FNCE611 Corporate Finance

Introduction

The “Department of Defence (DoD, USDOD, or DOD)” is identified as the executive branch of the federal government of US which has been charged with the coordination and supervision of the agency functions and concern for the national security and US armed forces. The department largest is identified with more than “1.3 million active duty serviceman and women of 2016”. The department is seen to be headed by the secretary of Defence by the Secretary of Defence and cabinet level head who is identified to report directly to the president of US. Beneath the Department of Defence the three subordinate military departments such as “United States Department of the Army, the United States Department of the Navy, and the United States Department of the Air Force” (Department of Defense & Defense, 2017).

The report is intended to analyse the employer’s method for capital budgeting. Some of the other aspects of the report have further aimed to discuss on the Methods Currently Used, Analysis of Employer’s methods of Capital Budgeting and Employer computation of cash flows, before or after tax.

Analysis of Employer’s methods of Capital Budgeting

“U.S. Government Department of Defence (DOD)” rates are seen to be applicable to all the DOD agencies and several foreign countries and international agreements. In case the coast guard is seen to be activated under DOD by the “Presidential declaration”, non-combatant evacuation operations for the force protection related costs and not for general population evacuation, central intelligence agency and the Department of State (DOS).  This is seen to be done in terms of armoured motor vehicles to a foreign country to meet the requirements related to Secretary of State in that country. The different types of the rates are seen to be applicable with the “HQ USTRANSCOM J8-A at Commercial (618)229-5098 or DSN 779-5098” (Harvard Law Review, 2017).

Methods Currently Used 

For US DOD, the performance based budgeting is used with strategic plans of the department which may lead to a much larger role for the capital budgeting process. Although the “Government Performance and Results Act (GPRA)” is required the agencies to submit five-year strategic plan, the financial budgeting plans are only considered in every three years and presently not used in appropriation. In case the budgeting plan is following a more decentralized decision making process, the plan would lead to a more result oriented goal approach.

Unlike the general methods of capital budgeting such as Payback Period, Discounted Payback Period, Net Present Value, Accounting Rate of Return, Internal Rate of Return and Profitability Index US DOD is seen to be discerned with considering lifecycle cost for capital budgeting. In case the asset’s life cycle cost is tied to the strategic plan then funding, maintenance and replacement of the assets is planned in advance. The US DOD is seen to estimate the lifecycle estimation to recommend for the replacement of asset and funding requirements.

In order to include the lifecycle estimation cost, dollar rates from the shipment zone are considered from zone to zone basis. In case the cargo zone of the country is unsure then the attached cargo zone is charged as per shipment zone. In order to obtain the rates of the passenger the listing of the stations is done as per the Department of Defence Channel Passenger Tariffs. The rates table is seen to reflect the total tariff rate in one direction. However, the various types of the inbound and outbound rates are identical. The surplus charges of the equipment are considered as per piece basis, as per the passenger fare. Every passenger is seen to be authorised for two-piece baggage which is not seen to exceed beyond 70 pounds and each with 62 linear inches. The sum of the liner measurements (length, width and height) should not exceed beyond 62 inches.  The various types of the authorization for the excess baggage needs to be included with the travel which are in accordance with “AMCI 24-101, Vol 14, paragraph 68.1 and DOD 4515.13-R, C1.4.2.2” is not authorization of the excess baggage. The excess charges for the cost related to the cargo are seen to be assessed by cube or pound. The future research would be able to analyse the extent to which Federal. The future research can further include the detailed analysis of the impacts  (US DoD, 2015).

Employer computation of cash flows, before or after tax

It has been discerned that as per the financial year results of 2014 the Department used almost 35,000 gig watt hours (GWH). The overall cost assessment for the same for the same has been discerned to be close to $2.2 billion. The Department’s electricity use and the supply of the electricity have been discerned to be more than 2.6 million averages of American homes. As per the data in 2007, it has been that the DOD is seen to be responsible for 93% of the US government consumption of fuel. It has been further seen to be discerned that Department of Air Force has been discerned with 52% consumption of Department of the Air Force. It has been also seen that the total consumption by the Department of the Navy is 33%; Department of the Army 7% and other Department components is 1%. The main consideration for the spending of DOD is identified to be 4.8% of the total GDP amount in 4.8%. This has accounted for 45% of the budgeted global military spending and more than 17 largest militaries combined (Sharkey et al., 2014).

Determination of employer’s weighted average cost of capital

The various types of the determination of the cost consideration have been discerned with $585 billion. The highest level of the resource for budget has been applied with the budgetary resources among all Federal agencies. The total amount of one half of the annual Federal Expenditures is US is considered with the federal discretionary budget (Perdue et al., 2015).  

Employer’s computation of WACC

The main form of the method used to compute the cost of capital has been discerned with the use of Average Channel Cargo Zone Rates. For the computation of the cost of the cargo estimates, the request of the rates is made to “HQ USTRANSCOM/J8-CA at DSN 779-5074 or 779-5061, commercial”.

Figure: Tariff one way rates in financial year 2016

(Source: Ustranscom.mil., 2017)

The computation of the cost of capital has been determined with the one-way tariff rates has been seen with converted pallet space which has been used with 5th weight-break (3600+ lbs) at the minimum target 2.5-ton. The computation of the U.S. Government and the passenger cargo is clearly indicated with rates table (Dod, 2014).

Conclusion

The main form of the depiction of the report has been able to state that the main form of the depiction of the capital budgeting method has been seen with the use of dollar rates from the shipment zone are considered from zone to zone basis. It has been further discerned that US DOD method of capital budgeting is based on lifecycle cost for capital budgeting. The Department’s electricity use and the supply of the electricity have been discerned to be more than 2.6 million averages of American homes. As per the data in 2007, it has been that the DOD is seen to be responsible for 93% of the US government consumption of fuel. It has been further seen to be discerned that Department of Air Force has been discerned with 52% consumption of Department of the Air Force.

References

Department of Defense, & Defense, U. S. D. of. (2017). About the Department of Defense. Retrieved from https://www.defense.gov/About/%0Ahttp://www.defense.gov/About-DoD/DoD-101#Our Most Important Rescource

Dod. (2014). Quadrennial Defense Review 2014. Vasa, 88. https://doi.org/10.1017/CBO9781107415324.004

Harvard Law Review. (2017). Defense Distributed v. United States Department of State. Harvard Law Review, 130(6), 1744–1751. Retrieved from https://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=122431031&site=ehost-live&scope=site

Perdue, C. L., Cost, A. A. E., Rubertone, M. V., Lindler, L. E., & Ludwig, S. L. (2015). Description and utilization of the United States Department of Defense serum repository: A review of published studies, 1985-2012. PLoS ONE, 10(2). https://doi.org/10.1371/journal.pone.0114857

Sharkey, J. M., Harkins, D. K., Schickedanz, T. L., & Baird, C. P. (2014). Department of Defense Participation in the Department of Veterans Affairs Airborne Hazards and Open Burn Pit Registry?: Process , Guidance to Providers , and Communication. The United States Army Medical Department Journal, (September), 44–50. Retrieved from http://www.cs.amedd.army.mil/FileDownloadpublic.aspx?docid=e358fb9a-c3f2-41d6-93ef-63d352ef3b82

US DoD. (2015). Department of Defense Dictionary of Military and Associated Terms. US Department of Defense Joint Publication, 2001(June), 513. https://doi.org/10.1080/14777622.2016.1237212 U6 - https://www.scopus.com/inward/record.uri?eid=2-s2.0-85003550236&doi=10.1080%2f14777622.2016.1237212&partnerID=40&md5=063c6b04f6b1364a44a9081b3e602227 M4 - Citavi

 Ustranscom.mil. (2017). Retrieved 19 November 2017, from https://www.ustranscom.mil/dbw/docs/FY16_Department_of_Defense_Airlift_Instructions_and_Rates.pdf