Saturday, March 28, 2020

List of the input variable assumptions

Investment Project & Project Analysis.
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.

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