ASSESSMENT CASE PAPER ANALYSIS / TUTORIALOUTLET DOT COM ASSESSMENT CASE PAPER ANALYSIS / TUTORIALOUTLET DO | Page 34

tutorialoutletdotcom
ntroduction:
You have recently been hired as a Financial Analyst in the Finance
Department of Zeta Auto Corporation which is seeking to expand
production. The CFO asks you to help decide whether the firm should
set up a new plant to manufacture the roadster model, the Zeta
Spenza.
Deliverable:
Write a report providing the CFO with your recommendation whether
Zeta should set up the plant to produce the Spenza’s and support your
recommendation by in-depth analysis in Excel. In your report, explain
the results of each portion of your analysis (represented by the tabs on
the Excel template). Submit all the completed Excel worksheets with
the completed responses to the questions posed to support your report
and recommendation. Provide a one-page Executive Summary
summarizing the results of your analysis and recommendation.
Steps to Completion:
Capital Investment Data
To assess the suitability of the project you begin by listing the various
cash flows. A consultant has been paid $50,000 to do a market survey.
She reports back that Zeta can sell 7,000 Spenza’s for $80,000 each in
years 1 and 2, and 4,000 Spenza’s for $80,000 each in years 3 and 4.
The consultant also estimates that the increased sales of the Spenza
will cannibalize the sale of an existing model, the Zeta Monza,
resulting in 1,000 fewer units of the Monza sold in each of the 4
years. Monza’s are priced at $65,000.
After 4 years it is expected the Spenza will be phased out, and the
plant will be put to other uses generating $15 M annually. However,
this decision can be reevaluated at the end of year 3, based on new
information which will become at that time. Your consultant has
prepared her estimates of what this new information might be. These
estimates are given in the attached Excel spreadsheet.
The cost of setting up the plant is to be $250 M with annual
manufacturing capacity of 10,000 cars. In addition, at the beginning
of each year the plant will require the Net Working Capital outlay
equal to 4.75% of direct manufacturing costs (excluding labor and