# This mission statement should be linked to each

Question

Analyzing an Investment Project

The first step in analyzing an investment project is to draw a time line. This is a straight line divided into equal periods. Typically each period on a time line represents one year.

The second step is to place all cash flows on the time line. All cash flows for a single year are usually combined into a single amount. Cash that is received is denoted by an arrow pointing up with the amount written above the arrow. Cash that must be paid out is denoted by an arrow pointing down with the amount written below the arrow. If cash is to be received and paid out in a single year the amounts are combined with the arrow noting which the net result. It is important to note that the cash flows represented on a time line are all assumed to occur at the end of the period indicated.

The third step is to calculate the Net Present Value. The Net Present Value equals the present value of the cash inflows (that is, all cash flows with arrows pointing up) minus the cash outflows (that is, all cash flows with arrows pointing down). The present value of each cash inflow and cash outflow is calculated, using the appropriate required rate of return as the discount rate. If the sum of the present values of all of the cash inflows is greater than the sum of the present values of all of the cash outflows, the Net Present Value is positive. The project adds value to the company and should be accepted. If the sum of the present values of all of the cash outflows is greater, the Net Present Value is negative. The project does not add value to the company and should be rejected.

The fourth step is to calculate the Internal Rate of Return. When the Internal Rate of Return is used in the Net Present Value equation in lieu of the required rate of return, the Net Present Value is zero. As a result, the Internal Rate of Return makes the present value of the cash inflows equal to the present value of the cash outflows. To find the Internal Rate of Return, set the present value of the cash inflows equal to the present value of the cash outflows. Select a return and enter it into the equation. The Internal Rate of Return can only be calculated by trial and error. If the value selected does not make the present value of the cash inflows equal to the present value of the cash outflows, try another value. This process is repeated until the return if found that makes the present value of the cash inflows equal to the present value of the cash outflows.

Net Present Value and Internal Rate of Return can be calculated using either a financial calculator or any spreadsheet software.

Instructions

For this assignment each student develops a balanced scorecard for a small auto repair and detailing company to include metrics for all four perspectives.

The analysis should be organized as follows:

(1) Create a section titled “Mission Statement.” In this topic create a mission statement for this company that provides strategic perspective for the company. This mission statement should be linked to each of the four perspectives of the Balanced Scorecard.

(2) Create a section titled “Financial Perspective.” In this topic discuss the relevant elements of this component of a Balanced Scorecard to include examples of the metrics used to meet the company’s mission statement as well as a target for each metric. The metric needs to be quantifiable so identify how the units by which each metric could be measured.

(3) Create a section titled “Customer Perspective.” In this topic discuss the relevant elements of this component of a Balanced Scorecard to include examples of the metrics used to meet the company’s mission statement as well as a target for each metric. The metric needs to be quantifiable so identify how the units by which each metric could be measured.

(4) Create a section titled “Internal Business Process Perspective.” In this topic discuss the relevant elements of this component of a Balanced Scorecard to include examples of the metrics used to meet the company’s mission statement as well as a target for each metric. The metric needs to be quantifiable so identify how the units by which each metric could be measured.

(5) Create a topic titled “Learning and Growth Perspective.” In this topic discuss the relevant elements of this component of a Balanced Scorecard to include examples of the metrics used to meet the company’s mission statement as well as a target for each metric. The metric needs to be quantifiable so identify how the units by which each metric could be measured.

The grading rubric for this assignment is as follows:

Clarity and organization of responses to the discussion (70%)

Identification and explanation of assumptions (20%)

Appropriate spelling, punctuation, grammar, and APA formatting (10%)

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