XYZ Corporation—An Integrated Capital Budgeting Instructional Case

• In Event: Teaching, Learning and Curriculum 2

Abstract

This (fictional U.S.-based) case requires students to evaluate an asset-replacement decision, viz., whether a company should keep an asset it purchased and put into operation two years ago or whether the company should replace that asset with a newer, more efficient model. Increasingly, accountants are being called upon to be “value integrators,” that is, to integrate knowledge and skills from across a variety of disciplines. To complete the XYZ case successfully, students will need to draw upon and integrate concepts from accounting (determining relevant cash flows), finance (modeling-related issues associated with the analysis of a capital budgeting decision), and tax (various real-world considerations). In addition, students will be asked to complement their financial analysis with strategic and/or qualitative considerations associated with the capital investment proposal under consideration. Extensive use of Excel is required to complete the case, including the use of Excel to deal with the issue of uncertainty. A final requirement of the case is to prepare an effective document (or table) that summarizes the various analyses you conduct in conjunction with the present case analysis.

Keywords: capital budgeting, curricular integration, discounted cash-flow (DCF) analysis, tax, decision-making, qualitative/strategic considerations

Authors

• David E. Stout, Youngstown State University

• Raymond J Shaffer, Youngstown State University

• Jeremy T. Schwartz, Youngstown State University