Forecasting Scenario and Capital Budgeting Criteria for Deere
& Company
Assignment Instructions:
Create a forecasting scenario for Deere & Company using the financial statements in this
week’s Required Resources and two outside scholarly or credible sources.
In your presentation you must:
- List the criteria used to evaluate how cash flows influence capital budgeting decisions.
- Identify at least five criteria necessary for making a good capital budgeting
recommendation.
- Explain the rationale for considering these criteria before making a recommendation.
, Forecasting scenarios provide organizations with the ability to anticipate financial
outcomes under varying market conditions. For Deere & Company, a leading
manufacturer of agricultural, construction, and forestry machinery, capital budgeting
decisions are central to ensuring long-term profitability and competitiveness. Using its
financial statements and insights from scholarly literature, this paper outlines a
forecasting scenario, identifies criteria for evaluating the influence of cash flows on
capital budgeting, and explains the rationale for applying these criteria before making
recommendations.
Deere & Company’s financial performance is highly influenced by agricultural demand
cycles, interest rate environments, and global commodity prices. Forecasting cash flows
requires consideration of equipment sales, financing revenue, and operating costs. By
analyzing net operating cash flow trends, depreciation schedules, and projected capital
expenditures, the company can assess the sustainability of future investments. A
forecasting model might assume, for instance, a moderate growth in global demand for
precision agriculture technology, leading to increased revenues, but also requiring
substantial upfront capital investment in research and development.
Cash flows play a critical role in capital budgeting decisions because they determine
whether investments will generate adequate returns. Positive net cash inflows ensure that
Deere can cover initial outlays, service debt, and deliver value to shareholders.
Discounted cash flow (DCF) analysis, net present value (NPV), and internal rate of return
(IRR) are standard evaluation tools, each requiring accurate forecasting of future inflows
and outflows.
The criteria used to evaluate how cash flows influence capital budgeting decisions
include:
1. **Net Present Value (NPV):** Ensures the investment generates value above its cost
of capital.
2. **Internal Rate of Return (IRR):** Evaluates the percentage return relative to
alternative investments.
3. **Payback Period:** Measures how quickly the project recovers its initial investment.
4. **Profitability Index (PI):** Assesses the relative profitability of projects by
& Company
Assignment Instructions:
Create a forecasting scenario for Deere & Company using the financial statements in this
week’s Required Resources and two outside scholarly or credible sources.
In your presentation you must:
- List the criteria used to evaluate how cash flows influence capital budgeting decisions.
- Identify at least five criteria necessary for making a good capital budgeting
recommendation.
- Explain the rationale for considering these criteria before making a recommendation.
, Forecasting scenarios provide organizations with the ability to anticipate financial
outcomes under varying market conditions. For Deere & Company, a leading
manufacturer of agricultural, construction, and forestry machinery, capital budgeting
decisions are central to ensuring long-term profitability and competitiveness. Using its
financial statements and insights from scholarly literature, this paper outlines a
forecasting scenario, identifies criteria for evaluating the influence of cash flows on
capital budgeting, and explains the rationale for applying these criteria before making
recommendations.
Deere & Company’s financial performance is highly influenced by agricultural demand
cycles, interest rate environments, and global commodity prices. Forecasting cash flows
requires consideration of equipment sales, financing revenue, and operating costs. By
analyzing net operating cash flow trends, depreciation schedules, and projected capital
expenditures, the company can assess the sustainability of future investments. A
forecasting model might assume, for instance, a moderate growth in global demand for
precision agriculture technology, leading to increased revenues, but also requiring
substantial upfront capital investment in research and development.
Cash flows play a critical role in capital budgeting decisions because they determine
whether investments will generate adequate returns. Positive net cash inflows ensure that
Deere can cover initial outlays, service debt, and deliver value to shareholders.
Discounted cash flow (DCF) analysis, net present value (NPV), and internal rate of return
(IRR) are standard evaluation tools, each requiring accurate forecasting of future inflows
and outflows.
The criteria used to evaluate how cash flows influence capital budgeting decisions
include:
1. **Net Present Value (NPV):** Ensures the investment generates value above its cost
of capital.
2. **Internal Rate of Return (IRR):** Evaluates the percentage return relative to
alternative investments.
3. **Payback Period:** Measures how quickly the project recovers its initial investment.
4. **Profitability Index (PI):** Assesses the relative profitability of projects by
