FIN 571 Week 6

Learning Team Assignment: Guillermo Furniture Store Recommendation

Resources: The Guillermo Furniture Store Scenario or your own organization, with the approval of your instructor, for this assignment

Write a paper in no more than 2,100 words that analyzes Guillermos alternatives and make a recommendation of a financial decision. The paper must also include a justification for your recommendation.

Create a pro forma cash flow budget for the organization for at least the next 5 years.

Format your paper according to APA standards.

Discussion Questions

How important are the initial forecasts and budgets in capital rationing decisions. How accurate should they be?

Suppose you are a manager considering a capital budgeting project. You have examined the proposed project and, according to every relevant piece of information you can find, you feel the project should be undertaken. After submitting your analysis, the division head informs you that the project has not been approved for funding. Briefly discuss the possible causes of the difference between your opinion of the project and that of upper management.

From one point of view, inflation does not create a problem in the evaluation of a capital budgeting project. From another point of view, inflation creates tremendous problems in the evaluation of a capital budgeting project. What are these points of view? Which do you personally believe and why?

Why can the NPV and IRR methods disagree on the rankings for mutually exclusive projects? If they disagree, which method do you personally believe has more merit and why?

Suppose you are a manager considering a capital budgeting project. You have examined the proposed project and according to every relevant piece of information you can find, you feel this project should be undertaken. After submitting your analysis, the division head informs you that the project ahs not been approved for funding. Discuss the possible causes of the differences between your opinion and that of upper management.