Objectives:
The purpose of this group assignment is for you to apply capital budgeting techniques. Project based on the quality of your analysis, on how well you support your assumptions/methods.
Details:
- To complete your report you will work in groups of 3-5 students. All students are equally responsible for the work that is turned in. In completing this assignment, you should not collaborate with any students outside your own group.
- Each group may will have to select a restaurant chain already existing in Singapore. Your project is to do a feasibility analysis for a new franchise for that restaurant.
- Work out a cost of capital- Assume a debt equity capital structure. How will you raise your debt or capital? Explore long term financing options. Work out cost of equity, cost of debt, and then calculate WACC. Data like risk free rate, beta etc are available on various websites (do some google search) or assume your own and provide basis for it.
- Give your analysis using capital budgeting techniques and emphasize why your group should invest or should not invest.
- Along with quantitative analysis give your qualitative analysis. Other risks or benefits faced by the company other than financial risks.
- You will be required to develop a detailed spreadsheet model. This model will incorporate all of your quantitative analysis and provide the justification for your recommendation. You will have to develop relevant cash flows to apply the capital budgeting techniques.
- You should explain (not just list) all assumptions made regarding all relevant variables.
- Think of this as a report to the Board of Directors. A discussion of the financial feasibility (capital budgeting) used and key assumptions - Explain and justify the assumptions that are most important to your analysis. Examples include forecasts for free cash flow and its components (working capital, capital expenditures, after-tax income, etc.), margins, growth forecasts and drivers of growth, cost of capital, etc. You should also discuss any sensitivity analysis that is relevant to your analysis. Concluding remarks summarizing the main points of your recommendation.