| Course | MGT 418 Evaluating New Business Opportunities (MGT/418) |
|---|---|
| Week | 3 |
| Paper type | Financial projection and investment analysis |
| Length | about 1,058 words, 4 double-spaced pages plus title page and references |
| Format | APA 7 student paper |
| School | University of Phoenix |
| Program | BS in Business |
| Updated | October 2026 |
Free sample paper for MGT 418 Week 3
Does Portable Storage Pay? Ten-Year Projections, NPV, IRR and Payback for Summit Ridge's New Venture
[Student Name]
University of Phoenix
MGT/418: Evaluating New Business Opportunities
Week 3 Assignment
[Instructor Name]
[Date]
Summit Ridge Equipment Rental and all projections are composites written for a model paper.
Summit Ridge Equipment Rental, the composite Boise rental company, has chosen portable storage containers as its new venture, sized the Treasure Valley market at about 2,400 to 2,800 containers rented on an average day and set a target of about 300 by year three. The owners have up to $3 million to invest and want to know whether the venture will earn an acceptable return. A market can be large enough and a share target realistic, and the venture can still fail the test that matters most to owners: earning more than the money would earn elsewhere. This paper projects the venture's finances and evaluates its return.
Revenue Assumptions
Revenue depends on containers rented on an average day. The plan assumes 120 in year one, 210 in year two and 300 in year three, rising slowly to 385 by year ten. Average monthly rent is $185, delivery and pickup fees total $190 per rental and the average rental lasts about 60 days. Together, each rented container generates about $3,400 a year.
Revenue Projections
Revenue is projected at $408,000 in year one, $714,000 in year two, $1.02 million in year three, $1.19 million in year five and about $1.31 million in year ten.
Operating Cost Assumptions
Variable costs, mainly drivers, fuel, truck maintenance, container repairs and credit card fees, are estimated at 35 percent of revenue, based on Summit Ridge's existing delivery costs. Fixed costs for a storage coordinator, marketing and software are $150,000 a year.
Capital Investment
At 85 percent utilization, Summit Ridge needs about 141 containers in year one, growing to 353 by year three and about 453 by year ten. New steel containers with locks and branding cost about $4,800 each. Startup costs also include three tilt-bed delivery trucks for $420,000, yard improvements of $250,000 and launch marketing and software of $150,000. Initial investment is about $1.5 million, with total capital spending of about $3 million over ten years.
Taxes and Depreciation
Containers are depreciated over 15 years, trucks over seven and yard improvements over 15, and taxes are estimated at 25 percent of operating profit after depreciation. Depreciation lowers taxes, which raises cash flow.
Projected Cash Flows
After operating costs, taxes and capital spending, cash flow is negative in years one and two, about minus $393,000 and minus $234,000, because the fleet is still being built. It turns positive in year three, about $263,000, and reaches roughly $460,000 to $530,000 a year from year five. In year ten, the remaining containers are assumed to be worth half their cost, adding about $1.1 million in salvage value.
Choosing a Discount Rate
Graham and Harvey (2001) surveyed chief financial officers and found that NPV and IRR were the most widely used capital budgeting methods, though smaller firms relied more on payback. The discount rate should reflect the return owners could earn on similar-risk investments. Summit Ridge's owners require 10 percent, a little above the company's borrowing cost, reflecting the added risk of a new line.
Net Present Value
Discounting the cash flows at 10 percent produces an NPV of about $337,000. The venture is expected to earn more than the required return, but not by a large margin. At 12 percent, NPV falls to about $66,000.
Internal Rate of Return
The IRR is about 12.5 percent, above the 10 percent requirement. Berk and DeMarzo (2020) note that IRR can mislead when cash flows change sign more than once or when projects differ in scale, but here the pattern is simple, so IRR is a fair summary.
Payback Period
Cumulative cash flow becomes positive at about seven years. For a family company, that is a long time to wait, and much of the value depends on years eight through ten and salvage.
ROI
Simple return on investment, total net cash generated over ten years divided by total capital spent, is about 90 percent over the decade, or roughly 9 percent a year without considering timing. NPV and IRR are better measures because they account for when cash arrives.
Scenario: Refurbished Containers
Buying a mix of new and refurbished containers at an average of $3,600 reduces total capital spending to about $2.45 million, raises NPV to about $658,000 and IRR to about 16 percent and shortens payback to about six years.
Scenario: Lower Demand
If containers rented are 20 percent below plan, NPV falls to about minus $23,000, IRR to about 9.8 percent and payback to nearly eight years. Combined with refurbished containers, lower demand still produces an NPV of about $235,000.
Scenario: Lower Prices
If competitors respond by cutting prices so that each rented container earns $3,100 instead of $3,400, NPV falls to about $64,000 and IRR to about 10.5 percent.
Where the Value Comes From
Breaking the NPV down shows a pattern worth noticing. The first two years subtract about $550,000 in present value as the fleet is built. Years three through seven add back roughly enough to cover that. Most of the positive NPV comes from years eight through ten and the salvage value of containers. If the containers wear out faster than expected or the market turns before year eight, much of the value disappears. That is a reason to look for ways to bring cash in sooner, such as renting to contractors with longer terms.
Effect on the Existing Business
The projections treat the venture on its own, but it also affects the rental business. Shared yards and trucks lower costs, and storage customers may rent equipment too. On the other hand, drivers and yard space used for containers are not available for equipment deliveries in busy seasons. A rough estimate suggests cross-selling adds about $60,000 a year in equipment rental profit, which would raise NPV modestly.
Watching for Optimism
Cassar (2010) found that people starting businesses tend to project more sales than they achieve, so the base case should be treated cautiously. The scenarios suggest demand and container cost matter most.
Conclusion
The portable storage venture earns slightly more than Summit Ridge's 10 percent requirement in the base case, with an NPV of about $337,000 and payback near seven years. It becomes clearly attractive with refurbished containers and marginal or negative if demand falls short. The decision will depend on reducing these risks, the subject of Week 4.
References
Berk, J., & DeMarzo, P. (2020). Corporate finance (5th ed.). Pearson.
Cassar, G. (2010). Are individuals entering self-employment overly optimistic? An empirical test of plans and projections on nascent entrepreneur expectations. Strategic Management Journal, 31(8), 822-840. https://doi.org/10.1002/smj.833
Graham, J. R., & Harvey, C. R. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60(2-3), 187-243. https://doi.org/10.1016/S0304-405X(01)00044-7
What the MGT 418 Week 3 instructions ask
The MGT 418 Week 3 paper usually asks students to prepare financial projections for a new opportunity and evaluate its return. Typical requirements include revenue projections tied to the market analysis, operating costs, startup and ongoing capital investment, projected cash flows over several years, return measures such as ROI, NPV, IRR and payback, and sensitivity or scenario analysis. Some prompts specify a discount rate. State every assumption, show calculations in tables, explain what each measure means in plain terms, test how results change under different assumptions and cite finance sources in APA format. Include salvage value if the assets will still have worth at the end.
How this MGT 418 Week 3 example is built
A storage venture that looks appealing in the market analysis must also pay back about $3 million in containers, trucks and yard work, and the paper tests whether it does. Revenue is projected from rented containers, monthly rent and delivery fees, growing from $408,000 in year one to about $1.3 million by year ten. Costs include delivery, maintenance and administration. Capital spending is phased as the fleet grows. At a 10 percent discount rate, NPV is about $337,000, IRR about 12.5 percent and payback about seven years. Refurbished containers raise IRR to about 16 percent; 20 percent lower demand pushes NPV slightly negative. The paper explains which assumptions drive the result and what that means for the go or no-go decision ahead.
MGT 418 Week 3 grading rubric: where the points go
Strong financial projection papers tie revenue to the market analysis, state assumptions clearly and calculate return measures correctly. Instructors credit tables that show revenue, costs, taxes, capital spending and cash flow by year, correct use of a discount rate, plain explanations of NPV, IRR and payback and scenario analysis that shows which assumptions matter most. Interpreting the results honestly, including when a project is only marginally attractive, demonstrates judgment. Connecting the analysis to the next steps of risk assessment and decision making ties the course together. Correct APA citations complete the paper. Instructors also look for an explanation of how much of the value depends on distant years and salvage, since a project whose return arrives mostly in year ten carries more risk than one that pays back early, even with the same NPV.
MGT 418 Week 3 help: mistakes to avoid
Students often project revenue without linking it to the market size and share from the previous week. Connect them. Another frequent gap is ignoring capital spending after the first year; growing fleets need more investment. Include it. Students also report NPV without explaining the discount rate. Justify the rate. Avoid presenting a single forecast as certain; show scenarios. Explain what each measure means in plain words. Check arithmetic carefully. Consider salvage value at the end of the projection. Finally, say what the numbers imply for the decision, since projections are a tool, not the answer. Point out which assumptions the result depends on most.
Related MGT 418 sample papers
Other MGT 418 week samples
- MGT 418 Week 1: Screening New Business Opportunities
- MGT 418 Week 2: Analyzing Markets and Competitors
- MGT 418 Week 4: Risk and Investor Considerations
- MGT 418 Week 5: Go or No-Go Recommendation
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MGT 418 Week 3 questions, answered
What does MGT 418 Week 3 usually cover?
It usually covers financial projections and return analysis for a new opportunity: revenue, costs, capital spending, cash flow, ROI, NPV, IRR, payback and scenarios.
Where can I find a free MGT 418 Week 3 sample paper?
The full ten-year projection and return analysis for a portable storage venture, with scenario results, is presented on this page. MGT 418 students can request a free draft of their projections paper.
What is net present value?
The sum of a project's future cash flows discounted to today at a required rate of return, minus the investment. A positive NPV means the project is expected to earn more than the required return.
What is the internal rate of return?
The discount rate at which a project's NPV equals zero. If the IRR exceeds the company's required return, the project is generally considered acceptable.
Why is payback period still used?
Payback shows how quickly invested cash is recovered, which matters to small companies with limited cash, though it ignores the time value of money and cash flows after payback.
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