Finacine casework MBA 796
Case III – American Grain Company
Due: Friday, December 2nd
(may be submitted electronically via e-mail)
Please respond to the following questions regarding the American Grain Company case posted on Isidore.
Calculate the relevant cash flows associated with purchasing the new pellet machines. (Note: this is a replacement scenario; the new machines will replace existing machines.) The depreciation schedule is as follows: 20%; 32%; 19%; 12%; 11%; and 6%.
Calculate the net present value (NPV) and internal rate of return (IRR) for the pellet mill project. Based on these results would you recommend proceeding with the project?
What qualitative factors should be considered in the purchase decision and why? (You may use bullet points in response to this question.)
Based on the results of your quantitative analysis, and your qualitative considerations, write a letter to management making a recommendation whether or not to purchase the new machines. You must include support for your recommendation.
Questions 1 and 2 may be completed in Excel. Your responses to questions 3 and 4 should not exceed two pages, combined. Please use 12-point text, double-spacing and 1-inch margins.
Cases may be completed in groups no larger than three. Each case must represent the work of the individual or individual group. No sharing of spreadsheets is allowed. I will be available to answer questions about the assignment.