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.
