How should our paper look like? (Total 14-15 pages)
In the first part of the paper we will write an introduction and talk the approach we take to write the full paper. (1/2 page)
In the second part of our paper we talk about ROIC/Payback period versus the NPV method of project valuations.
The bottom-line is that NPV method has definite advantages over the other methods. (2-3 pages)
In the third part we show that we will do the project valuation according to the NPV. We introduce the three excel sheets and write the conclusions of the three excel sheets. We talk on the basic assumptions we take to do the NPV calculations and discuss the final bottom-line.
The bottom-line is that the NPV is negative and hence this project should not be approved. (2-3 pages)
In the fourth part we have to talk on the difference between the negative NPV versus the ROIC of 72%. Why is there a huge difference and where is the problem in the capital budgeting process of HPC? (I think this is the key message that we have to deliver!!) (2-3 pages)
In the fifth part of the paper we should do a critical analysis of the comments by Wickler, Leiter & Nanzen. Everybody is partially right in some aspects and we should identify (a). Who is right in what aspect and why and (b). Who is wrong in what aspect and why. The aspect of contribution margin as performance indicator should also be covered here. (2-3 pages)
In the sixth part of the paper we summarize that the capital budgeting process should be changed to NPV. (1-2 page)
Excel Sheets in the appendix:
1. Production Capacities Calculations
2. WACC Calculations
3. NPV Calculations