Stephen Andrew Case

PLEASE READ THE SYLLABUS FOR FURTHER DETAILS ON THE REPORT.

1. Use the operating projections for each project to compute a net present value (NPV) for each. Which project creates more value? Give justification for the discount rate used and briefly let the reader know how you arrive at the constant growth rate used to find terminal value.

2. Compute the internal rate of return (IRR), discounted payback period and Profitability Index for each project. How do these metrics compare to NPV as tools for evaluating projects? Should they affect Harris's deliberations?

3. What additional information does Harris need to complete her analyses and compare the two projects? Do the cash flows provided for the projects seem reasonable? Have they forgotten any possible cash flows that should be included? What specific questions should she ask each of the project sponsors?

4. Conduct sensitivity analysis for the following situations: a) Different COC and b) Different perpetual growth rate. Use one higher and one lower number. Of course, you don't need to provide the components of free cash flows again since we already have seen them when doing part (1). In other words, when utilizing different COC, for example, just provide the NPV (no need for cash flows).

5. Compare the business cases for each of the two projections under consideration. Which do you regard as more compelling? If Harris is forced to recommend one project over the other, which should she recommend? Why?

Questions (1) and (2) should result in two exhibits, one for each project. Question (4) should result in the third exhibit. Please make sure that the font for the numbers is readable. Font in exhibits should not be less than 10.