Finance Assignment Due

Basic Analysis

Future Electricity prices downloaded and converted into $/kWh after adjustment for regional discount

Depreciation using both methods is calculated, comparison is made and a justified recommendation is given

Direct and Fixed Cost are properly identified and net income is calculated. Attention is paid to finding fixed cost based on allocation numbers and capacity

Lost after-tax profit from Monza's cannibalized sales is properly calculated

OCF is calculated based on approach used in earlier homework

Opportunity costs are identified and properly calculated

FCFs are calculated, combining together OCF, CapEx, investment in NWC, and opportunity costs

NPV and IRR are properly calculated (attention to NPV formula use – check Excel mistakes screencast). For preliminary check, if WACC is not calculated yet, 8% can be used. For final submission, WACC calculated in WACC tab should be used

WACC

Assumptions about risk-free rate, MRP, tax rates and peer companies are made. Sources of information are provided in pink cells

Data about peer companies downloaded from recommended sources (Yahoo Finance, EDGAR, Morning Star et al.) – levered beta, market value of equity, value of debt (book value of debt can be used instead), and possibly actual tax rates (unless assumption is made)

D/E, E/Total Value ratios, and unlevered beta are calculated

Mean and median of unlevered beta are found

Zeta's relevered beta is estimated with proper Zeta's D/E ratio used

Cost of equity is calculated using CAPM formula, calculated beta, and downloaded numbers for risk-free and MRP.

After-tax cost of debt is calculated

WACC is calculated

Scenarios

Electricity scenario summary is created by repeating basic analysis when using six different scenarios of electricity prices

Sales volume scenario summary is created by repeating basic analysis when using three different scenarios of future sales volumes

Electricity Breakeven

Arbitrary year 1 electricity cost is chosen and electricity costs in subsequent years are made dependent on this initial cost

EBIT is calculated either by using a complicated formula or by inserting extra rows and redoing calculations from basic analysis, but now as dependent on new electricity prices. DO NOT COPY VALUES of Body Materials electricity costs from Basic Analysis

Investment in NWC is calculated either by using a complicated formula or by using already inserted extra rows

FCF is calculated

NPV is calculated by properly using NPV function

Break-even year 1 electricity cost (making NPV = 0) is found either by trial and error or by using Excel Goal Seek

Crystal Ball (Optional, extra 5% bonus)

Assumptions cells are set at least for variables described in the project (Investment, Debt Financing %, interest rate, NWC Investment %, number of cannibalized cars, sales volume for each year, and electricity costs for each year). Averages should be the same as in the base case scenario. Additional assumptions can be made

Simulation is run for NPV and IRR as forecast cells

Probability of positive NPV is found based on NPV distribution chart

Tornado chart is created

Report

Report starts from executive summary with your main conclusions and recommendations put there!

Main part:

· Very briefly describes work performed

· Presents results

· Analyzes results, focusing on risk analysis (different scenarios, sensitivities, breakeven etc.).

· If simulation was performed, results are analyzed and discussed

· Conclusions are drawn

All sources used are properly cited and put in a reference list at the end. Remember that your instructor will submit your report to Turnitin. If you have your own access to Turnitin, I recommend submitting the report yourself and notify the instructor

Formatting, spelling and grammar are checked. Proof reading helps to catch typos missed by software.