The final project for this course is the creation of an external capital funding proposal.
Most businesses face a landscape of uncertainty and a never-ending stream of risks and opportunities. Managers must continually project the likely financial impact of decisions, make recommendations, act on those decisions, determine how to pay for them, and evaluate the costs and effectiveness of what has been done. Many decisions are short-term, routine, and operational. Others are longer-term investment decisions that require substantial new resources, such as developing new services, expanding into new geographic markets, or undertaking business combinations or spin-offs. Each requires managers to forecast, plan, and make decisions based on a thorough understanding of both internal and external factors that can affect a company’s financial success.
For the summative assessment in this course, you will bring your finance and economics knowledge to bear by preparing an external capital funding proposal for a major international investment at a publicly traded corporation. In order to secure the support of potential financial backers, your proposal will need to lay out what the proposed investment opportunity is, how it fits within the company’s broader mission and goals, its financial impact, and the amount being requested and why (including alternative funding mechanisms considered). In addition, it will also need to include information on the organization’s context, risk factors, and microeconomic assumptions that could affect the success of the investment.
The project is divided into three milestones prior to the final submission, which will be submitted at various points throughout the course to scaffold learning and ensure quality final submissions. These milestones will be submitted in Modules Four, Six, and Seven. The final submission will occur in Module Nine.
In this assignment, you will demonstrate your mastery of the following course outcomes:
· Assess the global microeconomic environment for determining the driving factors that affect business financial decisions
· Develop financial models that project the impact of different business scenarios on financial performance and business planning
· Assess decision alternatives by using time value of money (TVM) and other appropriate financial metrics
· Evaluate the potential impact of internal and external qualitative factors on business activities for supporting strategic financial decisions
· Weigh internal and external funding alternatives for carrying out investment decisions
· Construct persuasive, evidence-based arguments that incorporate legal and ethical behavior and sound financial analysis for soliciting external business funding
Imagine you are a manager working at a publicly traded company. (You will select a company from the list below.) You have been tasked with preparing an investment proposal for a large bank loan to finance a major expansion into another country. Your funding request will include both narrative text and financial models designed to clearly explain and justify the investment proposal, how it will be financed, and its likely impact on the company. As support, you will show the proposal’s most likely financial implications and the consolidated financial projection with and without the project. You should also consider risks—including
global microeconomic factors outside the company that may affect the investment’s success in the targeted country—and describe alternative financial scenarios should sales exceed or underperform your assumptions.
Your funding request should be well organized, clear, concise, and free of distracting errors. Because business executives seldom have perfect or complete information, you should base your proposal on data from authoritative sources when possible and make reasonable assumptions where information is not available. As in real life, however, you must clearly specify your assumptions.
To begin, choose one of the following publicly traded companies. Once you have chosen your company, you will determine the investment opportunity for which you are seeking funding as well as the country into which your company will be expanding:
Specifically, the following critical elements must be addressed:
I. Executive Summary: Briefly summarize the key points of your proposal, giving the loan committee the most essential information while convincing themto read further. Remember this is the first, and sometimes the only, section a selection committee will read in an initial screening.
II. Investment Project: Use this section to describe the investment for which you are seeking funding, its costs, and time frame. Specifically, you should:
A. Describe the investment project. Be sure to provide sufficient detail to give the loan committee a firm sense of the parameters of the activity,the need for it, and what financial metrics are relevant for determining success. In other words, what do you propose to do, where, what marketplace need will it fill, and how will you measure success?
B. Specify the resources the project will require and where these resources will come from. In addition to noting the amount of the loan you are requesting, you should also consider human resources, facilities, government approvals, intellectual property, access to natural resources, and other resources that might be required to carry out the project.
C. Time frame. When will the project start, what is the anticipated economic life of the proposed expansion, and how will you decide if, when, orhow to exit? Justify your choices with appropriate financial metrics.
III. Justification: In this section, you should analyze the impact of the investment proposal on your business. In particular, you should cover:
A. Why is now a good time for this investment given the global context? Justify your response, citing specific external factors such as traderegulations, foreign currency considerations, or trends in foreign direct investment that might affect business financial decisions.
B. Strategic fit. Use this section to discuss why the investment proposal makes sense for your company strategically. Specifically:
1. How does the investment align with the company’s organizational and financial priorities? Support your argument with evidence from company reports and financial statement analysis designed to persuade the lender that the investment is a good strategic fit for your company.
2. How does the project fit within the global microeconomic environment? Support your response with evidence. For example, would the expansion tap unmet demand for the company’s key products or services or fill a new niche? How do you know?
3. How does the project build on the organization’s core competencies and comparative advantage? For example, does the company have a strategic advantage in regards to intellectual property, regional expertise, suppliers, or organizational structure?
C. Financial impact. This section should discuss the project’s most likely financial implications and the consolidated financial projection withandwithout the project. Be sure to:
1. Project the incremental, annual, and cumulative cash benefits and outflows associated with the proposed expansion for the next seven to 10 years, using a spreadsheet or other relevant presentation vehicle to support your narrative. Be sure to justify your assumptions and methodology based on sound microeconomic and financial principles. For example, what assumptions have you made about demand, price, volume, capital purchase costs, incremental hiring, and so on?
2. Develop a consolidated financial projection of revenue, pretax income, and cash flow for the overall business, over that same number of years, both with and without the proposed investment. Use a spreadsheet or other relevant presentation vehicle to support your narrative, being sure to describe any relevant assumptions.
IV. Risks: Use this section to discuss any risks that might affect the success of the project and how you have planned for those contingencies. In particular:
A. Internal. What are the company’s most significant internal risks and opportunities related to the project? How might they affect yourfinancialestimates and how will you address them? Support your response with specific examples.
B. External. How will you address significant qualitative risks outside the company that might affect project success? Give specific examples. Forexample, how might culture or politics in the target country affect the proposed investment’s financial success? Natural disasters? How have you planned for these risks?
C. Microeconomic. Assess the microeconomic factors that might affect decisions about the proposed investment. Support your response withspecific examples. For example, how competitive is the market you will be entering? How elastic is the price for your product or service?
D. Alternate financial scenarios. Use this section to discuss the sensitivity of your financial projections to different scenarios. Be sure to address:
1. How would your projected financial performance change if sales fall 20% short of or are 20% higher than your base assumption? What does your analysis of these two scenarios imply for the proposed investment? Justify your response.
2. What do the net present value, internal rate of return, and payback values from your base scenario and the sales variation scenarios above imply for the proposed investment? Be sure to explain how the time value of money affects your calculations and analysis.
V. Financing: In this section, compare the proposed loan to alternative financing methods. Specifically:
A. Weigh the pros and cons of raising money using internal financing mechanisms versus seeking funding through global capital markets via loans, commercial paper, bonds, or equity financing. Which might be viable alternatives should the loan not be approved? Support your answer with appropriate research and evidence.
B. Assess the viability of a business combination as a mechanism for expanding into the new market. Is this a reasonable option for the company? Why or why not? Support your answer with appropriate research and evidence.
VI. Track Record: Use this section to persuade the lender that you are credit-worthy. You must:
A. Convincingly argue that your organization is on solid financial footing, and thus at a low risk for default, supporting your argument recent with appropriate financial statements, ratios, and other indicators of financial performance and health.
B. Convincingly argue for your organization’s trustworthiness, providing credible evidence of legal and ethical financial behavior. For example, this might include recent audit results; credit history; absence of significant lawsuits, recalls, or regulatory judgments; or other evidence designed to show that the company holds itself to the highest legal and ethical standards.
VII. Questions and Answers: End your proposal by constructing a persuasive, evidence-based question-and-answer section that addresses additionalfinancial questions you think the loan committee might ask, including legal and ethical concerns and why the loan would be attractive to the bank.
Milestone One: Investment Project and Justification (Parts A and B)
In Module Four, you will submit a draft of Section II (Investment Project) and Section III (Justification), Parts A and B only, of the final project. Submit 8-10 pages of narrative, building on the narrative you began in the Module Three executive memo short paper. Include references to past financial results, growth rates, and other financial ratios as exhibited in the spreadsheet you created in Module Two, and end with appropriate reference citations. This milestone is graded with the
Milestone One Rubric.
Milestone Two: Risks
In Module Six, you will submit a draft of Section IV (Risks) of the final project. Analyze internal and external risks and discuss how they might affect your financial estimates and how you might plan for such risks. You will assess the microeconomic factors that affect decisions about the proposed investment, and you will analyze alternative financial scenarios. This milestone is graded with the Milestone Two Rubric.
Milestone Three: Justification (Part C), Financing, and Track Record
In Module Seven you will submit a draft of Section III Part C (Justification), Section V (Financing), and Section VI (Track Record) of the final project. You will discuss the project’s most likely financial implications and the consolidated financial projection with and without the project; compare the proposed loan to alternative financing methods by weighing the pros and cons of raising money internally versus seeking funding through global capital markets; and assess the viability of a business combination as a mechanism for expanding into the new market. You will also use this section to persuade the lender that your company is credit-worthy by presenting appropriate financial information and by providing evidence of your company’s legal and ethical behavior. This milestone is graded with the Milestone Three Rubric.
Final Submission: External Capital Funding Proposal
In Module Nine, you will write Section I (Executive Summary) and Section VII (Questions and Answers) of your final project and submit your final external capital funding proposal. It should be a complete, polished artifact containing all of the critical elements of the final project. It should reflect the incorporation of feedback gained throughout the course. This submission will be graded using the Final Project Rubric (below).
|One||Investment Project and Justification (Parts A and B)||Four||Graded separately; Milestone One Rubric|
|Two||Risks||Six||Graded separately; Milestone Two Rubric|
|Three||Justification (Part C), Financing, and Track Record||Seven||Graded separately; Milestone Three Rubric|
|Final Submission: External Capital Funding Proposal||Nine||Graded separately; Final Project Rubric (below)|
Final Project Rubric
Guidelines for Submission: Your Investment Funding Proposal should be approximately 15-20 pages in length (excluding title page, table of contents,spreadsheets and other exhibits, and list of references). It should be double spaced with 12-point Times New Roman font and one-inch margins. Use APA format for references and citations.
Instructor Feedback: This activity uses an integrated rubric in Blackboard. Students can view instructor feedback in the Grade Center. For more information,review these instructions.
|Critical Elements||Exemplary (100%)||Proficient (90%)||Needs Improvement (70%)||Not Evident (0%)||Value|
|Executive Summary||Meets “Proficient” criteria and||Briefly summarizes the key points||Summarizes key points of||Does not summarize key points of||2|
|response is especially convincing,||of proposal, giving audience the||proposal, but summary is lengthy,||proposal|
|engaging, and/or well suited for||most essential information while||omits essential information,|
|target audience||convincing them to read further||contains inaccuracies, or does not|
|induce the audience to read|
|Investment Project:||Meets “Proficient” criteria and||Describes investment project,||Describes investment project, but||Does not describe investment||5.33|
|Describe||provides target audience with an||providing sufficient detail to give a||description lacks detail, contains||project, providing sufficient detail|
|especially clear and complete||firm sense of the parameters of||inaccuracies, or omits key||to give a firm sense of the|
|understanding of project and||activity, market need, and relevant||information on parameters,||parameters of activity, market|
|alternatives for evaluating success||financial metrics for determining||market need, and relevant||need, and relevant financial|
|success||financial metrics for determining||metrics for determining success|
|Investment Project:||Meets “Proficient” criteria and||Specifies resources required,||Specifies resources required,||Does not specify resources||5.33|
|Resources||response is particularly||including amount of loan and||including amount of loan||required|
|comprehensive and well aligned||other physical and financial||requested, other physical and|
|with needs of expansion project||resources, along with where||financial resources, and where|
|resources will come from||resources will come from, but|
|response contains inaccuracies or|
|omits key details|
|Investment Project:||Meets “Proficient” criteria and||Determines when project will||Determines when project will||Does not determine when project||5.33|
|Time Frame||suggested time frame and metrics||start, anticipated economic life,||start, anticipated economic life,||will start, anticipated economic|
|are especially appropriate given||and exit process, justifying choices||and exit process, justifying choices||life, and exit process, justifying|
|diverse alternatives and needs of||with appropriate financial metrics||with financial metrics, but||choices with financial metrics|
|specific project||response contains inaccuracies,|
|omits key details, or financial|
|metrics are not appropriate|
|Justification: Why Now||Meets “Proficient” criteria and||Evaluates why now is a good time||Evaluates why now is a good time||Does not evaluate why now is a||5.33|
|demonstrates especially keen||for this investment in the global||for this investment in the global||good time for this investment in|
|insight into the range of external||context, citing specific external||context, citing specific external||the global context, citing specific|
|factors that might impact global||factors that might affect business||factors, but response contains||external factors that might affect|
|business activities and how they||financial decisions in justifying||inaccuracies, omits key details, or||business financial decisions in|
|would do so||response||links to business financial||justifying response|
|decisions are tenuous|
|Justification: Strategic||Meets “Proficient” criteria and||Persuasively argues how the||Argues how the investment aligns||Does not argue how the||4|
|Fit: Priorities||response is particularly insightful||investment aligns with the||with the company’s organizational||investment aligns with the|
|and well suited for convincing||company’s organizational and||and financial priorities, supported||company’s organizational and|
|target audience to grant funding||financial priorities, supported by||by evidence, but argument is||financial priorities, supported by|
|request||evidence from company reports||cursory, illogical, contains||evidence from company reports|
|and financial statement analysis||inaccuracies, or is poorly||and financial statement analysis|
|supported by evidence and sound|
|Justification: Strategic||Meets “Proficient” criteria and||Assesses how the project fits||Assesses how the project fits||Does not assess how the project||5.34|
|Fit: Microeconomic||demonstrates especially strong||within the global microeconomic||within the global microeconomic||fits within the global|
|insight into which microeconomic||environment, supported by||environment, supported by||microeconomic environment|
|factors are most relevant in||evidence||evidence, but response is cursory,|
|determining strategic fit||poorly supported, contains|
|inaccuracies, or links between|
|microeconomic factors and|
|project are tenuous|
|Justification: Strategic||Meets “Proficient” criteria and||Evaluates how project builds on||Evaluates how project builds on||Does not evaluate how project||5.33|
|Fit: Comparative||response is especially nuanced||organization’s core competencies||organization’s core competencies||builds on organization’s core|
|Advantage||and well-aligned with strategic||and comparative advantage in||and comparative advantage in||competencies and comparative|
|needs of project||explaining why the project makes||explaining why the project makes||advantage|
|sense strategically||sense, but response is cursory,|
|contains inaccuracies or is only|
|tangentially related to strategic fit|
|Justification: Financial||Meets “Proficient” criteria and||Projects expansion’s incremental,||Projects cash benefits and||Does not project expansion’s||5.33|
|Impact: Expansion||response demonstrates a nuanced||annual, and cumulative cash||outflows over specified time||incremental, annual, and|
|understanding of the||benefits and outflows over||period, using relevant||cumulative cash benefits and|
|microeconomic and financial||specified time period, using||presentation vehicle and justifying||outflows over specified time|
|principles that underlie business||relevant presentation vehicle to||assumptions and methodology,||period|
|projections||support narrative and justifying||but response contains|
|assumptions and methodology||inaccuracies, omits key details, or|
|based on sound microeconomic||is poorly grounded in|
|and financial principles||microeconomic and financial|
|Justification: Financial||Meets “Proficient” criteria and||Develops consolidated financial||Develops consolidated financial||Does not develop consolidated||5.34|
|Impact: Consolidated||projections demonstrate||projection for overall business||projection for overall business||financial projection for overall|
|especially keen insight into the||with and without the proposed||with and without the proposed||business with and without the|
|short and longer-term financial||investment over specified time||investment over specified time||proposed investment over|
|impact of the expansion on the||period, using relevant||period, using relevant||specified time period|
|company’s overall performance||presentation vehicle to support||presentation vehicle and|
|narrative and describing relevant||describing assumptions, but|
|assumptions||response contains inaccuracies or|
|omits key details|
|Risks: Internal||Meets “Proficient” criteria and||Projects how company’s most||Projects how company’s most||Does not project how company’s||5.33|
|demonstrates especially keen||significant internal risks and||significant internal risks and||most significant internal risks and|
|insight into the links between||opportunities might affect||opportunities might affect||opportunities might affect|
|internal risks and opportunities,||financial estimates and how they||financial estimates and how they||financial estimates and how they|
|financial projections, and planning||will be addressed, supported by||will be addressed, supported by||will be addressed|
|for business expansion||specific examples||specific examples, but response|
|contains inaccuracies, omits key|
|details, or links between|
|projections and planning are|
|Risks: External||Meets “Proficient” criteria and||Evaluates how significant external,||Evaluates how significant external,||Does not evaluate how significant||5.34|
|demonstrates particularly keen||non-financial risks that might||non-financial risks that might||external, non-financial risks that|
|insight into how external risks||affect project success will be||affect project success will be||might affect project success will|
|affect project success and||addressed, giving specific||addressed, giving specific||be addressed|
|financial decisions||examples||examples, but response contains|
|inaccuracies, omits key details, or|
|examples are not relevant|
|Risks: Microeconomic||Meets “Proficient” criteria and||Assesses the microeconomic||Assesses the microeconomic||Does not assess the||5.33|
|assessment is especially is||factors that might affect decisions||factors that might affect decisions||microeconomic factors that might|
|especially nuanced and well||about the proposed investment,||about the proposed investment,||affect decisions about the|
|aligned with strategic needs of||supported by specific examples||supported by specific examples,||proposed investment|
|project||but response contains|
|inaccuracies, omits key details, or|
|examples are not relevant|
|Risks: Alternate||Meets “Proficient” criteria and||Projects how financial||Projects how financial||Does not project how financial||5.33|
|Financial: Sales Fall||discussion of implications for||performance would change if||performance would change if||performance would change if|
|planning and financial||sales fall 20% short of or are 20%||sales fall 20% short of or are 20%||sales fall 20% short of or are 20%|
|performance is particularly||higher than base assumption,||higher than base assumption,||higher than base assumption|
|nuanced and well supported||including what analysis of two||including what analysis implies for|
|scenarios implies for the proposed||the proposed investment, but|
|investment, justifying response||response contains inaccuracies,|
|omits key details, or is poorly|
|Risks: Alternate||Meets “Proficient” criteria and||Assesses what net present value,||Assesses what net present value,||Does not assess what net present||5.34|
|Financial: Time Value of||demonstrates keen insight into||internal rate of return, and||internal rate of return, and||value, internal rate of return, and|
|Money||how diverse scenarios and||payback values from base and||payback values from base and||payback values from base and|
|financial metrics affect project||sales variation scenarios imply for||sales variation scenarios imply for||sales variation scenarios imply for|
|projections and subsequent||the proposed investment,||the proposed investment,||the proposed investment|
|business decisions||including how time value of||including how time value of|
|money affects calculations and||money affects calculations and|
|analysis||analysis, but response contains|
|inaccuracies or omits key details|
|Financing: Global||Meets “Proficient” criteria and||Weighs pros and cons of raising||Weighs pros and cons of internal||Does not weigh pros and cons of||5.34|
|Capital Markets||assessment is particularly||money using internal financing||financing versus global capital||raising money using internal|
|nuanced and relevant to the||versus global capital market||market mechanisms, identifying||financing versus global capital|
|specific needs of the expansion||mechanisms, identifying viable||viable alternatives based on||market mechanisms|
|alternatives based on appropriate||research and evidence, but|
|research and evidence||response contains inaccuracies,|
|omits key details, or research and|
|evidence are not relevant or|
|Financing: Business||Meets “Proficient” criteria and||Assesses the viability of a business||Assesses the viability of a business||Does not assess viability of a||5.33|
|Combination||assessment is particularly||combination as a mechanism for||combination as a mechanism for||business combination as a|
|nuanced and relevant to the||expanding into the new market,||expanding, supported by research||mechanism for expanding into the|
|specific needs of the expansion||supported by appropriate||and evidence, but response is||new market, supported by|
|research and evidence||cursory, contains inaccuracies, or||research and evidence|
|research and evidence are not|
|Track Record: Financial||Meets “Proficient” criteria and||Convincingly argues that||Argues that organization is on||Does not argue that organization||4|
|Performance||response is particularly insightful||organization is on solid financial||solid financial footing, supported||is on solid financial footing|
|and well suited for convincing||footing, supported by appropriate||by financial statements, ratios,|
|target audience to grant funding||financial statements, ratios, and||and other indicators of financial|
|request||other indicators of financial||performance and health, but|
|performance and health||argument is cursory, contains|
|inaccuracies, or supporting|
|evidence is not credible,|
|appropriate, or convincing for|
|Track Record: Legal and||Meets “Proficient” criteria and||Convincingly argues for||Argues for organization’s||Does not argue for organization’s||4|
|Ethical||response is particularly insightful||organization’s trustworthiness,||trustworthiness, providing||trustworthiness|
|and well suited for convincing||providing credible evidence of||evidence of legal and ethical|
|target audience to grant funding||legal and ethical financial behavior||financial behavior, but argument is|
|request||cursory, contains inaccuracies, or|
|evidence is not credible or|
|convincing to lenders|
|Questions and Answers||Meets “Proficient” criteria and||Constructs persuasive, evidence-||Constructs question and answer||Does not construct question and||4|
|response is particularly insightful||based question and answer||section that addresses potential||answer section that addresses|
|and well-suited for convincing||section that addresses additional||loan committee questions,||additional financial questions loan|
|target audience to grant funding||financial questions loan||including legal and ethical||committee might ask|
|request||committee might ask, including||concerns and why loan would be|
|legal and ethical concerns and||attractive to bank, but response|
|why the loan would be attractive||contains inaccuracies, is not|
|to the bank||persuasive, or is not well-|
|grounded in evidence|
|Articulation of||Submission is free of errors||Submission has no major errors||Submission has major errors||Submission has critical errors||2|
|Response||related to citations, grammar,||related to citations, grammar,||related to citations, grammar,||related to citations, grammar,|
|spelling, syntax, and organization||spelling, syntax, or organization||spelling, syntax, or organization||spelling, syntax, or organization|
|and is presented in a professional||that negatively impact readability||that prevent understanding of|
|and easy-to-read format||and articulation of main ideas||ideas|