You have been hired by a midsize copper smelting company in northern Canada to act as a consultant and help the executive team determine its best course of action on a major decision. Due to some recent changes to the local environmental air quality laws, the company’s large coal-fueled smelting furnace is now operating out of compliance due to high levels of pollutants in the exhaust gases. The regulatory agency has given the company 12 months to demonstrate compliance, after which it will be fined $1,000 per day until the operations meet the regulation. The company has two alternatives. The first alternative is to install air scrubbers to reduce the output pollutant levels. The second alternative is to convert the smelting furnace from coal to natural gas. Both alternatives will meet the current regulatory requirements, but there is a slight concern that the air scrubber solution may not meet future regulatory restrictions. The executive team wants you to perform a financial performance analysis on both alternatives using several different capital budgeting methodologies. The team also is seeking guidance on non-financial considerations regarding the company’s ethical and social responsibilities related to this decision.
The product of your financial performance analysis will be a report for the executive team. In addition to the requirements that follow, be sure to incorporate references to appropriate academic sources, such as those found in this week’s Learning Resources or in the Walden Library.
To prepare for this Assignment:
· Download Module 3 Assignment Template. Note: Be sure to keep a copy of your completed Assignment this week, as you will be adding to the same file for your Week 9 and Week 10 Assignments.
· Your instructor will provide part of the data to complete the calculations for this week’s Assignment. To access that information, refer to Doc Sharing .
Submit Part 1 of your report to the executive team, as well as the accompanying Excel file. Part 1 of your report should be approximately 2 pages in length (excluding title page and references) and should address the following:
Part 1: The Financial Performance Analysis
For the first part of your report, you will provide an analysis of the financial performance of both alternatives using net present value (NPV), accounting rate of return (ARR), internal rate of return (IRR), and payback. ( Note: ARR is also called Return on Investment, or ROI.) In Doc Sharing , your Instructor will provide you with financial information to use for this part of the Assignment.
To complete this part, address the following:
· Using the Week 8 Assignment Template and the data provided by your Instructor in the Doc Sharing area, calculate the NPV, payback, IRR, and ARR.
· Note: In addition to submitting your work in Excel, include your calculations within your report by copying and pasting the information from Excel. For information on inserting data from Excel into Word, refer to the following:
· Microsoft. (n.d.). Insert a chart from an Excel spreadsheet into Word Links to an external site. . https://support.microsoft.com/en-us/office/insert-a-chart-from-an-excel-spreadsheet-into-word-0b4d40a5-3544-4dcd-b28f-ba82a9b9f1e1
· Analyze each of the alternatives based on your calculations and illustrate to the executive team which alternative should yield the highest return.
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