Posted: December 5th, 2014

finance project

finance project

Project description
You will need to submit a copy of a memorandum and an excel spreadsheet model detailing your cash flows. The memorandum should be no more than 2 pages single spaced.

You may include additional materials in an appendix (referred to in the memorandum) and any appendices will need to be submitted separately from the memorandum. For a

good example of how to write a memorandum, see the Purdue Online Writing Lab5. Additionally, Microsoft Word has a template that you can use for your memorandum
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Added on 03.12.2014 20:01
if more pages are required to fully cover all my requirements, please let me know. remember my project include the memorandum and excel.
Business Finance ?Project?
You are employed as a financial analyst at Hasbro (Ticker: HAS). Your division is seeking funding for a new manufacturing facility to build action figures based on a

series of films with a major movie studio. The deal is contingent on approval from both sides. Your duty is to examine the financial aspects of the deal and make a

recommendation based on your findings. The studio has guaranteed that the movie franchise will have production releases for the next seven years with very little risk

that the franchise will be cut short. In the event of an early termination of the franchise, the studio will compensate Hasbro. If the project produces a viable

revenue stream, the facility will be kept in service and the strategic partnership will be extended for a longer period of time.
The company wants to launch the project in summer of 2015 with production and revenue generation beginning in the first quarter of 2016 and the project has a projected

life of six years. (If the project is accepted, it will surely have a longer useful life, but management wants to be conservative in its analysis. In other words, if

it does not pay off in seven years they don’t want to do it.) FASB rules indicate the project investment should be depreciated using a 15-year useful life with the

MACRS depreciation schedule (see Table A-1 http://www.irs.gov/pub/irs-pdf/p946.pdf). Hasbro and the movie studio have spent $845 million in market research and

research and development for the project over the last three years. The project requires an increase of $297 million in working capital. An initial investment of $673

million in production facilities is required to undertake the project. When the project is completed in six years, the company will reclaim $320 million from the

repurposing and reallocation of the facilities. (Note: The reclamation value is below the accounting value of the facility, so no taxes will be charged on the

reclamation.)
The forecasts for the project state that the revenue from the project will initially start at $418 million and are expected to increase at a rate of 9.8 percent

annually for each of the following five years. The variable costs associated with the project are expected to be thirty-one percent of the revenue generated annually.

The fixed costs attributed to the project are $108 million and will increase by 3.8 percent over the life of the project. The working capital requirements of the

project are such that the firm will need to increase working capital by 6.1 percent per year for the project. Due to the treaties and agreements in place concerning

global manufacturing, Hasbro is subject to a tax rates of twenty-four percent. The action figure line’s success is tied to the effectiveness of the movie from which

the figures are based. Because of the uncertainty related to the market acceptance of the product line and the success of the studio’s series of films, additional risk

above Hasbro’s current cost of capital exists. Mitigating the risk of the project is Hasbro’s expertise with taking similar projects to market; management suggests

that a risk adjustment in excess of cost of capital of three percent is necessary.
Your job is to prepare an analysis of the project and prepare a brief report explaining whether the firm ought to undertake the project. You should consider various

evaluation techniques such as NPV , IRR, and profitability index for the analysis. Include in your report any assumptions and sources that you use for discussion and

data. Stock and financial data for the firm can be found at Yahoo! Finance1, data to determine the market risk premium is available in an academic working paper by

Fernandez, Aguirreamalloa and Avendaño 2, treasury rates can be found from the U.S. Treasury3, and bond data is available from the Financial Industry Regulatory

Authority4.
You will need to submit a copy of a memorandum and an excel spreadsheet model detailing your cash flows. The memorandum should be no more than 2 pages single spaced.

You may include additional materials in an appendix (referred to in the memorandum) and any appendices will need to be submitted separately from the memorandum. For a

good example of how to write a memorandum, see the Purdue Online Writing Lab5. Additionally, Microsoft Word has a template that you can use for your memorandum.
1 http://finance.yahoo.com/?2 Fernandez, Pablo and Aguirreamalloa, Javier and Avendaño, Luis Corres, Market Risk Premium Used in 82 Countries in 2012: A Survey with

7,192 Answers (May 15, 2013). Available at SSRN: http://ssrn.com/abstract=2084213 or http://dx.doi.org/10.2139/ssrn.2084213?3 http://www.treasury.gov/resource-

center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield?4 http://finra-markets.morningstar.com/BondCenter/Default.jsp?5

http://owl.english.purdue.edu/owl/resource/590/1/

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