| Course | GM591 Strategic Project Selection and Initiation |
|---|---|
| Unit | Unit 3 |
| Paper type | Financial screening exercise |
| Length | About 1,110 words, 7 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Management |
| Updated | October 2026 |
Free sample paper for GM591 Unit 3
Payback Says Trees, Value Says Meters: A Unit 3 Financial Screening Exercise for Five Cooperative Projects
[Student Name]
Purdue University Global
GM591: Strategic Project Selection and Initiation
Unit 3 Financial Screening Exercise
[Instructor Name]
[Date]
The electric cooperative, its projects and every figure are composite and illustrative; the calculations follow standard formulas and the research cited is real.
Assumptions
The five candidates are the discretionary projects that passed the Unit 2 screen. Coteau Plains Electric Cooperative borrows long-term capital at about 6.5 percent, which serves as the discount rate. Each candidate's cost, annual net benefit and life come from its sponsor's proposal, checked by finance.
Meter replacement. Cost $9.4 million; annual net benefit $1.38 million for 15 years. Source: the metering business case, built from meter reading contracts, truck rolls and support costs.
Outage system and member app. Cost $2.2 million; annual net benefit $0.46 million for 8 years. Source: vendor quote and operations' estimate of crew hours saved in restoration.
Vegetation analytics. Cost $0.62 million; annual net benefit $0.29 million for 5 years. Source: a two-year trial in one district that cut tree-related outage minutes.
Community solar. Cost $4.8 million; annual net benefit $0.36 million for 25 years, assuming the array is fully subscribed. Source: developer bid and subscription pricing.
Fiber build. Cost $14.5 million for the full program; net benefits rising from $0.15 million in year one to $0.45 million, $0.80 million and $1.05 million, then $1.2 million a year through year 20. Source: the pilot's subscriber forecast.
Results
The appendix workbook computes each measure. Net present value discounts every year's benefit at 6.5 percent and subtracts the cost. The IRR column shows, for each candidate, the borrowing cost at which its discounted benefits would just equal its cost. Payback counts the years until undiscounted benefits recover the cost, and discounted payback does the same with discounted benefits. The profitability index is the ratio of discounted benefits to cost.
Meter replacement. NPV $3.58 million; IRR 12.0 percent; payback 6.8 years; discounted payback 9.3 years; profitability index 1.38.
Outage system. NPV $0.60 million; IRR 13.1 percent; payback 4.8 years; discounted payback 5.9 years; profitability index 1.27.
Vegetation analytics. NPV $0.59 million; IRR 37.1 percent; payback 2.1 years; discounted payback 2.4 years; profitability index 1.94.
Community solar. NPV negative $0.41 million; IRR 5.6 percent; payback 13.3 years; never recovers its cost on a discounted basis within its life; profitability index 0.91.
Fiber build. NPV negative $3.37 million; IRR 3.7 percent; payback 14.0 years; never recovers its cost on a discounted basis; profitability index 0.77.
By payback and IRR, vegetation analytics ranks first; by net present value, meter replacement creates six times as much value as either of the next two projects.
The Old Payback Rule
The cooperative's capital policy, written in the 1990s, approves projects that pay back within five years. Under that rule, vegetation analytics and the outage system pass, and meter replacement fails at 6.8 years. Yet meter replacement adds $3.58 million in value, more than the other two combined. The payback rule ignores everything after the cutoff, so a fifteen-year project with steady benefits looks worse than a five-year one, regardless of total value. Richard Brealey, Stewart Myers and Franklin Allen point out that payback gives equal weight to all cash flows before the cutoff and no weight to any after it, which can lead a firm to reject good long-lived projects (Brealey et al., 2023).
Why IRR Misleads Here
Vegetation analytics has an IRR of 37.1 percent, which sounds far better than meter replacement's 12.0 percent. But IRR is a rate, not an amount. A 37 percent return on $0.62 million adds less value than a 12 percent return on $9.4 million. When projects differ greatly in size, ranking by IRR favors small projects. John Graham and Campbell Harvey's survey found that most chief financial officers use both IRR and NPV, and that many also use payback, especially in smaller firms (Graham & Harvey, 2001). The board's habit of asking for IRR first is common, but it is not the right first question here.
Which Figure the Board Should Read First
The board should read net present value first. The cooperative exists to serve its members at the lowest reasonable cost over the long run, and net present value measures how much a project adds to the members' wealth, in dollars, after the cost of the money. A positive NPV at 6.5 percent means the project earns more than the cooperative pays to borrow.
If capital is limited, the profitability index should come second, because it shows value per dollar invested. Vegetation analytics, with an index of 1.94, delivers the most value per dollar and should be funded even if capital is tight, since its cost is small. Payback can stay on the page as a measure of risk, because a project that pays back in two years is exposed to fewer surprises than one that takes nine.
Does the Discount Rate Change the Order?
The cooperative's borrowing cost could move during the projects' lives, so the workbook repeats the NPV calculation at 5 and 8 percent. At 5 percent, meter replacement adds about $4.92 million, the outage system $0.77 million and vegetation analytics $0.64 million. At 8 percent, the same three add about $2.41 million, $0.44 million and $0.54 million. Meter replacement leads at every rate tested. The only change in order is between the outage system and vegetation analytics, which swap places at 8 percent because the outage system's benefits arrive over a longer period and lose more value at higher rates. Solar's NPV is negative at 8 percent by a wider margin, about $0.96 million. The ranking that matters most, meter replacement first, does not depend on the rate.
What the Numbers Do Not Settle
Two projects with negative NPVs remain in the portfolio discussion. Community solar would turn positive at a 5 percent cost of capital, adding about $0.27 million, so a grant or a cheaper loan could change the result. The fiber build is negative under any plausible rate and depends on a subscriber ramp the pilot has not yet reached. Daniel Kahneman and Dan Lovallo describe how forecasts for projects tend toward optimism when planners build them from the project's own plan instead of checking how comparable projects actually turned out (Kahneman & Lovallo, 1993). The fiber forecast should be checked against other cooperatives' broadband take rates before the board relies on it.
The screen also leaves non-financial value out. The outage system's member app and solar's renewable option serve strategic goals that the weighted scoring model in Unit 4 will capture.
References
Brealey, R. A., Myers, S. C., & Allen, F. (2023). Principles of corporate finance (14th ed.). McGraw Hill.
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
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
The Purdue Global GM591 Unit 3 instructions
In GM591 Unit 3 you screen candidate projects financially and argue which measure should guide the decision. Set out each project's cost, annual net benefit and life, with a source for each figure. State the discount rate and why it fits the organization. Work out all five measures, from simple and discounted payback to NPV, IRR and the profitability index, defining each in a sentence. Then explain where the measures disagree and why, especially when projects differ in size or life. Test whether the ranking changes at higher and lower discount rates. Argue which figure decision makers should read first, given the organization's purpose and any capital limit. Close with what the numbers leave unsettled, such as optimistic forecasts or value they do not capture. Expect about five pages with an assumptions panel and results, citing corporate finance sources in APA 7.
How the GM 591 Unit 3 example is put together
The assumptions give five candidates, from meter replacement at $9.4 million returning $1.38 million a year for fifteen years to a $14.5 million fiber build with a slow ramp. Results list each measure: meter replacement at $3.58 million and 12.0 percent, the outage system at about six tenths of a million and 13.1 percent, vegetation analytics at $0.59 million and 37.1 percent, solar at negative $0.41 million and fiber at negative $3.37 million. The highlighted sentence states the conflict. Brealey, Myers and Allen explain why the five-year payback rule rejects the most valuable project, and Graham and Harvey describe how often executives use IRR. Net present value is recommended first. A rate test at 5 and 8 percent keeps meter replacement on top. Kahneman and Lovallo's warning about inside forecasts applies to fiber, and solar turns positive at 5 percent.
Where the points sit in the GM591 Unit 3 rubric
GM591 instructors grade this exercise on correct calculations and a reasoned argument about which measure to use. Every figure should have a stated source, and the discount rate should be justified. Defining each measure plainly shows understanding. Credit goes to explaining conflicts between measures, especially IRR's bias toward small projects and payback's blindness after the cutoff. Testing the ranking at other discount rates shows care. The recommendation should follow from the organization's purpose and capital situation, not from habit. Identifying what the numbers cannot settle, such as forecast optimism, connects the screen to later stages. Citations in APA 7 come from the Brealey, Myers and Allen finance text, Graham and Harvey's survey of chief financial officers and Kahneman and Lovallo on forecasting.
GM591 Unit 3 help: mistakes that cost points
Many GM591 Unit 3 papers compute every measure correctly and never say which one should decide. Others rank by IRR without noticing that a small project's high rate adds little value. A common gap is the old rule: organizations often have a payback cutoff that quietly rejects long-lived projects, and showing that cost is persuasive. Some writers accept the sponsors' forecasts without question. Give every figure a source, compute and define all five measures, explain where they disagree and why, test other discount rates, argue for one measure given the organization's goals and flag the forecasts that most need checking.
Get a GM591 Unit 3 example written to your instructions
The candidate projects' costs, benefits and lives, as your prompt gives them or as you can estimate them, are the inputs; add the discount rate if one is set, plus the Unit 3 prompt and rubric. In 24-48h a first exercise comes back free, figures computed and shown, with the argument written from them rather than around them. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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GM591 Unit 3 questions, answered
Which discount rate should I use?
Whatever the prompt specifies. If it leaves the choice open, use a rate the organization could defend, such as its cost of borrowing or a stated hurdle, and explain why. Showing results at one rate above and one below the chosen figure is good practice, because it tells the reader whether the ranking depends on a number that could reasonably be different.
What should the paper do when NPV and IRR rank projects differently?
Explain the conflict rather than hide it. IRR is a percentage and ignores scale, so a small project can post a high rate while adding little value. When projects compete for limited capital, NPV or a profitability index gives the more useful ranking, and saying so with reasons is what the argument portion of the exercise rewards.
Should payback be used at all?
It measures how quickly money returns, which matters to an organization short of cash or facing high uncertainty. It ignores everything after the cutoff and, in its simple form, the time value of money. Many papers report it alongside discounted measures and show where a payback rule would lead the organization astray, which is often the most persuasive section.
Where can I find a free GM591 Unit 3 sample paper?
This page carries a full GM591 Unit 3 financial screening exercise for five cooperative projects, with payback, NPV, IRR and profitability index results, a rate test and APA 7 references.
Why does a high IRR not make vegetation analytics the best project?
IRR is a rate, not an amount. A 37 percent return on $0.62 million adds about $0.59 million in value, while a 12 percent return on $9.4 million adds about $3.58 million, so ranking by IRR favors small projects.