of

cash flows is

presented, though

key details may not

be clearly or

completely presented.

Analysis is

inadequate or

missing.

Gross Profit In Both

Scenarios Analysis

The evaluation of

gross profit in both

scenarios is clearly

presented, including

all key details.

The evaluation of

gross profit in both

scenarios is

presented, though

key details may not

be clearly or

completely presented.

Analysis is

inadequate or

missing.

(9 – 10 Points) (7 – 8 Points) (0 – 6 Points)

Clear and

Professional

Writing and APA

Format

Writing and format are

clear, professional,

APA compliant, and

error-free.

Few errors that do

not impede

professional

presentation.

Errors impede

professional

presentation;

guidelines not followed.