Case Variety Enterprises Corporation: Capital Budgeting Decision  

For this case report, you will work individually. The main body of the report must be no shorter than 10 pages and no longer than 20 pages, double spaced. The main body should comprise:

1. Executive Summary – Identify the key problem and summarize the key issues in 1-5 sentences;

2. Introduction/Background information – include relevant facts and issues on company. Competitors, industry

3. Financial Analyses – Assume that you are Joan Hamilton. Provide answers based on both qualitative and quantitative analyses to the following:

– Calculate VEC’s WACC using the data in Exhibit 1.

– Calculate the project’s cash flows using the data in Exhibit

– Why is it important to take into account the effect of inflation in forecasting the cash flows? Briefly comment.

– Evaluate the profitability of the project with the NPV, IRR, MIRR, simple payback period, and discounted payback period methods. Is the project acceptable? Briefly explain. Why is the NPV method superior to the other methods of capital budgeting? Briefly explain.

– Conduct the stand-alone risk analysis of the project with the sensitivity analysis and scenario analysis techniques. Explain why sensitivity analysis and scenario analysis can be useful tools in the capital budgeting decision-making process when economic and financial conditions are likely to change in the future.

4. Recommendation/Solution –Provide one justifiable and realistic solution to the problem; explain the reasons behind the proposed solution; support this solution with justification and include relevant theoretical concepts as well as the results of your research.

Figures and tables could be placed in an appendix at the end of the paper but preferably incorporated in the body where appropriate.  All figures and tables must be numbered and all pages, including pages with tables and figures must be numbered.