corporate finance

2

>individual Report Example

year’s project

. Senario Analysis

Criteria

Base Worst Best

0%
Microsoft Office User: Microsoft Office User:
assumptions and research with the citation

Probabilities

($)

Microsoft Office User: Microsoft Office User:
a similar size of investment from a competitor or industry (with the citation on research and assumptions)

10,000

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation
Microsoft Office User: Microsoft Office User:
assumptions and research with the citation 5 5 5

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation 2,000 2,000 2,000

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation

3,000

/ unit (initial year)

Microsoft Office User: Microsoft Office User:
reasonable expected sales price per unit, expected number of goods sold (with the citation on research and assumptions)

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation 15

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation
Microsoft Office User: Microsoft Office User:
assumptions and research with the citation 1,000

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation
Microsoft Office User: Microsoft Office User:
assumptions and research with the citation 40%

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation

Analysis

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation
Microsoft Office User: Microsoft Office User:
assumptions and research with the citation 4,000

3,500
Microsoft Office User: Microsoft Office User:
assumptions and research with the citation

included)

5%
Microsoft Office User: Microsoft Office User:
assumptions and research with the citation
Microsoft Office User: Microsoft Office User:
assumptions and research with the citation
Microsoft Office User: Microsoft Office User:
assumptions and research with the citation 5% 5% 5% Selling price

Inflation

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation 3% 3% 3%

Microsoft Office User: Microsoft Office User:
Industry average cost of capital (with the citation on research and assumptions)

12%

12%

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation 17% 17% 17%

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation

15% 15% 15%

rate

35%
Microsoft Office User: Microsoft Office User:
assumptions and research with the citation 35% 35% 35% Discount rate (WACC)

0 1 2 3 4 5

Investment

NPV

0 1 2 3 4 5

Microsoft Office User: Microsoft Office User:
assumptions and research with the citation

Deviation

Initial Investment NPV

Tax

– 0 Deviation

Depr.

0 1 2 3 4 5

NOWC

0 1 2 3 4 5 – 0

Free Cash Flows

Case. Blooper Industry Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper

5

1

0

1. Inputs

Base

Worst

Best

6. Project Valuation &

Investment

Final

Probabilities

50% Microsoft Office User: Microsoft Office User: assumptions and research with the citation

20% Microsoft Office User: Microsoft Office User: assumptions and research with the citation

3

Initial Investment

10,000

Microsoft Office User: Microsoft Office User: assumptions and research with the citation

10,500 Microsoft Office User: Microsoft Office User: assumptions and research with the citation

9,500 Microsoft Office User: Microsoft Office User: assumptions and research with the citation

Disc. Payback Period

useful life of the invested assets (years)

5 Microsoft Office User: Microsoft Office User: assumptions and research with the citation

Net Present Value

Salvage value of the fixed asset ($)

2,000

IRR

Sales of the fixed assets, t=5 ($)

3,000

2,500 Microsoft Office User: Microsoft Office User: assumptions and research with the citation

3,500 Microsoft Office User: Microsoft Office User: assumptions and research with the citation

PI

Selling price

15

1

4

16 Microsoft Office User: Microsoft Office User: assumptions and research with the citation

Number of units sold a year

1,000

900 Microsoft Office User: Microsoft Office User: assumptions and research with the citation

1,100 Microsoft Office User: Microsoft Office User: assumptions and research with the citation

Variable Cost (% of sales)

40%

4

5%

35%

7. BEP

NPV

Initial fixed Cost ($)

4,000

4,500 Microsoft Office User: Microsoft Office User: assumptions and research with the citation

Number of Units sold a year

Growth rate (

Inflation

3%

Variable Cost (%)

Discount rate (WACC)

12%

13% Microsoft Office User: Microsoft Office User: assumptions and research with the citation

Accounts Receivable, as fraction of sales

17%

Inventory as fraction of following years’ expenses

15%

8. Restricted 4 years DPP Analysis

Tax

Growth Rate

2. Capital Expenditure

Fixed Cost

Sales of fixed asset

Tax on gain of sale

9. Sensitivity Analysis

Cash flows in Capital Expenditure

Selling Price

3. Operating cash flows

Deviation

– 0

Revenue

VC

FC

Depr.

EBIT

Deviation Microsoft Office User: Microsoft Office User: assumptions and research with the citation

Cash flows in Opr.

4.

NOWC

Cash flows of Changes in NOWC

5.

Free Cash Flows

PV of FCFs

Cumulative PV of FCFs

FIN325 Corporate Finance

.

Individual Project Assignment (30%).

Investment Project & Project Analysis.

One of main highlights of the course for the midterm is valuing an investment project and analyzing it. Students will be able to perform the procedure of creating a spreadsheet for a hypothetical project, evaluate it with four investment criteria, and demonstrate breakeven analysis, sensitivity analysis, and scenario analysis.

This assignment is very important in that students will face this type of interview questions in hiring procedure and that students planning their own business must provide investors with the investment project spreadsheet to propose a funding. Please carefully read the instruction to get a high grade and to prepare your future.

A. Instruction

1. Students will create a hypothetical but realistic project just like United Pigpen (Excel Exercise) case and submit Investment proposal in Word file and Spreadsheet in Excel file.

2. Word file MUST include: (1) Project description (2) List of Input variable assumptions (3) Investment proposal (Please use the Word format below.)

3. Excel file MUST include: (1) Input variable assumptions in each cell using Note (2) FCFs spreadsheet model (3) Investment criteria (4) Breakeven analysis (5) Sensitivity analysis (6) Scenario analysis.

a. You may use Spreadsheet from Excel Exercise example, which is a basic format, but students should develop their own spreadsheet model beyond the example in order to get a higher grade.

b. Any other project spreadsheet from other websites or Google is acceptable but MUST include all the required work mentioned above.

B. Grading Criteria

1. Must submit Both Word file and Excel file.

2. Sharing Excel model, project description, or list of the assumptions with others will result in Zero grade both giver and receiver. (Turnitin over 50%). This is an alternative of Midterm Exam.

3. Reduction criteria. (Refer to the rubrics for the specific point reduction.)

a. Just using the same Excel Example model without development won’t get full credit.

b. Missing or Sharing the requirements on the Word file.

c. Missing or Sharing the requirements on the Excel file.

d. Failure of connecting Input variables all the way through spreadsheet. All the values in spreadsheet MUST be connected to input variables. Don’t put a hard number anywhere in spreadsheet except Input variables. (That’s the most serious failure of spreadsheet in the real business! Investors or your boss will try to change the variables to see how the investment criteria change.)

C. Due Date

1. April 5th, 11:59PM, on Sunday

2. Late Policy by the school rule.

a. 10% additional reduction for any late assignment.

b. Late assignments will be accepted up to two days past the due date.

c. Following this 2-day grace period, there will be no marks given. 

*Remove the instruction part above to avoid plagiarism.

—————————————————————————————————————————–

FIN325 Corporate Finance.

Individual Report Assignment (30%).

Investment Project & Project Analysis.

Name:

1. Project Description. (Strongly recommended to keep revising along with creating spreadsheet in Excel. Must be realistic based on research.)

e.g. United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would make use of an existing warehouse, which is currently rented out to a neighboring firm. The next year’s rental charge on the warehouse is $100,000, and thereafter, the rent is expected to grow in line with inflation at 4% a year. In addition to using the warehouse, the proposal envisages an investment in plant and equipment of $1.2 million….

2. List of the input variable assumptions. (Why should be this amount? Must be realistic based on research. All input assumptions MUST be described here in Word and in a cell with Note on Excel Spreadsheet)

e.g. United Pigpen case

Input variables

a. Investment $1.2 million: a similar size of investment from a competitor or industry (assumptions and research with the citation)

b. Revenue $4.2 million: reasonable expected sales price per unit, expected number of goods sold (assumptions and research with the citation)

c. Cost of Capital 12%: Industry average cost of capital (assumptions and research with the citation)

.
.
.

*Please research and complete just one or two variables every day as if you’re planning your own project. You will be enjoying this assignment. (You have plenty of time to complete until the due date, but clock is ticking. Work on just about an hour every day and start right now to avoid procrastinating and cramming.)

3. Investment Proposal. (Why investors or your company should invest)

e.g. Blooper Industry case

Conclusion with key points.

Results of DDP (how the project shortens the payback)

NPV (how much value expected)

IRR (how much profitable than cost of capital)

PI (how much profitable than initial investment)

Break Even Analysis (how many units to sell)

Sensitivity Analysis (which variable is most sensitive)

Scenario Analysis (considering risks)

And other comments to propose the investment.