FIN 420 Individual Case Analysis Guidelines

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University of Rhode Island *

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420

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Finance

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Jan 9, 2024

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pdf

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Uploaded by DeanMonkey14947

FIN 420 Individual Case Analysis Guidelines Case Title: Zorbas Bakeries (Cyprus): An Option to Expand? Please read the case, complete the “Zorbas Worksheet” excel file, and write up a case report (3-4 pages, single spaced, excluding Exhibits) to answer the following questions. IMPORTANT: Please make sure numbers in the excel sheets are calculated through excel formulas, and not being typed in. Otherwise, you will not be able to correctly conduct sensitivity analysis. Numbers without formula will not receive credit. 1) Provide a brief case background and assess what the strength and weakness are for Zorbas to undertake the project. 2) What discount rate will you use? Explain your choice of variables. • Please complete the “Discount Rate” worksheet by conducting calculations in the cells in gray. 3) Based on the information in Exhibit 7, create the 5-year cash flow estimation model for the Normal Scenario in the excel template. Calculate the NPV, IRR, and payback. • Please complete the “Normal Scenario” worksheet by filling out the necessary cells in the area highlighted in gray. If you think it is necessary to add/delete rows or rearrange the cashflow tables according to your own needs, please feel free to do so. 4) Conduct sensitivity analysis. • On the “Normal Scenario” sheet, use two-way data table to assess how will the change of Cost of Goods Sold/Sales and Variable Operating Expenses/Sales impact the NPV. Use one way data table to assess how will the change of initial investment for the store influence the NPV. Comment on your findings. • Develop two additional scenarios: pessimistic, and optimistic. Explain your logic when assigning the inputs. Create the free cash flow projections for the pessimistic and optimistic scenarios. Calculate the NPV, IRR, payback and summary them in your report. i. To create a scenario for Pessimistic, you can create a copy of the “Normal Scenario” sheet and rename it as “Pessimistic”. You can then change the input cell assumptions and create the FCF for the pessimistic scenario. You can repeat the same process and create a “Optimistic” Scenario. ii. Please highlight (in red) in your excel file on the input cells you changed for the two scenarios, and justify why you made such changes in the analysis report.

5) If we consider that the first store in New York was intended as a test for the future franchise and we view the experience of running this store as a learning opportunity which will lead to the opening of a second store, will this influence your conclusion? Please discuss implications of the option to expand on your final decision. There is no need to conduct numerical analysis in this part. 6) Please conclude the report by summarizing all your analysis results above and talk about whether Zorbas Bakeries should expand to the New York city. Note: 1. Please do not use Q&A format for your report; I recommend you to structure your report in the following way: • Overview of the case: o Case Background o Strength and Weakness to undertake the project • Analysis: o Discount rate o Normal scenario o Sensitivity analysis • Other considerations • Conclusion 2. Please use the excel template posted on Brightspace (under Individual Case Analysis) for your analysis. Your analysis report is due on Dec 13th by midnight via Brightspace. Please submit both your excel file and word report. The submission link is under Assignments. No late submission will be accepted.

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