Case Analysis 1 Weight 20% of total assignment
Based on this information, answer the following questions:
1) How much money will be in the bank account if you leave the $300,000 alone until you need it in five years?-Answer
2) If you undertake the investment opportunity, what is the Nominal Payback Period?- Answer
3) Using the factors for 6%, what is the Discounted Payback Period?- Answer
4) What is the Net Present Value of this investment opportunity? – Answer
5) Which option make the investment or leave the money in a savings account would you recommend to your CEO? Why? What additional factors/information might make you change your point of view? Answer
Case Analysis 2 – Weight 30% of total assignment
Calculate the Nominal Payback, the Discounted Payback, the Net Present Value and the IRR (so 4 answers for each scenario) assuming:
-Alice (A) recommends using the base assumptions above: 3 year project life, flat annual savings, 10% discount rate Answer
– Bill (B) recommends savings that grow each year: 3 year project life, 10% discount rate and a 10% compounded annual savings growth in years 2 & 3. In other words, instead of assuming savings stay flat, assume that they will grow by 10% in year 2, and then grow another 10% over year 3 in year Answer
Carla (C) believes we use a higher Discount Rate because of the risk of this type of project: 3 year project life, flat annual savings, 15% discount rate. Answer
Danny (D) is convinced the machine will last longer than 3 years. He recommends using a 5 Year Equipment Life: 5 year project and savings life, flat annual savings, 10% discount rate. In other words, assume that the machine will last 2 more years and deliver 2 more years of savings. Answer
Discussion in a Word Document in paragraph form, respond to the following:
1)Which persons scenario would you present to management and why? From a strictly financial (numbers) perspective, would you recommend this purchase to management? Answer
2) In your opinion, which persons scenario is the most aggressive (i.e., is based on the most aggressive assumptions)? If you were to select this scenario as the basis for your proposal, how would you justify the more aggressive assumptions? Answer
3) In SIMPLE English (as in talking to a non-Finance and non-MBA person), explain why there is value to management in running all 4 of these scenarios. Answer
4) Beyond financial measures, what other considerations would you want to consider, before making a recommendation to management? Answer
5) If you were the CEO, would you approve this proposal? Why or why not? Answer
Case Analysis 3 Weight 40% of total assignment
Discussion in a Word Document in paragraph form, respond to the following:
1) From a purely financial (numbers) perspective, would you recommend this purchase to management? Why? Answer
2) What are some of the non-financial elements that need to be considered for this proposal? Answer
3) Assumptions in project economics can have a huge impact on the result. Identify 3 financial elements/assumptions in your analysis that would make this project not be financially attractive (e.g., answer this question: what would have to be true for this to be a bad investment?) Answer
4) If you were the CEO, would you approve this proposal? Why or why not? Answer
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