Financial Decision Making: MBA 620 Project 5 Analysis Report

This project, completed for MBA 620, focuses on managerial financial decision-making for Maryland Creative Solutions, LLC (MCS). It involves analyzing the cost of capital and capital budgeting decisions to provide recommendations to management. The project includes calculating the weighted average cost of capital (WACC), determining the weight of equity and debt, and assessing the cost of equity and debt. The analysis explores how understanding the cost of capital influences financing decisions and how capital budgeting aids in making better financial choices. Recommendations are provided to improve financial strategies, including reducing WACC, performing scenario analysis, and conducting sensitivity analysis. The project utilizes Excel for calculations and includes an executive summary with findings, conclusions, and recommendations, along with a list of references.

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MBA 620 Financial
Decision Making
Project 5: Managerial
Financial Decision Making
Presented by: [Student’s name here]
Date: [Date here]

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• Do not delete existing slides.
• Do not insert new slides.
• Replace the text inside brackets with your answers.
• Restrict the content on your slides to your key points. You
may elaborate if necessary in the speaker notes section
below each slide.
Instructions

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• Cost of capital helps in analyzing the profitability and
viability of the project.
• It helps the management in decision making with the use
of various methods.
• Cost of capital tells us about the cost involved in the
various sources of financing. Thus helping in comparing
cost of various sources.
• Understanding of cost of capital helps company in
reducing the Overall WACC by choosing more of cheap
cost of sources of finance.
• Lower WACC helps in improving the profitability of
projects. Thus, the project acceptance increases.
Cost of Capital Decisions

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• Capital budgeting helps company to take better financial
decisions by calculating profitability of a project.
• It helps in identifying the potential problems in the project
profitability and hence helps in taking corrective action.
• Managers can even use the scenario analysis to further
know the profitability in different assumptions.
• Sensitivity analysis in capital budgeting helps manager to
know the impact of change in one element on its
profitability. This helps in decision making for managers.
Capital Budgeting Decisions

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• Company should try to reduce the WACC by increasing
the portion of low cost financing.
• Company should perform Scenario analysis to know the
profitability of project under various assumptions.
• Company should also perform the sensitivity analysis to
know the impact on profitability due to change in any of
variable.
Recommendations to Management

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• Factors Affecting the Cost of Capital. (2018). Retrieved
from https://
www.investopedia.com/exam-guide/cfa-level-1/corporate-fi
nance/factors-affecting-cost-of-capital.asp
• Internal rate of return (IRR) method - explanation,
example, formula | Accounting for Management. (2018).
Retrieved from
https://www.accountingformanagement.org/internal-rate-o
f-return-method
/
• Net Present Value - NPV. (2018). Retrieved from https://
www.investopedia.com/terms/n/npv.asp
• Internal Rate of Return - IRR. (2018). Retrieved from
https://www.investopedia.com/terms/i/irr.asp
References