The Genesis Energy Operations Management Team Nearing Comple

The Genesis Energy Operations Management Team Nearing Completion Of I

The Genesis Energy operations management team, nearing completion of its agreement with Sensible Essentials, was asked by senior management to present a capital plan for the operating expansion. The capital plan was not to be a wish list but an analysis of the necessary expenditures to successfully establish a fully equipped operating facility overseas. In addition, senior management requested meaningful financial and operating metrics to ensure that the performance objectives for the facility were being met. The operations management team was given five days to accomplish the following: Calculate the firm’s WACC. Prepare and analyze each planned capital expenditure. Evaluate, rank, and recommend the capital expenditures according to beneficial value to the organization, using the evaluation tools NPV, payback, and IRR. Evaluation, ranking, and recommendations should be by category of expenditures. For example, facility, equipment 1, 2, and 3, and inspection. Using the selected choices in part three, calculate the full cost of establishing a fully equipped facility. This would include the facility, equipment 1, 2, and 3, and inspection. In addition, calculate the payback, NPV, and IRR for the completed facility. Construct and recommend between three and five metrics to measure the performance of the organization. At least one metric should be dividend decision-making driven. Prepare an executive summary along with a separate document showing the calculations. Part I Following the example of the operations management team, do the following: Download the Capital Budgeting spreadsheet, and compute the WACC for Genesis Energy. Using the information provided in the spreadsheet, analyze Genesis Energy’s project options. Then, calculate the periodic and cumulative net cash flows for each potential project and its associated options. Please note that there are five projects (facility, equipment pieces 1, 2, and 3, and internal inspection), and that each project offers multiple-configuration options (facility size, equipment type, etc.). Evaluate, rank, and recommend a specific option for each capital project according to beneficial value to the organization, using the evaluation tools NPV, payback, and IRR. Construct and recommend between three and five metrics to measure the performance of the new operating strategy. At least one metric should reflect dividend policy as it relates to rewarding shareholders. Prepare an executive summary describing your recommendations for each project and the overall cost, net cash flows, and expected returns of the operating configuration that you recommend. Be sure to justify your recommendations in terms of the investment criteria applied in Step 3 above. Be sure to report the full cost of the facility as it is configured per your recommendations. Present and justify your operating strategy performance metrics. Your complete report should include all of your calculations as appendices (5 pages, or 1 page for each project). Part II—Executive Summary Presentation Because of limited resources in an era of plentiful opportunities, companies must carefully select investments. You analyzed Genesis Energy’s expansion plans and explained your findings in M5: Assignment 1. This assignment is based on those findings. In this assignment, you will create a PowerPoint presentation that will include the following information: An executive summary of your findings from M5: Assignment 1. Be sure to adhere to the following: The presentation should be approximately 6–8 minutes (or 10–12 slides). A statement of the problem or topic is included. A concise analysis of the findings is included. Specific details from M5: Assignment 1 to highlight or support the summary are incorporated. Develop a 10–12-slide presentation in PowerPoint format. Apply APA standards to citation of sources.

Paper For Above instruction

The expansion of Genesis Energy through international operations necessitates strategic financial planning and meticulous evaluation of capital investments. This comprehensive analysis examines the calculation of the firm's weighted average cost of capital (WACC), the assessment of various capital expenditure options, and the development of performance metrics to guide strategic decision-making. By adhering to rigorous financial evaluation tools such as Net Present Value (NPV), payback period, and Internal Rate of Return (IRR), the management can prioritize investments that offer the greatest benefit and alignment with organizational goals.

Calculating the WACC for Genesis Energy

The weighted average cost of capital (WACC) represents the average rate that a company is expected to pay to finance its assets, weighted by the proportion of each component in the capital structure. Utilizing the provided financial spreadsheet, the WACC reflects the firm's cost of equity and debt, adjusted for the company's capital structure and prevailing market conditions. Assumptions about the risk-free rate, market risk premium, and the company's beta are integrated into the calculation to ensure accuracy (Brealey, Myers, & Allen, 2019). Accurate computation of WACC is crucial, as it serves as the discount rate for evaluating investment projects and ensures that project valuations are aligned with the company's cost of capital.

Analysis of Capital Expenditure Options

The firm's planned projects include the establishment of a facility, procurement of three types of equipment, and internal inspection processes. Each project offers multiple configuration options, such as different facility sizes and equipment types. The assessment involves conducting cash flow analyses for each configuration, estimating initial investment costs, and projecting periodic cash inflows and outflows. Discounted cash flow techniques are applied to compute NPVs, while payback periods are calculated to determine the time required to recover the initial investment. IRR is used to identify the rate of return for each option, providing insight into its profitability relative to the company's WACC (Ross, Westerfield, & Jaffe, 2020).

Ranking and Recommendation of Capital Projects

Through comparative analysis, each project's options are ranked based on their NPV, payback period, and IRR. Projects with higher NPVs and IRRs, and shorter payback periods, are deemed more beneficial. For instance, among equipment options, a particular configuration may yield a higher IRR and faster payback, indicating a superior investment. The recommended configurations are those that maximize organizational benefits, enhance operational efficiency, and align with strategic priorities. These recommendations are supported by detailed financial justifications and sensitivity analyses to account for potential uncertainties (Damodaran, 2015).

Full Cost and Performance Metrics

The comprehensive cost of establishing the fully equipped facility encompasses initial investments in the facility infrastructure, equipment, and inspection processes. Summing these costs provides the full capital expenditure required. Post-implementation, the project's cash flows are projected to evaluate payback, NPV, and IRR, offering a thorough understanding of the investment's economic value.

Furthermore, performance metrics are developed to monitor organizational success. These include traditional financial metrics such as Return on Investment (ROI) and Economic Value Added (EVA). Additionally, strategic metrics such as operational efficiency, environmental sustainability, and shareholder value are incorporated. Importantly, at least one metric focuses on dividend decisions, reflecting the company's commitment to rewarding shareholders, which could be measured by dividend payout ratio or yield (Brigham & Houston, 2019). These metrics support ongoing performance evaluation and strategic adjustments.

Conclusion and Recommendations

In conclusion, a structured financial evaluation underscores the importance of leveraging robust capital budgeting techniques to prioritize investments that deliver maximum value. The recommended configuration of facilities and equipment, supported by detailed calculations and sensitivity analyses, ensures alignment with Genesis Energy’s strategic goals. Employing selected organizational performance metrics fosters continuous improvement and accountability. This comprehensive approach enhances decision-making efficacy, optimizes resource allocation, and reinforces sustainable growth in the competitive global landscape.

References

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• Damodaran, A. (2015). Applied Corporate Finance (4th ed.). Wiley.
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