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Question descriptionThis assignment involves development of an Excel-based capital budgeting model and an analysis of a proposed capital budgeting project for Costco.

Prepare Capital Budgeting Model and Analysis

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Describe a capital budgeting project (i.e., an investment in fixed assets) that might be undertaken by Costco. Make sure that the project has an initial investment in Year 0, followed by a series of annual cash flows for at least seven (7) years. In addition, determine the discount rate, or hurdle rate, that is appropriate for this project and explain the determination of that rate.

Develop your own Excel spreadsheet model that can be used to determine the Net Present Value (NPV), Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR), and Profitability Index (PI).

The Excel spreadsheet that you develop must use Excel’s automated financial functions for determining the NPV, IRR,MIRR, and PI.

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Following the completion of the spreadsheet analysis, explain whether, or not, the project should be implemented? Also, discuss what the various indicators (i.e., NPV, IRR, MIRR and PI) mean?

For this assignment, it is necessary to develop your own Excel spreadsheet; it needs to be submitted.

The analysis needs to include:

1.Description of Proposed Capital Budgeting Project-Describe a capital budgeting project (i.e., an investment in fixed assets) that might be undertaken by the company that you have selected. Make sure that the project has an initial investment in Year 0, followed by a series of annual cash flows for at least seven (7) years. In addition, determine the discount rate, or hurdle rate, that is appropriate for this project and explain the determination of that rate.

2.Explanation of the Excel Capital Budgeting Model-Develop your own Excel spreadsheet model that can be used to determine the Net Present Value (NPV), Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR), and Profitability Index (PI). Explain how the model is constructed and the required inputs. Discuss the outputs of the model.

3.Explanation and Interpretation ofCapital Budgeting Criteria-Prepare a written analysis of theresults including NPV,IRR, MIRR, PI, and Profitability Analysis.

4.Recommendation About Implementation of Capital Budgeting Project–Develop and defend a recommendation about whether the proposed project should be implemented or not.

Writing Instructions

The discussion portion of the analysis should be three to five pages in length, double spaced, and should employ APA style and format for reference citations. Supporting data (e.g., figures, tables, etc.) and references should be submitted limited to four separate attachments in an appendix after the written portion of the paper.

The paper should begin with a short introduction and then proceed to examine the four topics outlined in the previous section.

The subheadings used in the paper should be:

1.Introduction

2.Description of Proposed Capital Budgeting Project

3. Explanation of the Excel Capital Budgeting Model

4. Explanation and Interpretation of Capital Budgeting Criteria

5. Recommendation About Implementation of Capital Budgeting Project

Completeness of analysis:The analysis must demonstrate a solid understanding of capital budgeting and the analysis of corporate investments.All assumptions used in preparing the projections for the project need to be thoroughly explained.

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