5/2/22, 8:03 PM Feedback for Major Project 2 preliminary check - FIN XXXXXXXXXXInvestment Valuation XXXXXXXXXXUMGC Learning Management System...

Please read my professor feedback and fix it to according to his notes. Thank you


5/2/22, 8:03 PM Feedback for Major Project 2 preliminary check - FIN 630 9080 Investment Valuation (2222) - UMGC Learning Management System https://learn.umgc.edu/d2l/lms/dropbox/user/folder_user_view_feedback.d2l?db=1259072&grpid=0&isprv=0&bp=0&ou=634140 1/8 Project 2 Check Activity: Major Project 2 preliminary check Course: FIN 630 9080 Investment Valuation (2222) Name: Lusye Smith Automation Project Excellent Good Satisfactory Need improvement Criterion Score Salvage value 0.5 / 1 Criterion Feedback FCFs 3 / 3 Criterion Feedback NPV and IRR 3 / 3 Criterion Feedback Scenario summary table 1 / 3 1 point 0.5 points 0.25 points 0 points Wrong number for EBIT in year 5. No formula given 3 points 2 points 1 point 0 points are correct 3 points 2 points 1 point 0 points are correct 3 points 2 points 1 point 0 points Perisca Highlight Perisca Highlight 5/2/22, 8:03 PM Feedback for Major Project 2 preliminary check - FIN 630 9080 Investment Valuation (2222) - UMGC Learning Management System https://learn.umgc.edu/d2l/lms/dropbox/user/folder_user_view_feedback.d2l?db=1259072&grpid=0&isprv=0&bp=0&ou=634140 2/8 Automation Project Excellent Good Satisfactory Need improvement Criterion Score Criterion Feedback Expected NPV 2 / 2 Criterion Feedback Break-even byproduct sales (making NPV = 0) 0 / 3 Criterion Feedback Wrong approach to find NPVs for different scenarios. You were expected to recalculate NPV and IRR for each new level of sales. 2 points 1 point 0.5 points 0 points is correct 3 points 2 points 1 point 0 points Breakeven value was not calculated Breakeven is the level of annual byproduct sales at which NPV = 0. Fiz-mRNA Vaccine Excellent Good Satisfactory Need improvement Criterion Score Expected revenues 3 / 4 Criterion Feedback 4 points 3 points 2 points 1 point Revenue growth should stop after three years. Perisca Highlight Perisca Highlight Perisca Highlight 5/2/22, 8:03 PM Feedback for Major Project 2 preliminary check - FIN 630 9080 Investment Valuation (2222) - UMGC Learning Management System https://learn.umgc.edu/d2l/lms/dropbox/user/folder_user_view_feedback.d2l?db=1259072&grpid=0&isprv=0&bp=0&ou=634140 3/8 Fiz-mRNA Vaccine Excellent Good Satisfactory Need improvement Criterion Score SGA 1 / 3 Criterion Feedback OCF 2 / 3 Criterion Feedback FCF 1 / 3 Criterion Feedback NPV and IRR 1 / 3 Criterion Feedback 3 points 2 points 1 point 0 points SGA numbers are incorrect – they ignore all risks. 3 points 2 points 1 point 0 points Wrong depreciation - you show Net PP&E instead of annual depreciation 3 points 2 points 1 point 0 points Wrong approach to find FCF. And sign for investment should be negative 3 points 2 points 1 point 0 points Wrong use of NPV formula - in your case it combines cash flows from 2022 and 2023 and shifts subsequent cash flows one year earlier. Perisca Highlight Perisca Highlight Perisca Highlight Perisca Highlight 5/2/22, 8:03 PM Feedback for Major Project 2 preliminary check - FIN 630 9080 Investment Valuation (2222) - UMGC Learning Management System https://learn.umgc.edu/d2l/lms/dropbox/user/folder_user_view_feedback.d2l?db=1259072&grpid=0&isprv=0&bp=0&ou=634140 4/8 Fiz-mRNA Vaccine Excellent Good Satisfactory Need improvement Criterion Score FCF and NPV for the case of FDA approval in two-stage investment 4 / 8 Criterion Feedback FCF and NPV for the case of FDA rejection in two-stage investment 2 / 4 Criterion Feedback Expected NPV 0.5 / 2 8 points 6 points 4 points 2 points If project is approved, then the probability of success in 2026 should be 1. Same issues with revenues, SGA, and depreciation OCF is incorrect in 2024 Wrong use of NPV formula - in your case it combines cash flows from 2022 and 2023 and shifts subsequent cash flows one year earlier. 4 points 3 points 2 points 1 point If the project is not approved, the only relevant cash flow is stage 1 investment and subsequent depreciation tax shield. There is no second stage investment then (that was the whole point of having two stages of investment - to cancel the second one, if necessary) 2 points 1 point 0.5 points 0 points Perisca Highlight Perisca Highlight 5/2/22, 8:03 PM Feedback for Major Project 2 preliminary check - FIN 630 9080 Investment Valuation (2222) - UMGC Learning Management System https://learn.umgc.edu/d2l/lms/dropbox/user/folder_user_view_feedback.d2l?db=1259072&grpid=0&isprv=0&bp=0&ou=634140 5/8 Fiz-mRNA Vaccine Excellent Good Satisfactory Need improvement Criterion Score Criterion Feedback Wrong formula for expected NPV - it ignores the case of success and uses wrong probabilities of success (FDA approval) and failure (FDA rejection) NewRNA Excellent Good Satisfactory Need improvement Criterion Score Expected revenues 0 / 0 Criterion Feedback SGA 0 / 0 Criterion Feedback OCF and FCF 0 / 0 0 points 0 points 0 points 0 points Revenues in 2027-2032 are incorrect – they ignore the obsolescence risk between 2026 and their current year. 0 points 0 points 0 points 0 points You should have used Fizek's SG&A - "[i]f Fizek were to acquire NewRNA, it would be able to bring SG&A costs down to Fizek’s level." SGA numbers are incorrect – they ignore all risks. 0 points 0 points 0 points 0 points Perisca Highlight Perisca Highlight Perisca Highlight 5/2/22, 8:03 PM Feedback for Major Project 2 preliminary check - FIN 630 9080 Investment Valuation (2222) - UMGC Learning Management System https://learn.umgc.edu/d2l/lms/dropbox/user/folder_user_view_feedback.d2l?db=1259072&grpid=0&isprv=0&bp=0&ou=634140 6/8 NewRNA Excellent Good Satisfactory Need improvement Criterion Score Criterion Feedback "Value if acquired" 0 / 0 Criterion Feedback Depreciation is incorrect OCF is incorrect - it ignores depreciation 0 points 0 points 0 points 0 points correct Financing Excellent Good Satisfactory Need improvement Criterion Score NOPAT and Terminal Value 0 / 0 Criterion Feedback NewRNA’s book value, if FDA rejects 0 / 0 0 points 0 points 0 points 0 points Revenue growth should stop after 3 years Depreciation incorrect Terminal Value is incorrect – “If the VC agrees to invest in NewRNA, it plans to exit after eight years at which time it expects that the company’s value would be eight times its year 8 EBIT.” It means that the terminal value in year 8 will be EBIT in year 8 times 8. 0 points 0 points 0 points 0 points Perisca Highlight Perisca Highlight 5/2/22, 8:03 PM Feedback for Major Project 2 preliminary check - FIN 630 9080 Investment Valuation (2222) - UMGC Learning Management System https://learn.umgc.edu/d2l/lms/dropbox/user/folder_user_view_feedback.d2l?db=1259072&grpid=0&isprv=0&bp=0&ou=634140 7/8 Total 24 / 45 Financing Excellent Good Satisfactory Need improvement Criterion Score Criterion Feedback FCFs for each financing case 0 / 0 Criterion Feedback Expected FCFs 0 / 0 Criterion Feedback NPVs 0 / 0 Criterion Feedback If FDA rejects the project, then there is no revenue and your NewRNA Book Value in 2023 should decrease by depreciation amount. 0 points 0 points 0 points 0 points Your approach to calculating cash flows in all three financing cases is incorrect. It would be easier for three financing options to use the incremental cash flow approach - look only at the cash flow related to financing from the company’s owners (not VCs!) perspective. VCs give money first and then get something in return. As an example, see Module 5 file “VC Example” tab 0 points 0 points 0 points 0 points Your expected FCFs ignore probabilities. 0 points 0 points 0 points 0 points IRR formulas are missing Perisca Highlight Perisca Highlight Perisca Highlight Perisca Highlight 5/2/22, 8:03 PM Feedback for Major Project 2 preliminary check - FIN 630 9080 Investment Valuation (2222) - UMGC Learning Management System https://learn.umgc.edu/d2l/lms/dropbox/user/folder_user_view_feedback.d2l?db=1259072&grpid=0&isprv=0&bp=0&ou=634140 8/8 Overall Score Excellent Good Satisfactory Need improvement CB_DATA_ Crystal Ball Data ERROR:#NAME? Workbook VariablesLast Var Column0 Name: Value: Worksheet DataLast Data Column Used 3 Sheet Ref ERROR:#REF!ERROR:#REF!ERROR:#REF! Sheet Guid 9bbac9de-130f-4cff-8cb1-1f2a360a2a8bf12410cb-8654-4745-8b8f-f89e0f861aa42a62b937-bf2c-4a11-bfb5-be42818d1d60 Deleted sheet count Last row used 282626 Data blocks CB_Block_0 㜸〱敤㕣㕢㙣ㅣ㔷ㄹ摥㌳摥㕤敦慣敤搸㡤搳㑢㑡㘹つ愵戴挴挱㡤搳㠶㔲㈰〴㕦㥡㑢㜱㘲㌷㜶㔲㔰㐱㥢昱敥㤹㜸㥡㥤ㄹ㜷㘶搶㠹㑢愵㔶搰㜲㠷㑡摣㐴愱㐰㔵㐱㈵㕥戸〸〹捡攵〵〹〹㠴㡡挴〳㐸㈰昱㔰㄰㠲〷㄰ち攲㠵〷㈴昸扥㌳㌳扢㌳扢摥戱扢㙤挱㐵㍥改晥㍥㜳㙥㜳捥昹慦攷晦捦㌴㈷㜲戹摣扦㤱昸㤷㈹捦捣㜵㡢敢㝥㈰敤㠹ㄹ户㕥㤷搵挰㜲ㅤ㝦㘲捡昳㡣昵㌹换て晡搰愰㔸戱㔰敦ㄷ㉡扥昵愰㉣㔵搶愴攷愳㔱㈱㤷㉢㤵㜴つ昵ㅣ㠴扦㤱昸㐱㘷慦挱㍣挰搲捣昴晣昲晤ㄸ㜵㌱㜰㍤戹㝦散㙣搸昷昰攴攴挴攴挴敤㠷㈶て㑥ㅣ搸㍦㌶搳愸〷つ㑦ㅥ㜶㘴㈳昰㡣晡晥戱㠵挶㜲摤慡扥㔳慥㉦戹ㄷ愴㜳㔸㉥ㅦ戸㙤搹戸晤捤㤳户ㅦ㍡㘴摥㜹攷㥢〷昱敡摣愹㤹改〵㑦㥡晥㑢㌴㘶㠱㔳扥㝤㔶㔶㉤慥㑤㑡捦㜲捥㑦捣㑣攳扦挴晣昱㜴挷挴攲㡡㤴〱㕦㉤㍤改㔴愵慦愳攳㠰㍤攵晢つ㝢㤵㥢愷摢㐷戱搴慡攱〷〵㝢㐶搶敢扡ㅤ㡦㕡戲攷戱㜷㜵㘳㝤搰㕥㤴㡥㙦〵搶㥡ㄵ慣ㄷ敤㈵っ㔴ㅢ戲捦昸昲戴攱㥣㤷愷っ㕢ㄶ散㘳つ慢㤶て㔳慥敦收㜸㠸攴挴搴昲㈷愶㝣㝢㘶挵昰搴㡣㝣㙥㑣㐶摢愳㕥㌵摤昶挶敥攳㜲敡敡つㅣ昳愶敥敤㔰㜳搶昰㥡㉤挷扢户㡣ㄶ㥦㥥挱慤摤摢㈷昶㈸摤攷つ摤晢愸慤㑣户ㄶ〳ㄱ㝤慢ㅤ挵㘲昴㈲㐱㍦㐱㠹㠰〸搴换〴〳〴㠳〰㈲晦て㜰㐹戲㈳慢戴㡡愱㔵㤶戵㑡㔵慢搴戴㡡搴㉡愶㔶㌹慦㔵㔶戴㡡愵㔵敥搷㉡ㄷ搰㈶㑥愵晥㝥㉤㑡〷㍥㝡敥㍢㍦㜸晣㌷搳㍦扣敦敦愵㝤晤晤㕦ㅢ摣㠵㐶昷㐴㤳㥡昵㡣㡢㈰戵ㄶㄵ㠳㈳昸㙦㜳慥〰㔳㤸㠷捣㍢捣挹挹摡愱〳挶㙤㐶㠱换捡㐰㝥㡡㔰㐶搰㜶搰扣搷㜲㙡敥㐵㠵扢敢愶つ㕦戶㌶㙥㍣慡㥢㜶ㅢ㑥捤㝦搵挶㤵㡢㠱ㄱ挸㙢摢敢㕡㠳㜴㜴㕢〴㕢㐹㕦扤敦晡昶㙥㘷㡤㝡㐳㑥㕤戲挲敡㔷户㔵摢ぢ㥥扢摣扤昶愸㈷ㅦ㘸搶㜶捣㘸ち㐲㙤㑤㡤摤戱捡戰㉡㥣搷搸捣㡡敢㑢㐷㑤㙦摣㕥戰慡ㄷ愴户㈸㈹ㄲ㘵㑤㉤昵㑡㔶㐵㕣㍦㍥敦㘰愱攰搶摡㙢㤳愵收㕤㤷〲㌰戳慣㘱扥慢搲ぢ搶㤷㡣攵扡扣㉡搵㈴㝣㈷㉡昶愶㡡㡦扡搵㠶㍦攳㍡㠱攷搶搳㌵㔳戵㌵〳㤲愶㜶搲慤挹㝣㍥愷㠴〲〴㙥㕦㥦㄰戹㝤摤㜹㐱㈱㈲㠱㘲㌲昲㌵㘹戲㥢㌸㡤搵㘱ㄵ㜵㐹㥡搴㕥户挹㘰㥣慦㤲㌱ㄹㅣ㤸㔸ㄳ昵〷㕦㝡换㈶挳㌶㌱昷昲㌶搶戴搱㘸昵㜷慤㐹㈷㌸㙥㌸戵扡昴㌲戵㥦攰㡣昴㘱㠰挲㘵〸㠴慥扢㐷㔵㈷㉥㠹昵挲㐵慢ㄶ慣ㄴ㔷愴㜵㝥㈵㐰ㄹ㌴㘴愹挴慤敤㐸晡ㄵ㈸搲㜷ㄳ㡣〲㤴换戹攲ㅥ㌶㉡㤶㤱㜲〵㑡愷っ㕥㑥〹㜲昶㑢昱昲愰㜹搴慡〷㌲ㄴ捡挳㈶㌰ㄲ㙡㌵㠵扥㈱㤲愸㘷㔴㐳㠵戱挷㥣〱㤵ㅡ㤶ㄳ慣户昸戶㠳㑢㐲㈲摡㤱〵摢㑥ㄶ㔰ㄴ愴攵㐱〶慦㠱㘸摡愴㐱㜶攳〴ㄱ㤱つ㌲㌴㍢㐶㑥ㄳㄹ摢㘷挸〸戴㑦ㄲ㈱㕢ㅦ攸㉥㈳㐸散㥤㐴捡㑥㕤昹㜱㐷㥡㙤㘴换㠷搲散㑡㙣㥣㝥ㄵ挱搵〴搷㄰散〵㄰㝦㠲㠴愳㤴㐳㍥㥤昴㔷攱㔹扦㡥攰搵〰㤰㑦㍡㘵㑥㈴慡㘸㐳㙤挵㡥㘴扢㈱搸挹捡㈸づ㐵ㄱ㉤攳愶㥤㌹㘴㉢㐴㐷㔶攷昶搰戵㜹愵㘳㕦摦㥤㌶㤳换㈱㐵㘶㌴㑤慥㜵㤳愶挹㡤㘰搳ㅥ昵搶つ攸慡㡦ㄱ扣〶愰慣扦㤶㄰捡㠵〶敦搶㉣㝡㥡㤴慦〸戳㈸㌴㠶㝡㔴昰ㄱ㈱昳〸㤰㈱攴㍡㡥㉦㍢㌶㌴捤挱㜱昳ㄵ㙦㐳敦敦捥摦ㄱ搲摢昴收㡥摥愱扦攸〵㕡搱㌷㠲扤挴敦扡敡㤸㥢㔰慤扦㥥攰㘶㠰㌶ㅤ挳搳昷ぢ昵ㄴ㈸戳搸㑥㘰㙥㌷扤㉥捡捡㕤㕡㕦㤵㑡〳つ㥡㑢㠶㜷㕥〶昰㘰㥣㤸㠵㉤散㝡㥥慣攳㔰㕢㔳〵㍣扦㕣㥤㉥昴㡦㝡慥捤昲ㅤㅢ搹㝦㐵㈸㠶㝣㕥敢换戵搹挸ㄹ戶㘶挲攷㤴愰ㅣ敡攰摢扡ぢ㠹㐴愷㌴㜹戱㕦昶昹㜲㐷㤲昴㈰㐹摥㠰㙤搵昷〱㐰㑡㠸㕦㜷㤵㈸晢搹散㡤慡㔹摡㘲愵㠷㉦攳㜴搲收㐳散㤰㈳〳愱挳㜶ㅡ晥〳㝦挸㕥戴散愶戰ㄸ戰ㄷ愴㔷㠵㙦挱慡换㜲攸㤶愵愸搹㤱ㄵ慦㄰㔹搱搷搷㜱㥥捥昰慦㈹㍡㘹㤳ㄲ㤹摣㥥㔹㤹㜱ㄶ㙦ㄱㄵ摤㤰ㄴ㉡ㄹ慥愱愶〴㈲攵戱敤㡥㠸改㐱挴摣㡡㡤搳て㄰㑣ㄲㅣ〴㈸晣〲㤲㘶慢ㅢ捦㜰㔸晦ㅡ㕤摡㤵㑡慥㐴㌴㈸ㄷ攱㜳㕤㠵搵㈱扥收㑤〴㜷〰戴㤹㍦㜴㐰㘶㄰愲㐲㜹㠲㄰㔵ㄸ挳㍣㙢挹㡢愴㠱㕤㈶〲㑢㌳つ㍦㜰㙤㐶㤶㠶捣㔹昷㤴ㅢ捣㕡晥㉡㈲㔱愳㘶㤴戹㜷㐵㍡愰㉥て戶㑦㕢㤹扢扡㉡㙢扡戹攸㌶㈰摡㑥捣㙥㠷㠳㌹戶〳戶愴㍡㥢㙢〲愹户昳㌱㠶㄰搸㘹攵㙦愵㌷㜶㑢摥㙦ㅥ晡㠶㕢㍢扡㘴〵㜵㌹㘰㠶㑣挷㝣挹挴㉥㈲㜲㔰敢㌷㤷㔶㍣㈹㘷㠷捣㘳㥥㔵慢㕢㡥㈴㌲㘰㘳㌲㔸㌷㈷捦㈳㑡戰攰㌲〶攸㍡㐳收㤲㘷㌸晥慡挱㠰攲晡敥搴㤳ち㡢ㄴ捣㘹换昱昱ㅡ㠵㐵收㠷捤挵ㄵ昷㈲㈲戶つ摢㌹㘶慣晡摢〲㉢㈴晡㌰㈹搴〸㑤㘸㥡㈸㘹愵㕥昱挳〳㜹㉥㐷摥换ㄳ㈸㕣攵ち昴㤹㘷㘸㙦摡昵㔱㡣㠶㜶㍡攷㌴㠸攸㔱戳戰㉦㔳ち㤳㔳昵㍢搹攷㉤〰㜷ㅦ㍢㜳愲ㄵ㤹㝢㔱㌱敢〲扤晣ㄹ㌲㕥㤱㐵㌳㄰㐲ㅦ摤慥㤰㔴㔸㐶捡〱〷〲攳㝣㙡㈷扦戲愹摡㤰晡㜶戵戲㐷ㄱ㐹ㅡ㌴攷㡣㘵㔹㐷㍣摡㌶㠲㕤攱〳捤㔸摢愸晢㔱摤㡣㙢摢〶㐹㡢㘴戹㔸㌵㐸挱㔳㡤挰㍤㘹㌹扡〹愰攸㉦㉡㌲㉥愱挸戸愴㡡〶捤搳っつ慡㍣挷㜲捦ㅢ㥥ㄵ慣搸㔶戵挴〷㠶敦戶〵㑤㠲挹㈹㜹攳ㄴ换㡣戱㌶㙢晥っ㑣㌶㝦〲攸㥥㠰ㅣ攵搶ㄱ晤愰㕣㑤ㄴ昱㑦昴攸㔸㠲㠰㔱㥥㔲晤㙤ㄸ慤愰㙥㐷㐰攴愸㜴㌹扥㠳㜱昹㘱㤴㠴㐲㠸㔸捦㈰ㄱ㜸〵ㄳ㐲㥥㉥敥愲㜹挶戱〲㘰㡦ㄸ㍢㙡〵戳㍥㔰づ㠰慣㍡摥㕥慢戰㥡攸㌴摥搴ち㌷㜴㔶愵搴挴昵㥤昵㐹扤昱扡つ慡㐳㡤㤲㔰㈴㥢㌵㔲㥡㘵㠳㌹㙥㈷㔵㈳㤴攲㡥戵㡤挸㜲㥢戶昶㥤㔲攴㐵㈸㈶㐵㌳㌹晤敤㡡㔰㄰攸㡤㜴ㄴ㝤昶搹攴㤱㠸搸搰〶㈸㔳㑦㠵㘵㐳㔱㐸昰〴慥㥤搴㘴㌹㝡〲㝦敦㡡戲昳㡤㈰㔵㘳㕣ㅡ㡤㙡愶敡昵㜹〷㔶㐲搵昰㙡摢㠴愵戱戶㔰挳㈸敥散㔵晢㠷摢㥢㘰挴㠸つㄹㄶ挹昰〳㠳つ挱㕣㠹㠸㉡慤戳㈱㙥㜵戳戸挴愷㤳搲㜰ㄴ〶ㄶ㠳摡慣㕣㔳㘶㔸换㤲ㅦ㔵ㅤ㥡愷㐵㈵㐷㜵㜳㙡搹㠷㑡て㈸挷愳㥣㘲㜰摤㍣㑤户ㄴ㉥㌱㐰散㐶戹㠵㙡㠰搰㙥㜳〰㥥っ戶て㜶戰㈳㘱攸㠴搶ㄹ㈵㘸㌱㠳㜰搳㡢㈰敦昴㠸㔱〸㔲㔳愵扦ㅤㄱ㕦㜸㠲改敢㐷㜲㜱㈶㘲㈲㠶扢㌲慣〷㈰㌷ㄹ㤹㈴ㄷ㡤挶〱昳㔰戲㈹愱㌵ㄸ㤷搱挴ㄸ愲挹攷〵戸挵挳㔸搶㌰搹愶㡥㝢㙥㠱〵㙤㕡㕦摦㘵㥥㜰慡昵㐶㑤㉡㔵ㅣ换㙡愵㤱户〵扥搴ㄵ挰㤰㥢㌲昶㈵摡㤴ㄳ㌸㑡㜱挹㐴㔲敦㜶户㝥〴摤㤵㤰挳ㄸ愱敡㘳〰㌲挳㉤愷〲㘲ㅤ昷ㄴ㘸ㅦ敥㙥㕤㘰㔰㤷攷㈰搲㍡㡡㈸换收㜰ㅦ慦ㄹ㐵㔶摣㤶㘸㌶攷捥戹戴搹ㄳ㐵挷慤戰㘸㕢攰〸敢っ〵㕥戱〸㘳愴㐷敥攰㈰戹换㔱㜴昷昲挳敡㌱㜷ㄹ愸㔰ㄸ㄰㡣昱昲ㄴ㤴挳慥㠲㤱㘸㜰㙢㉤慢㕢㌰晡㑢换㕢㥦〲㄰っ〳搳愰㐵换搰挰㤹㐱㝥㜳〳攷〶戴捡㠸㤰㈶㠳愹㡣㔱㡥挲㘱て愴㠱㥢㜸㤰㕥㜲愱㠴㠲㍤敡㘲㔸㝣㌷㜱摣挶ㄱ挸昵慥㙡㉢㕣㌰〲㕣㝦㜱昶戶ㄵ㑦搵㙡㌴㜷攱㥦摢ㄶ㔸挵搵㡤搰ㅣ摤搳㜶㈹㑢慤㠹昶摤㡤㙤ㄵ搱㘵挱㠳戳ㄳ挷㡤愰扡戲ㄸ慣㠷ㄷ户㝡㈵㠹挲㡦攰㡦搸昰敤戴㤹昳づ㉦愲慥㜱敦换ㄷㅣ昷愲愳收㔵昰㜹敢てㄴ㠲㉢㤴晤㥣㘴㌹昷㙦晣㔳㐹换ㄵ㝥㠸ㄱ户㌲㙤づ搰㜲㤰㜰ㅣ㤵㐲㘹㌰㠶㝣〶㥤挰㜶㙦摥ㅡ㈰㥤散㘹愳ㄳ㈵〸㜶〸挵㌹晦㤲ㄱ㡡昸〱搰㑡㘲〹㡦攴搸昳㘷挰晡攲晢㈸㈱挲昱ㅣ㠹㤱挲㙢㤰换㐰㥤ㄲ攴搱ㄵて㕥〸昹晦挱㔲捣捤ㅢ戲搳㝦㠱㤹挵戳敤㈸扡㥥㈸晡㕥〷㡡〴慦㠱㈸晥扤ㅢ㤹㌸ㄵㄸ㥥㝤㐱㠱㜰慥㘹攷〰晡戲㕦昸晤ㅦㅥ㐰攷㈲攲㔰㌶ㅡ㐲㙤㌷攱戹㘹㈲昴㜵㤸〸っ摥㉢ㄳ攱㈴㌲㠲㔱晣搰㐴㠸㝣㈰昳㈸搸摣㐴㘰㙣㉦挳㄰㑣㠴㕡ㄳ㙥つ㥥挰慥戲改ㅦ㍢㡥㡢户搲㐷㍣ㅦ㑡换㥦㠱㐷敡敡捥攲〵挳㌳散扤慡晣㤸㈷愱捣扣㈵摣攴㔶㕤搸攳摡つ㙢㔴愷つ㝣ㄵ戱㤷㝤挷㥦戲戵晢敢挰㔴㤸㐲昷扤㈸㠹攲㡢昰㤴〸㥥ㅢ㜲敦摢昳㡤㘳扦㝦昰搱㈳扣慤ㄶ搱㙡㘱ㅦ昲扤㠴散㘹㑦㈰愸㥢戸㈸㜲㈵㍦捣㌹㠹㑦㤴慣搵扡㥣㌶㍣㘵〵昹扡ㅤ㘷㐳挲㑢㄰㘶㐸㝣摢挱挴挴扤㠷搰挴㥣㘸㜳㜷慡て㥢㤴㡢㜰㈲㌱㜱攵搳㡢挳㠶愲慢㈲敢搱摡㉣㝣ぢ慡攸〵㑥㈴㙤㈵昲搴挹㈴挴㌷摢㜵摤㈱敡扡昰㈰挳戰㝦㉣愵㄰㝦㈰㠵㈴て㌲扣㄰愰愴搴㘹㘴ち户〲㘴㐴搶摡㐳扣昴〷散〸〱搹扣昴搷攳㐷㉣搸㐵㘰㌱昶挵昷㝡愲愵㉤ㅡ慢㈶㠶㙡㤵㑤戳㠸㡣㍡扣戰㘰㌲㉥㑤㔹㍡〷㔱扡㘵㜷ㄴ㕦㌲㘴㠷㠱户㤰戱ぢ㌶㝤㙤㘵晢㉥愷㠱㥢ㅦ搰㌳㐵愵㌰㥣摤㉣挶㠱㔴挵攸挲愶攵戰㠸㜰㌸捣㌶㍢つ㐴㔵搰㔹捥㕥㥣㑡ㄱ晣攳㤷㐲慣ㅦ㙦つ㝤㘵㝢つ㜵㥣搳㡦〵昲〷晢敢晡っ挶挶㕢挹㌱㤰戰㕢㙡㔵ち慦㠷㥦㐱ㄷ㉥㍡㈷昴㔶㔶㍤㡢㐳昸ㄳ㜳㔶㥦搶愱晦ㄹ扤㔶㥣㜵㤶扤ㄹ挶㑥改晦㜷愱㘰㔳晤㉦ㄸ㝢㔳㠸㝣㜷㤴攱㐳㠱昱㤳㑤㐳㌶摣ㄱ㜸戶ㄱ扣㔱〷㘳㕤㘵ㄹ昲づ㜳㡢昸㜸㌵慣㔶ㄲㅣ㝥慦㝣晢搵㠸㘶㕦摡戶〳㕤〵㈰㘳㐳㠵㘷㈰㠲扡昶㑦换慤昸㜴㕢扣てㅤ昷㥣戴慡㥥敢扢㘶㌰戶㠸愰敦ㄸ扦㍤㌳㘱昳㑣㠹慦戶ぢ戵ㅢ戱ㄳ㠳敦㐵㥦㔳昳㄰搸愷㘴昰㔲挵㈲ㄹ㔹搸㕡㈴㠳摦㈱㡤㈴挲㑢搴づ晥ㄵ收㍤つ愳㡥㑦㔷攷攱敢っ㔸戴㉤㤴㕤攸㜱㙥扦愱挱慤挳ㅤ慤㜷挲ㅦ㈴敢ㄳ〸㡥愹㈵摣昷㕥敥㙢晢ㅥ愴摢㐶㙢昳搹戲㌷㥦㕢戹昰㌴㜰扡戵户愴㐹㠶敦攴ㄷ挹㘵扤㐲㠸㑢晢㐷昰㜷敢づ㕡㡥㌶ち㍡㡦㍥攸愶㈳㙣扣づ昷搹ㄶ愲摦攷搰㔵㑣ㄱ攰愷ㅢ㔱㠶て㠲㕥㍥戲愲昸㌲㤶㐵〶㐰㍥㔷慣〲㜴愷敡㈷㌷愲敡㤱㔸㈰ぢ㥥㌱㐸㡥㘵昱㐵㌴攴㜶㠵换〶㑢㜰搹㐲㥤㈵㤰搷攳ㅥ挸攷〴捦ㄲ㙡㈲㥦㐷㠷收㐴㉣㤴㜶㥦挸攷㌶㥡㠸愰ㄵ愰ㄶ㥡ㅣ㝦㈴搶㈲㝡ㅤ搵扡㑤攰㄰戸〰挳ㄴ㡢㤴㌵挵㌰戴昰㝤㘲〶改㤷搱摦攷㡦晣攲㌹愶扦ㅥㄱ㑡㄰愲㉡㍤㜹ち㐲㌵昹挷㤳㤳昷㔰摡㝤昲㥦搸㘸昲㈳㤴㤱㥣㠹ㅥ〰っ昵㠹ち晥愸挵㌴㤰攱㍥昲㈷捥ㄱ攰㤷㥡挵㠸㠱ㄲ搵昷㈲㌲攸换つ㔷慤㉥㈱ㄳ昷㉤㜰晤ㄹㅦ昷㈸晢㠸ㄷ㈱改换㈹㠶捥搸㘲愸ㄵ㑢㜶攴㠵摤ㄶ戲〱㑢攲搷戲㕤㐵㝡戱挷〸扦昸㔰㡣㤸攳挷攳㉦愷戴㈸收〴挲〸㉤㔲搲て㌷㔲㝣㌰㙥晣敤敦戶㕣愶愸㐰〲昵㠴㡤㐹㘷慡昱㘳㜱攳㠳昸㉡㑢戵挹昱〶〱搳昳㜱㘳搲愳㙡晣㘸摣昸㉦〷昷㌶ㅢ挷㜴ㄸ㡥㕣㈰㤱㘴搸扡捡晡㑦㝣愱㍤㡣收〵㤳晡㜳挰っ㡢㈹㌹㔵攸戸慥㌴攸㈰㉥㠳㜸昸㐶㝡づ㜷㥢㜰〵〴㐲㌶晣㕦㈵㥣挰㥤愷㔹㈳㌰昰〹昴ㅡ㠲捤㥥慥㥥搸戹㘸捥㝢㈸攸㌷㑦昸㌸㔳搵戶ㄵ㠹挰ㅣ挸㠷晢扢㠹㔳㍥挳㜴㙣敤㐷ㅣ㈴搳㜸㠷愴㌷攵愱〲㉢㜹昱晥ㄸ戳戹㐷㕡㌴愳㍦っ攴㐰㍡〲㌲愳㍦〲ㄸ〶㘲㜸㕢㌹㌷㐲晥㔷捣晤㝥㔶㝣㠰攰㔱㠰戲㈰戳㤳づ㡡㡦〱っ挷晦愳㡡戱㌵攵㉦搱挴㠳昱换㤲㘴愴㝦㠸ㅤ㍥っ搰〷昷慤㠸㠸戰慣㝦〴㈵挹㤷㔲㜰愸㤷㝥㡣ㄵㅦ㈷昸〴㐰戹挰挹㙥㜹搷戸愶ㅥ㌵搷㈷搱㔵㍣㐲㠰㥦晥㜸㤴攱㐳㠱晢昰搶敥戶㌲㡦挲昱㠷晤〸㜵愶扥攰扦ぢ㕦攴慦㜳搱㝤昸ㅦ㤲ㄴ㤴㘱㥦搷摥搲摢㔸㘴〲摡攴敡户㡡捤㝥ㄱ攳㜰㕤慤〸ち㐷愴㔲㈹㘹㐵㐱㝣㜳挱挲挵ㅢ昸㤶挳慡㐲〸搲㠰慡㜰愲㡡㈳㈸搰㍦捤愶挴㌱昱愴㝦㠶㑦㐴慤摡挴捦㐶ㄹ㍥〸攲㔵㜵扦㍦敡ㅥ扦㤰戸㔶ㄵ㔶摢ぢ㠹㝦㔵戱㤲㝣攱ㄳㅣ㑣㈱ぢ㤹戴㔶㈲搲ㄴつ㝤ㄱ㤹愱扥㘱捥敤㕥晣戴㑢愲㝡慥㜶敥摣㍦㠷昳㘳搷收摦昵㡥挱㈷㥥晦昹ㅦ㍥昵慢昷ㅣ晥昳扦㥥㝣昲㔷㝦晣搴㜳晦晡搱昲攱㥦㍥晤昴㑦敥晥捡㜳㝦搸㙤㍥愵㝤昷㥦㜳㑦㍤㌴㜹攱愱〷捣㌳晢㡥㍤昴敥晢敦㤹㕣戸㘲扣慦慦扦晦收搱㥦㕤㜳换挸㈳て㍣㉢㝥晣摢慢ㅤ愱㤶㡢ㄷ愴愷挱㘵慢㘹㝣〹ㄹ㑣㠳㌳㝥㔹愷挱攵慡㡤㕡㡥㌶㙡ㅡ〵㈵昸㌴㌸〱㔵㘱愴㉢〶晥〳㙡㠹戲㑦 Decisioneering:7.0.0.0 &1#&"Arial"&9&K000000Proprietary Automation Project Fizek's Automation ProjectSolution Legend Value given in problem GivenFormula/Calculation/Analysis required Investment cost (today)($500.00)Assumptions, Qualitative analysis or Short answer required Salvage Value percentage20%Goal Seek, Scenario or Data Table cell Project life5MACRS ScheduleCrystal Ball Input Annual labor costs savings $50.00year 133%Crystal Ball Output Annual waste disposal cost savings$10.00year 245% Annual Byproduct sales$80.00year 315% Required rate of return12%year 47% Tax rate21% Solution Basic Analysis (All numbers in $ Mil)Year Cash flow estimation012345 Investment($500.00) Annual labor costs savings $50.00$50.00$50.00$50.00$50.00 Annual waste disposal cost savings$10.00$10.00$10.00$10.00$10.00 Annual Byproduct sales$80.00$80.00$80.00$80.00$80.00 EBITDA$140.00$140.00$140.00$140.00$140.00 Less: Depreciation$165.00$225.00$75.00$35.00$0.00 Additional EBIT (including salvage value)($25.00)($85.00)$65.00$105.00$265.00 Less: Taxes($5.25)($17.85)$13.65$22.05$55.65 NOPAT($19.75)($67.15)$51.35$82.95$209.35 Plus: Depreciation$165.00$225.00$75.00$35.00$0.00 FCF($500.00)$145.25$157.85$126.35$117.95$209.35 NPV$39.21 IRR15.02% AnalysisThe project should be accepted since the NPV and IRR are greater than the RRR Scenario Analysis Sales and NPV numbers are in $ Mil ScenarioprobabilityByproduct SalesNPVIRR $39.2115.02% Base40%$80.00$39.2115.02% Byproduct sales decrease by 10%30%$72.00$ 21.608.28% Byproduct sales decrease by 30%20%$56.00$ 11.204.29% Byproduct sales decrease by 50%10%$40.00$ 4.001.53% Expected NPV$24.80 Breakeven Breakeven byproduct sales$39.21 &1#&"Arial"&9&K000000Proprietary Fiz-mRNA CoGS ratio15%Solution Legend growth50%Value given in problem SGA$2.00Formula/Calculation/Analysis required CapEx$2.00Assumptions, Qualitative analysis or Short answer required Revenue1$10.00Goal Seek, Scenario or Data Table cell Project Life10 yearsCrystal Ball Input Tax rate21%Crystal Ball Output R&D$0.6012345678910 probability of approval10% probability of obsolescence5% WACC12% Year202220232024202520262027202820292030203120322033 Probability of Success0.10.950.950.950.950.950.950.950.950.95 Revenue$1.00$1.43$2.03$2.89$4.12$5.88$8.37$11.93$17.00$24.23 Cost$0.15$0.21$0.30$0.43$0.62$0.88$1.26$1.79$2.55$3.63 SGA$2.00$2.00$2.00$2.00$2.00$2.00$2.00$2.00$2.00$2.00 R&D$0.60 Depreciation (unconditional)$2.00$1.80$1.60$1.40$1.20$1.00$0.80$0.60$0.40$0.20 EBIT$0.60($3.15)($2.59)($1.87)($0.94)$0.30$1.99$4.32$7.54$12.05$18.39 Taxes$0.13$0.04$0.04$0.04$0.04$0.04$0.04$0.04$0.04$0.04$0.04 Net Income$0.47($3.19)($2.63)($1.92)($0.98)$0.26$1.95$4.28$7.50$12.01$18.35 OCF$0.47$0.00($1.19)($0.83)($0.32)$0.42$1.46$2.95$5.08$8.10$12.41$18.55 CapEx$2.00 FCF$0.47$2.00($3.19)($0.83)($0.32)$0.42$1.46$2.95$5.08$8.10$12.41$18.55 NPV$17.34 IRR41.66% Real Option ModificationDepreciation CapEx 1$0.8010 years CapEx 2$1.208 years Two-stage investment alternative can be evaluated by simply calculating the NPV for two different outcomes (FDA approval or not) and then finding the expected value. Alternatively a Monte Carlo simulation can be used. To check your calculations look at expected NPVs found using these two approaches - they should be nearly identical. Evaluating two outcomes separately If approved by FDA (project can still get obsolete in later years) Year202220232024202520262027202820292030203120322033 Probability of Success0.950.950.950.950.950.950.950.95 Revenue$9.50$14.25$21.38$32.06$48.09$72.14$108.21$162.32 Cost$1.43$2.14$3.21$4.81$7.21$10.82$16.23$24.35 SGA$2.00$2.00$2.00$2.00$2.00$2.00$2.00$2.00 R&D$0.60 Depreciation$0.80$1.80$1.20$1.05$0.90$0.75$0.60$0.45$0.30$0.15 EBIT$0.60($0.80)($1.80)$4.88$9.06$15.27$24.50$38.28$58.87$89.68$135.82 Taxes$0.13$0.04$0.04$0.04$0.04$0.04$0.04$0.04$0.04$0.04$0.00 Net Income$0.47($0.84)($1.84)$4.83$9.02$15.23$24.46$38.24$58.83$89.64$135.82 OCF$0.47$0.00($0.84)($0.04)$6.03$10.07$16.13$25.21$38.84$59.28$89.94$135.97 CapEx$0.80$1.20 FCF$0.47($0.80)($0.84)($1.24)$6.03$10.07$16.13$25.21$38.84$59.28$89.94$135.97 NPV$148.27 IRR216.12% If FDA does not approve (project fails) Year202220232024202520262027202820292030203120322033 Probability of Success0.10.950.950.950.950.950.950.95 Revenue$1.00$1.50$2.25$3.38$5.06$7.59$11.39$17.09 Cost$0.15$0.23$0.34$0.51$0.76$1.14$1.71$2.56 SGA$2.00$2.00$2.00$2.00$2.00$2.00$2.00$2.00 R&D$0.60 Depreciation Dima Leshchinskii: Dima Leshchinskii: No follow-up investment $0.80$0.72$0.64$0.56$0.48$0.40$0.32$0.24$0.16$0.08 EBIT$0.60($0.80)($0