The document provides details for Assignment 2 of the JWI 530: Financial Management I course. It includes 3 case analyses involving evaluating capital investment techniques. The first case involves choosing between leaving $300,000 in a savings account or investing it based on projected cash flows. The second case involves analyzing investment options for purchasing new equipment. The third case involves evaluating the potential acquisition of a small law firm. Students are required to calculate financial metrics like payback period, discounted payback period, net present value, and internal rate of return for each case and provide recommendations based on the analyses.

1. JWI 530: Financial Management I
Assignment 2
©2016 Strayer University. All Rights Reserved. This document
contains Strayer University confidential and proprietary
information
and may not be copied, further distributed, or otherwise
disclosed, in whole or in part, without the expressed written
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Strayer University. This course guide is subject to change based
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Page 1 of 5
Assignment 2: Management Accounting Application
Due Week 10, Day 7, Sunday (Weight: 22.5%)
In this assignment you will demonstrate your understanding of
capital investment techniques by
evaluating the following three case studies.
Case Analysis 1 – Weight 20% of total assignment
You work for a small, local telecommunications company. In
five years, the company plans to undertake a
major upgrade to its servers and other IT infrastructure.
Management estimates that it will need up to
$450,000 to cover all related costs; however, as a fairly young

2. company, the goal is to pay for the
upgrade with cash and not to take out loans.
Right now, you have $300,000 in a bank account established for
Capital Investments. This account pays
6% interest, compounded annually.
A member of the finance department has approached you with
an investment opportunity for the
$300,000 that covers a five-year period and has the following
projected after-tax cash flows:
Year Projected Cash
Flow
1 $94,000
2 $114,000
3 $134,000
4 $114,000
5 $94,000
Based on this information, answer the following questions:
1) How much money will be in the bank account if you leave
the $300,000 alone until you need it in five
years?
2) If you undertake the investment opportunity, what is the
Nominal Payback Period?
3) Using the factors for 6%, what is the Discounted Payback
Period?
4) What is the Net Present Value of this investment

3. opportunity?
5) Which option – make the investment or leave the money in a
savings account – would you
recommend to your CEO? Why? What additional
factors/information might make you change your
point of view?
JWI 530: Financial Management I
Assignment 2
©2016 Strayer University. All Rights Reserved. This document
contains Strayer University confidential and proprietary
information
and may not be copied, further distributed, or otherwise
disclosed, in whole or in part, without the expressed written
permission of
Strayer University. This course guide is subject to change based
on the needs of the class.
Page 2 of 5
Case Analysis 2 - Weight 30% of total assignment
The CEO of Dynamic Manufacturing was at a conference and
talked to a supplier about a new piece of
equipment for its production process that she believes will
produce ongoing cost savings. As the
Operations Manager, your CEO has asked for your perspective

4. on whether or not to purchase the
machinery.
After talking to the supplier and meeting with your Engineers
and Financial Analysts, you’ve gathered the
following pieces of data:
• Cost of Machine: $150,000
• Estimated Annual After Tax Cash Flow Savings: $65,000
(which may or may not grow)
• Estimated machinery life: 3-5 years (after which there will be
zero value for the equipment and no
further cost savings)
• You seem to recall that Dynamic’s Finance organization
recommends either a 10% or a 15%
discount rate for all Cost Savings Projects.
From your JWMI MBA, you understand that you need to
understand the project financials to ensure that
this investment will be economically attractive to Dynamic
Manufacturing’s shareholders.
Calculate the Nominal Payback, the Discounted Payback, the
Net Present Value and the IRR (so 4
answers for each scenario) assuming:
• Alice (A) recommends using the base assumptions above: 3
year project life, flat annual savings,
10% discount rate
• Bill (B) recommends savings that grow each year: 3 year
project life, 10% discount rate and a

5. 10% compounded annual savings growth in years 2 & 3. In
other words, instead of assuming
savings stay flat, assume that they will grow by 10% in year 2,
and then grow another 10% over
year 3 in year
• Carla (C) believes we use a higher Discount Rate because of
the risk of this type of project: 3
year project life, flat annual savings, 15% discount rate.
• Danny (D) is convinced the machine will last longer than 3
years. He recommends using a 5 Year
Equipment Life: 5 year project and savings life, flat annual
savings, 10% discount rate. In other
words, assume that the machine will last 2 more years and
deliver 2 more years of savings.
Discussion – in a Word Document in paragraph form, respond to
the following:
1) Which person’s scenario would you present to management
and why? From a strictly financial
(numbers) perspective, would you recommend this purchase to
management?
2) In your opinion, which person’s scenario is the most
aggressive (i.e., is based on the most
aggressive assumptions)? If you were to select this scenario as
the basis for your proposal, how
would you justify the more aggressive assumptions?
3) In SIMPLE English (as in talking to a non-Finance and non-
MBA person), explain why there is
value to management in running all 4 of these scenarios.
4) Beyond financial measures, what other considerations would

6. you want to consider, before making
a recommendation to management?
5) If you were the CEO, would you approve this proposal? Why
or why not?
JWI 530: Financial Management I
Assignment 2
©2016 Strayer University. All Rights Reserved. This document
contains Strayer University confidential and proprietary
information
and may not be copied, further distributed, or otherwise
disclosed, in whole or in part, without the expressed written
permission of
Strayer University. This course guide is subject to change based
on the needs of the class.
Page 3 of 5
Case Analysis 3 – Weight 40% of total assignment
You are the General Manager at the Bicker, Slaughter, and
Lynch Law Firm. There is an opportunity to
buy out a small law firm that was just started by a young
MBA/JD, and you believe the firm can be grown
and become a lucrative part of your Firm.
With help from your finance leader, you have estimated the
following benefit streams for this new division:

7. You estimate that the purchase price for this firm would be
$200,000 and that additional net working
capital would be needed in the amount of $60,000 in year 0, an
additional $20,000 in year 2 and then
$20,000 in year 5.
BSL usually spend about $275,000 per year in advertising. If
you make this acquisition, you would ask
that advertising spending be increased by an incremental one-
time amount of $50,000 in year 0 to
publicize the firm’s expansion.
Your finance leader has indicated that the firm has access to a
credit line and could borrow the funds at a
rate of 6%. He also mentions that when he runs project
economics for capital budgeting (such as a new
copier or a company car), he recommends a standard 10% rate
discount, but the one other time they
looked at an acquisition of a smaller firm, he used a 12% rate
discount. Obviously you will want to select
the most appropriate discount rate for this type of project.
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Before Tax
Cash Flow
From
Operations $(149,000) $0
$51,380

8. $88,760
$114,100
$129,780
$143,640
$167,300
After Tax
Net Income
From
Operations $(103,500)
$(50,500)
$36,700
$63,400 $81,500 $92,700
$102,600
$119,500

9. After Tax
Cash Flow
From
Operations $(85,600) $15,000
$48,600
$72,200 $95,550
$101,300
$125,200
$140,200
JWI 530: Financial Management I
Assignment 2
©2016 Strayer University. All Rights Reserved. This document
contains Strayer University confidential and proprietary
information
and may not be copied, further distributed, or otherwise
disclosed, in whole or in part, without the expressed written
permission of
Strayer University. This course guide is subject to change based
on the needs of the class.
Page 4 of 5

10. At the end of 8 years, the plan will be to sell this division. The
estimated terminal value (the sale and the
return of working capital) is conservatively estimated to be
$300,000 of after-tax cash flow help.
Using the data that you need (and ignoring the extraneous
information), calculate the Nominal Payback,
the Discounted Payback, the Net Present Value, and the IRR for
this potential acquisition.
Discussion – in a Word Document in paragraph form, respond to
the following:
1) From a purely financial (numbers) perspective, would you
recommend this purchase to
management? Why?
2) What are some of the non-financial elements that need to be
considered for this proposal?
3) Assumptions in project economics can have a huge impact on
the result. Identify 3 financial
elements/assumptions in your analysis that would make this
project not be financially attractive
(e.g., answer this question: what would have to be true for this
to be a bad investment?).
4) If you were the CEO, would you approve this proposal? Why
or why not?
Weight: 22.5% Assignment 2: Management Accounting
Application

11. Criteria Unsatisfactory Low Pass Pass High Pass Honors
1. In Case Analysis
1, calculate the
various investment
options.
Weight: 20%
Did not
demonstrate
understanding by
either not
submitting the work
or only calculating
up to 2 questions
correctly.
Partially
demonstrated
understanding by
calculating a
minimum of 3
questions
correctly.
Satisfactorily
demonstrated
understanding by
calculating 4
questions
correctly.
Demonstrated a
high level of
understanding by

12. calculating a
minimum of 5
questions
correctly.
Exemplarily
demonstrated
understanding by
calculating all
seven questions
correctly.
2. In Case Analysis
2, fully evaluate
and support your
conclusions in
regards to the
investment options
by calculating the
nominal payback,
the discounted
payback, the net
present value, and
the IRR and fully
explain the financial
rational for your
recommendations.
Weight: 30%
Did not submit or
incompletely
analyzed the
investment options
and did not use
financial knowledge

13. and calculations to
explain
recommendations.
Partially analyzed
the investment
options and
partially used
financial
knowledge and
calculations to
explain
recommendations.
Satisfactorily
analyzed the
investment options
and satisfactorily
used financial
knowledge and
calculations to
explain
recommendations.
Completely
analyzed the
investment options
and used financial
knowledge and
calculations to
explain
recommendations.
Exemplarily
analyzed the
investment options

14. and exemplarily
used financial
knowledge and
calculations to
explain
recommendations.
JWI 530: Financial Management I
Assignment 2
©2016 Strayer University. All Rights Reserved. This document
contains Strayer University confidential and proprietary
information
and may not be copied, further distributed, or otherwise
disclosed, in whole or in part, without the expressed written
permission of
Strayer University. This course guide is subject to change based
on the needs of the class.
Page 5 of 5
Weight: 22.5% Assignment 2: Management Accounting
Application
Criteria Unsatisfactory Low Pass Pass High Pass Honors
3. In Case Analysis
3, fully evaluate the
buy-out opportunity
and support your
conclusions by
calculating the

15. nominal payback,
the discounted
payback, the net
present value, and
the IRR for the
potential acquisition
and fully explain the
financial rational for
your
recommendations.
Weight: 40%
Did not submit or
incompletely
analyzed the
acquisition
opportunity and
incompletely used
financial knowledge
and calculations to
explain
recommendations.
Partially analyzed
the acquisition
opportunity and
partially used
financial
knowledge and
calculations to
explain
recommendations.
Satisfactorily
analyzed the

16. acquisition
opportunity and
satisfactorily used
financial
knowledge and
calculations to
explain
recommendations.
Completely
analyzed the
acquisition
opportunity and
used financial
knowledge and
calculations to
explain
recommendations.
Exemplarily
analyzed the
acquisition
opportunity and
exemplarily used
financial knowledge
and calculations to
explain
recommendations.
4. Professionally
communicated:
writing is clear,
concise, and free of
mechanical errors.
Weight: 10%

17. Written
communication
does not flow and
fails to justify or
express student
assertions. Multiple
mechanical errors
or much of the
communication is
difficult to
understand.
Written
communication
does not flow or
the discussion
fails to justify
conclusions and
assertions.
Several
mechanical errors
make parts of the
text difficult to
understand.
Written
communication
flows but lacks
conciseness or
clarity; assertions
and conclusions
are generally
justified and
explained. There
are more than a

18. few mechanics
errors.
Written
communication
flows and
concisely and
clearly expresses
the student’s
position in a
manner that
rationally and
logically develops
the topics. There
are a few
mechanical errors.
Written
communication
flows and concisely
and clearly
expresses the
student’s position
in an exemplary
manner that
rationally and
logically develops
the topics. It is free
of mechanical
errors.