| Course | MAT 444 Finance for Managers |
|---|---|
| Module | Module 8 |
| Paper type | Capital investment recommendation |
| Length | About 1,101 words, 7 pages |
| Format | APA 7 student paper |
| School | Aspen University |
| Program | Business Administration |
| Updated | October 2026 |
Free sample paper for MAT 444 Module 8
Yes, With Two Conditions: A Capital Investment Recommendation on a Laser Cutting Cell, Tested for What Could Go Wrong
Student Name
Business Administration Program, Aspen University
MAT 444: Finance for Managers
Instructor Name
Month Day, Year
Yes, With Two Conditions: A Capital Investment Recommendation on a Laser Cutting Cell, Tested for What Could Go Wrong
To the Board of Haverstock Fabrication: Modules 6 and 7 forecast the cash flows of the proposed $2.4 million fiber laser cutting cell and found a net present value of about $135,100 at the company's 11.8% cost of capital, with an internal rate of return of 13.4%, below the 15% hurdle the owners have used for years. This memo tests that result, adds a tax choice the base case left out, weighs whether waiting would be wiser and recommends a decision. Haverstock, the cell and all amounts are fictional, and the tax rules are simplified.
The Base Case in Brief
The cell costs $2.4 million installed plus $150,000 of working capital. It replaces $540,000 a year of outsourced cutting and adds $380,000 a year of contribution from thin-gauge work, against new operating costs and forgone rent of $320,000. Over seven years, with seven-year MACRS depreciation and after-tax salvage of about $327,000, the project's net present value is about $135,100, roughly 5% of the investment.
Which Inputs Matter
The forecast has little room. The outsourcing savings are well documented by two years of invoices, so they are the firmest number. The new thin-gauge work is the least certain: it depends on winning bids for oven panels and truck body parts that Haverstock now turns away, and only one customer has given any written indication of volume.
| Change, one input at a time | Net present value at 11.8% | Change from base |
|---|---|---|
| Base case | 135,100 | |
| New thin-gauge contribution 30% lower | minus 257,600 | minus 392,700 |
| First year at half the expected benefit | minus 66,200 | minus 201,300 |
| Installed cost 10% higher | minus 63,700 | minus 198,800 |
| Outsourcing savings 10% lower | minus 50,900 | minus 186,000 |
| New thin-gauge contribution 20% higher | 396,900 | plus 261,800 |
The Tax Election
The base case followed seven-year MACRS. Under current federal rules, bonus depreciation lets Haverstock write off the whole cost of qualifying equipment in the first tax year the cell runs. Deducting $2.4 million in year one saves $600,000 of tax that year instead of spreading the saving over eight years, and the salvage is then fully taxable at the end. Because the tax saving arrives sooner, it is worth more: the base case rises to about $259,600 and the break-even rate climbs near 15.2%, just above the owners' hurdle. Haverstock has enough taxable income from its other operations to use the deduction in the first year, which the company's tax adviser should confirm before filing.
Three Scenarios With the Election
Kahneman and Lovallo (1993) warned that planners forecasting from inside a project, from its own plans and hopes, tend to be too bold, and that the record of similar projects is a better guide. The vendor's records show that comparable cells took about nine months to reach full use, so the worst case below assumes a half-speed first year.
| Scenario | Assumptions | Weight | Net present value |
|---|---|---|---|
| Best | Thin-gauge contribution 20% above plan, normal ramp | 25% | about 521,400 |
| Base | Plan as forecast | 50% | about 259,600 |
| Worst | Thin-gauge contribution 30% below plan, half-speed first year | 25% | about minus 296,100 |
| Expected value | about 186,100 |
The Value of Waiting
McDonald and Siegel (1986) modeled a firm that can invest in a project now or at any time later, when the value of the project moves unpredictably and the investment cannot be undone. Under those conditions, investing as soon as value exceeds cost is a mistake, because investing kills the option to wait for better information. With plausible levels of uncertainty, they found it could be optimal to wait until the project's value was well above its cost, in some cases about double. Their result explains why a positive net present value is necessary but not sufficient when delay is possible.
For Haverstock, waiting a full year would cost about $450,000 of after-tax benefits and risk losing the outside shop's goodwill if work returns later. But the main uncertainty, whether the thin-gauge work will materialize, can be resolved in weeks, not years: the oven maker has asked for a firm quote on a three-year panel program worth about $260,000 of yearly contribution. A short wait to secure that commitment buys most of what a year of waiting would teach, for far less than a year of lost cutting.
Capacity, Not Only Capital
Jagannathan et al. (2016) found that many companies set hurdles above their cost of capital not because money was scarce but because people were: firms short of managers and operating capacity used high rates to limit how many projects they took on. Haverstock fits that description. The plant manager who proposed the cell also runs daily production, and the maintenance lead was stretched by last year's press brake failure. An investment that beats Haverstock's 11.8% on paper will still fail if no one has time to install it, train operators and win the new work. The answer is not to reject the cell with a high hurdle but to make its management a condition.
Recommendation
The board should approve the laser cutting cell, with the bonus depreciation election, subject to two conditions. First, before the purchase order is signed, Haverstock must obtain a signed commitment from the oven maker for its three-year panel program, which would lock in about two thirds of the planned thin-gauge contribution and remove most of the worst case. Second, the company must name a project lead, either an internal engineer released from other duties or a contract manager for the first nine months, responsible for installation, the ramp to full use and winning the remaining new work. If the commitment is not signed within sixty days, the project should return to the board rather than proceed on hope.
Review Plan
The project lead will report each quarter against four measures: outsourced cutting avoided, thin-gauge contribution won, operator hours and machine use and any cost overrun. A post-audit at the end of year two will compare results with this memo's forecast. Consistent with Module 6, a decision to keep or sell the cell later will rest on its future cash flows only.
Conclusion
The laser cell adds value at Haverstock's cost of capital, about $259,600 with bonus depreciation, but its value rests on new work that is not yet committed. McDonald and Siegel show why a short wait for information is worth taking, Kahneman and Lovallo justify planning for a slower ramp, and Jagannathan and colleagues explain why management capacity must be part of the approval. Approved with a signed customer commitment and a named project lead, the cell is a sound investment.
References
Jagannathan, R., Matsa, D. A., Meier, I., & Tarhan, V. (2016). Why do firms use high discount rates? Journal of Financial Economics, 120(3), 445-463. https://doi.org/10.1016/j.jfineco.2016.01.012
Kahneman, D., & Lovallo, D. (1993). Timid choices and bold forecasts: A cognitive perspective on risk taking. Management Science, 39(1), 17-31. https://doi.org/10.1287/mnsc.39.1.17
McDonald, R., & Siegel, D. (1986). The value of waiting to invest. The Quarterly Journal of Economics, 101(4), 707-727. https://doi.org/10.2307/1884175
What the MAT 444 Module 8 instructions ask for
MAT 444 ends in Module 8 with a capital investment recommendation, and the assignment usually asks students to test a project's analysis and make a clear, conditional recommendation to decision makers. Your Module 8 classroom prompt is the authority; the cell and every figure are made up. Restate the base case briefly. Test each important input and find how far it can move before the decision changes. Build best, base and worst scenarios. Address taxes and timing choices that change the value. Weigh the option to wait. Recommend a decision with conditions and a plan to review results, and cite sources in APA 7 form.
How the MAT 444 Module 8 example is put together
The base case from Module 7 is a net present value near $135,100 at 11.8%. Single-input tests show that a 30% shortfall in new work drops it to about minus $257,600, a half-speed first year to about minus $66,200, a 10% price increase to about minus $63,700 and a 10% fall in outsourcing savings to about minus $50,900. Either a $39,000 yearly shortfall in new-work contribution or the same shortfall in outsourcing savings erases the value. Taking bonus depreciation on the full cost in year one raises the base case to about $259,600 and the rate of return to about 15.2%. With that election, the scenarios run from about minus $296,100 to about $521,400, with an expected value near $186,000. Two conditions grow out of McDonald and Siegel's waiting model in The Quarterly Journal of Economics, Kahneman and Lovallo's forecasting paper in Management Science and the hurdle study by Jagannathan's team: a signed commitment for the thin-gauge work and a named project lead.
MAT 444 Module 8 rubric: what earns full marks
A recommendation paper is graded on whether it tests the analysis honestly and reaches a decision that follows from the tests. This example finds the break-even point for the inputs that matter most, so the board sees how little room the base case has, then shows that a legitimate tax election changes the picture rather than presenting it as a rescue. The scenarios carry stated weights and produce an expected value. McDonald and Siegel give the option to wait a real place in the argument, Kahneman and Lovallo justify the slower ramp in the worst case and Jagannathan and colleagues explain why a project lead is a condition. The memo states a clear decision, the two conditions and how results will be checked.
MAT 444 Module 8 help: mistakes that cost marks
The most common weakness in a final recommendation is presenting one net present value and calling it the answer. Show which inputs could reverse the decision and by how much. Another is listing scenarios without probabilities, which leaves the reader with three numbers and no way to combine them. Students also forget timing and tax choices, such as accelerated depreciation, that can change value as much as the operating forecast. Do not treat waiting as free or as impossible; say what would be learned by waiting and what it would cost. Close with a motion the board could pass as written, its conditions and the few numbers that will reveal early whether the project is performing.
Write yours, or have the desk draft it
This paper is an original model document written by our desk, not a submitted student paper and not an official Aspen University document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.
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MAT 444 Module 8 questions, answered
What does MAT 444 Module 8 usually ask for?
Aspen's MAT 444 closes with a capital investment recommendation, so testing a project's analysis with sensitivity and scenarios and recommending a decision with conditions is typical. The exact deliverable is in your classroom prompt.
What is sensitivity analysis in capital budgeting?
Changing one input at a time to see how much net present value moves, and finding the value at which the decision would flip.
Is there value in waiting to invest?
Often. McDonald and Siegel showed that when an investment can be delayed and its value is uncertain, waiting for information can be worth more than investing now.
Where can I find a free MAT 444 Module 8 sample paper?
You are reading it: a full capital investment recommendation on an invented laser cutting cell, with sensitivity tests, three scenarios and a conditional approval.
Why might a good project still be delayed?
If its value is close to zero and a few months would resolve a major uncertainty, such as whether a customer will commit, waiting can add more value than starting now.