Assignment task: Taking one of the main risk/VUCA factor you have modeled in Project Assignment 1 earlier (it is your group choice which one of the two, "R" or "U" to select). Carry out the following:
Part A: Set out a range of scenarios consistent with your group's view of the chosen risk/VUCA factor possible evolution over the planning time horizon. Clearly define scenarios values (as we are doing in our inflation case example). To complete this task, set out our usual (excluding your risk factor) benchmark scenario as "Benchmark". Then run 5 "upside" to the "Benchmark" scenarios reflecting your risk factor and 5 "downside" to the "Benchmark' scenarios. You will have 11 scenarios overall.
Helpful suggestions for Part A:
1. It is up to your team how you want to parametrize the scaling of your "upside" vs "downside" scenarios, but this should be done consistently across all scenarios and your parametrization should be explained and justified.
Part B: Calculate all of these (11) scenarios for the model through Week 5 DCF model (Full DCF Model with all major financial metrics included). Calculate and plot NPV, DPP and PI profiles for each scenario.
Part C: Carry out analysis of the risk/VUCA scenarios outrun compared to the Benchmark Model. Make sure your analysis addresses business performance differences across the main metrics.
Part D: What, if any, differences in equity payouts, debt repayments and accumulation of impact funds arise as the result of your risk factor analysis. Hint: to answer this, you can compare Benchmark scenario against Worst Case and Best Case extreme 'bookend' scenarios you calculated.
Helpful suggestions for Parts (B)-(D):
1. Remember: visualizations are your friends, trends are your analytical keystones.
2. Do not leave any calculated metrics without annotating/briefly interpreting them: include them all in your analysis. But, focus your main fire power and summary presentation on those metrics that are important in conveying your worldview. Make sure the reader fully understands why your chosen metrics are so important to your analysis.
3. Look for / seek out those metrics, trends, charts, visualizations that tell the main part of your story and that pass the "who cares test?"
4. As always, Ii is up to your group to decide how you want to present your analysis, summarize your assumptions and develop your VUCA arguments. I am not providing a template for these on purpose, to encourage your own creative and analytical build-out of the model.