MBA FPX 5014 Assessment 3

MBA FPX 5014 Assessment 3 Financial Engineering to Enhance Stakeholder Value Student Name Capella University MBA-FPX5014 Applied Managerial Finance Professor Name Submission Date   Financial Engineering to Enhance Stakeholder Value Slide 1 Hi, it’s Elisha Howard. In this presentation, I will be explaining how the financial recommendations that are made as a result of the capital budgeting process will be implemented within ABC Healthcare Corporation. The following presentation will cover all areas of financial analysis that are conducted within ABC Healthcare Corporation, the steps to making financial analysis decisions about financial investments, and lastly, financial recommendations that should be made in ABC Healthcare Corporation. Recommendations for the finances in order to improve the profits and sustainability of the organisation will also be discussed. Slide 2 The main objective of “financial analysis” for ABC Healthcare Corporation will be to remove the finance evaluation routine and to put in place the actual treatments that will generate shareholder value and efficiency for the corporation. For this purpose, three investment alternatives were considered and analyzed by using different financial analysis techniques, namely Net Present Value (NPV), Investment Rate of Return (IRRR), Payback period, Profitability Index (PI), and capital structure analysis. This method was selected because the other methods mentioned above can offer valuable information on the creation of wealth for the shareholders, profitability, liquidity, efficiency, and risks. Capital budgeting analysis, as mentioned by Azlika et al. (2023), is a useful tool to sustain the business of the company as it can be applied to achieve the company’s strategic goals. Overall, it is important to focus on improving the performance of the business and the business’s finances. Slide 3 Key Financial Tools Financial position and investment opportunities were analysed using the different financial tools such as NPV, IRR, Payback period, Profitability index, Capital structure, and Industry trends of ABC Healthcare Company. The use of financial instruments is appropriate because they provide a comprehensive set of data on profitability, liquidity, investments, performance, and wealth creation. With the ever-increasing expenses and demands of medical care in the world, companies have no alternative but to be proactive when it comes to evaluating investments to remain competitive and sustainable. It is estimated that annually the US health care system costs $6.2 trillion, and by 2028 is projected to cost as much as 20% of GPD in health care costs, while the world’s overall health care costs for chronic diseases could be up to $47 trillion by 2030 (Bujang, 2026). So ABC Healthcare Company started using several financial instruments to help formulate an investment policy they could use to enhance the wealth of their shareholders through this. By taking the cost of the investment, as well as the time value of money, into account, NPV will tell you how much shareholder value is being added to the investment. Project A generated the highest NPV worth $44,262,269 compared to Project B ($22,259,712) and Project C ($33,470,904) (Sureka et al., 2022). The IRR method was used as an aid to comparing the profitability of the projects. The highest IRR was earned by Project B, followed by Project C and Project A, with IRR levels of 91.48%, 90.36%, and 79.79%, respectively. All of the projects are financially viable as they have IRRs greater than the required rate of return. Each project has an IRR higher than the required rate of return and therefore is considered to be financially viable (Ganti, 2024). The payback period method helped in the assessment of liquidity as well as the time needed for payback of the investments. The projects with the lowest payback are project B with a payback period of 1.14 years, project C with a payback period of 1.23 years, and project A with a payback period of 1.36 years. The profitability index was applied in the calculation of the efficiency of the investment. The Profitability Index for Project A is 5.43, which would indicate that the expected return is approximately $5.43 for each dollar invested in Project A. The Profitability Index of project C is 4.84, and for project B is 3.78 (Alrikabi, 2022). Besides capital budgeting techniques, industry trend analysis and capital structure analysis were also carried out as methods to determine the sustainability of financing. In this way, by performing these, the ABC healthcare firm could determine the business risk, debt-paying capacity, and competitive benefits of the enterprise for fulfilling the shareholders’ interests via investments. Slide 4 Rationale The various financial instruments that were selected for this research were selected with consideration of their use in decision-making on the basis of evidence and generation of shareholder wealth without any unnecessary risk from the finance perspective. The tools offer various lenses on organisational efficiency, investment efficiency, and financial sustainability. The NPV technique has been selected due to its association with maximising shareholder wealth. This makes it a particularly useful tool when comparing multiple investment options with differing risk profiles. There may be other methods that can be applied, but the Net Present Value is able to consider the cash flows in the future, the discount rate, and the risk of investment. As mentioned by Cotter (2023), NPV provides a more realistic perspective about value creation since it takes into consideration the time value of money. Slide 5 Linking the Data Used to Support Recommendations The ABC Healthcare Corporation financial recommendations were based on the outcome of the financial analysis done during the capital budgeting process. The results of the NPV calculation, IRR calculation, payback period, and profitability index calculation clearly show that investments in the efficiency of operation generate the greatest shareholder value. Project A is seen as the best option as it has the maximum NPV and the highest ratio of profitability index. The amount of investment that will be required in this project will be $10 million in acquiring new equipment, which will ensure a reduction in the cost of sales by 5% per year for eight years. From the investments considered above, it is evident that investments in technology and efficiency of […]