Some specific questions that should be answered are: • Start by sizing up the business situation • Before jumping into the calculations, analyze the expansion opportunities from a qualitative standpoint by clearly defining the pros and cons • Establish which cash flows are relevant for each company decision (a template has been provided) • Determine size and timing of the relevant cash flows for each of the proposed activities and calculate the estimated net cash flow for each project • Analyze the merits of each of the projects using the six capital budgeting tools explained in the related lecture and assuming cost of capital levels of 6%, 10%, and 14% • Focusing on the 10% cost of capital assumption, summarize your findings for the three projects and rank them in order of preference • Clearly explain your recommendations with regard to each of the projects to the company management and board of directors providing the reasons behind your recommendations and laying out not only the quantitative but also the qualitative considerations that led to your strategy. Assume MasterDecker pays a tax rate of 20%.
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