Please help with doing a powerpoint presentation for this assignment for Manager
ID: 1163105 • Letter: P
Question
Please help with doing a powerpoint presentation for this assignment for Managerial Economics. There is no other information about this. This is all I am given and I need to write up a powerpoint presentation for the below scenario.
Competency
Understand economic terminology and economic definitions pertaining to decisions made by managers.
Course Scenario
Oil Company X is a large oil refinery which has been expanding and taking on new investment projects. Recently, they have considered building a pipeline that stretches across the United States, from Canada to New Orleans.
This particular process will generate high revenues, but also high costs. The expected profit generated from the initial investment after 10 years will be approximately 8%. Assume that stocks tend to average a return of approximately 10% over a 10 year period.
Recently, the CEO has faced backlash from the company Board who have asked specific questions concerning the recommendations put forth by the Cost Analysis Department. The Cost Analysis Department has indicated that the marginal analysis does not support the project. However, the Board feels that this would be a profitable project due to the massive revenues that would be generated. They have questions in relation to marginal analysis, and how it is undertaken. As a Cost Analyst, you have been asked to make a presentation to the Board.
Instructions
The head of the Cost Analysis Department has asked you, a recent hire, to make a presentation to the Board explaining your recommendation. You will provide the Board with an introduction to marginal analysis used by the company when making investment decisions.
Your PowerPoint should include narration as you make your presentation to the Board.
Your presentation should justify your Department's recommendation not to undertake the project. This should include an explanation of the following terms and how they relate to the department's decision:
Opportunity Cost
Marginal Benefit
Marginal Cost
Format your PowerPoint to include a title page, introduction, body slides, conclusion, and references. Remember to cite your sources using correct APA format, and also use correct grammar, spelling, and formatting.
Explanation / Answer
Step to Step Suggestions for your powerpoint:
1.Begin with the usual greetings/welcome templates
2. You can use title:Canada-New-Orleans Pipeline Project with a subscript A Cost-Benifit Analysis.
3. Provide a brief introduction of the project without any prejudice to the conclusions of your analysis, the results or conclusion of your analysis will follow eventually. The introduction should include the geographical description of the pipeline the suppliers of the crude oil and the beneficiary region/market/population.
4. You can assume an investment of say $ 10 Billion for the project and can provide a quantitative analysis with regard to the viability of the project. As the tools of the analysis are already specified by the Cost Analysis Department you can proceed as given below in the following slides:
5.Opportunity Cost:
First calculate the Future Value of the present investment for both the cases one for the investment in the pipeline project and other for the investment in stocks. In this case the future value of the investment in the stocks will be higher than the investment in the pipeline.
Show the following in one of a slide:-
Opportunity cost of investing USD 10 Billion = FV of investment in Stocks - FV of investment in pipeline project
6.Marginal Benefit: After 10 year the pipeline project will provide a return of 8% thus marginal benefits arising from the project will be lower in comparison to the investment in stocks as every additional dollar invested in stocks will provide a return of 10 % .
7.Marginal Cost : The cost of investment is 10% against the future return of 8% for the pipeline project thus it can be easily explained that marginal costs are surpassing marginal benefits.
As the volume of revenue is not provided in the information set it is difficult to arrive at the quantum of profit generated by the pipeline project after 10 gestation period.
Following conclusions can be made :
The Board is claiming that high revenues will make for the low level of returns is quite uncertain by the same logic there can be higher returns in stocks (10% is the average return which is assumed to be certain) The pipeline project involves a great degree of risk due to its exposure to a large geographical area. Thus in view of the above the pipeline project seems unviable as indicated by various quantitative measures e.g. opportunity cost, Marginal cost-benefit. And a non –quantitative projection with regard to uncertainty faced by both the investment decisions in stocks and pipeline project.