Finance for Managers

Start Here

Error! Filename not specified.

As a senior analyst at Maryland Creative Solutions (MCS), you have continued to prove your value after helping Choice Hotels make strategic decisions by analyzing their financial reports. Frank Marinara and Elisa Izuki, continually happy with your work, have decided to transfer you to the finance team. You’re excited to continue working for MCS and you strongly believe you are capable of someday making senior partner.

Dialogue with Frank Marinara

You meet with Frank so he can orient you to your new team. “The finance team has a slightly different focus than the accounting team,” he says. “The finance team is more involved with analyzing financing and investment decisions, making corporate asset valuations, evaluating corporate financial performance, and providing corporate valuations. You will be working to complete a project for our Maryland-based client McCormick & Company.”

Given your position as a senior analyst, you are anticipating that Frank will have several separate requests for your group. Frank explains that McCormick & Company is considering expanding their operations by purchasing another factory to increase production of their spice products. The client has asked MCS to help them determine if this financial investment is worthwhile.

Frank continues by delineating your responsibilities for the project: “To get started, we will need to look at the variables involved in this purchase and the questions McCormick & Company has provided. Ultimately, MCS will help them determine their corporate valuation, responsibly raise capital, and make the right financing and investing decisions. This information will help you determine which financing and investing options would provide McCormick & Company with the best potential outcomes for sustainability and growth.

“You will also need to host a meeting with the other finance analysts to discuss risk and returns,” Frank says. This discussion will help the client decide if they should invest in the new factory.

“The client also mentioned they would like MCS to provide them with guidance on retirement plan options and other employee benefits,” Frank elaborates. “Finally, I will need you to complete the project by filing a report that highlights your recommendations.”

Frank needs all of these assignments done within two weeks and suggests you begin right away. Click Step 1 to get started!

When you submit your project, your work will be evaluated using the competencies listed below. You can use the list below to self-check your work before submission.

· 1.3: Provide sufficient, correctly cited support that substantiates the writer’s ideas.  

· 1.6: Follow conventions of Standard Written English.  

· 3.1: Identify numerical or mathematical information that is relevant in a problem or situation.

· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.

· 3.3: Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.

· 3.4: Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making.

· 8.1: Evaluate major business/organizational systems and processes and make recommendations for improvement.

· 10.3: Determine optimal financial decisions in pursuit of an organization's goals.

· 10.4: Make strategic managerial decisions for obtaining capital required for achieving organizational goals.

· 12.1: Assess market risk and opportunity.

Step 1: Analyze Financing and Investing Activities

INBOX (1 NEW EMAIL)

From: Frank Marinara, Director of Finance

To: You and Finance Team

I hope you have had a chance to get to know the team and are ready to move forward with the project at hand. I want to give you the background on the McCormick & Company case and instructions for this project.

McCormick & Company approached MCS because they would like to increase the production of their products and are considering purchasing a new factory in Largo, Maryland. This new factory would allow the company to increase its overall production capacity. As McCormick decides whether to purchase the new factory, they are asking our finance team to evaluate options to finance this purchase. McCormick has provided MCS with the purchase price, expected cash flow, and two new product line projects they expect to run in the new factory.

To understand which financing option would be best for the client, you must first understand time value of money, present value, future value, and loan amortization. These topics will help your group make recommendations about the relative benefits and drawbacks of each option.

Working in the attached Excel Workbook, complete the Financing and Investing worksheet. The Financing and Investing worksheet contains information about present value, revenue, expenses, and cash flows, as well as questions that will help Frank guide the client in selecting the best financing option.

When you have completed the Financing and Investing worksheet, submit it to the submission folder located in the final step of this project. You should aim to complete this step during Week 8. Then, proceed to Step 3, where you will examine the factors affecting McCormick’s corporate valuation.

Looking forward to seeing your work,

Frank

 

ATTACHMENTS

McCormick & Company Workbook.xlsx

Step 2: Determine Corporate Valuation

McCormick & Company is also interested in gaining further insight on the corporate valuation of the company, as they need to know how much capital they’ll need to raise to purchase a new factory. To understand valuation, you must review dividends, options, warrants, derivatives, discount rate, and yield.

Dialogue with Frank Marinara

Frank tasks you with recommending a method for raising sufficient capital. “McCormick & Company has been paying dividends to its shareholders for several years now,” he says. “The company has given us some data and would like us to recommend ways they can further leverage their financing activities. The company is interested in potentially issuing more stock or purchasing bonds to raise additional capital for the purchase of the new factory. I will need you to answer a few questions about the company’s stock prices and minimum acceptable rate of return. Your answers will help me make a recommendation to McCormick.”

Working with the same Project 4 Excel Workbook you worked with in Step 2, complete the Valuation of Performance worksheet. This worksheet contains information on McCormick’s dividends, stocks, and risk premiums, as well as questions that will guide the client’s decisions.

When you have completed the Valuation of Performance worksheet, submit the Project 4 Excel Workbook to the folder located in the final step of this project. As you enter Week 9, proceed to Step 4, in which you will discuss risk and returns with your colleagues.

Step 3: Discuss Risk and Returns

Dialogue with Frank Marinara

As McCormick decides whether they will invest in an additional factory to keep up with demand, the company remains uncertain if the investment will yield worthwhile returns. “That is where they need us to provide them with a risk and return evaluation,” Frank says. “Risk is the financial liability a company takes in a given investment in consideration of a potential return on the investment.”

Meet and Discuss

Frank has asked you to meet with your colleagues and discuss how risk and returns will influence McCormick’s investment decision. Complete the following tasks:

· Discuss whether McCormick & Company should invest in a new factory in Largo, Maryland. Give credit to any sources you use to support your statements.

· Discuss how understanding risk and returns will impact this decision. Give credit to any sources you use to support your statements.

· Later in the week, after you are back in your office, you have a follow-up discussion with your MCS colleagues in an effort to summarize the key lessons from your discussion on risk and returns at the meeting. Respond to your colleagues' original discussion posts and give credit to any sources you use to support your statements.

During Week 9, submit one original posting of at least 250 words in the Risk and Returns Discussion by Saturday and post two responses of at least 50 words each to other discussion participants by Tuesday. See MBA discussion guidelines.

This discussion will take place during Week 9 of the course.

When you have finished Step 4, proceed to Step 5, where you will advise the client on selecting a retirement plan for its employees.