THE AMERICAN COLLEGE OF THESSALONIKI Spring 1 2022

Fin 202 Entrepreneurial & Corporate Finance

Investment Analysis Case Study

Weight on Final Grade 25%

Purpose

This case allows students to apply the principles of capital budgeting to a hypothetical project. Students should assess whether the company should invest in this project, given the information provided in the case.

Instructions

Students need to assess the attached information and recommend to the CEO whether to invest or not on the particular project.

The report should be clear regarding any assumptions made in the analysis. It is also imperative that it includes a table of earnings/cash flows by year and the computation of the weighted cost of capital (WACC). Projects need to include an introduction that outlines the basics of the concept/market/tech and its prospects as well as follow a sound structure throughout the project with intro, main section, sub-sections and conclusion.

Indicative steps of your analysis:

· Calculate the Cost of Equity (beta, risk free rate and risk premium)

· Calculate the Cost of Debt

· Calculate the WACC

· Calculate yearly incremental earnings (Revenues incremental costs)

· Calculate Cash flows

· Use evaluation criteria (e.g. NPV, IRR, PB, DBP, PI)

· Use Sensitivity Analysis with a +-20% variability on final costs for initial investment and for required return only. Discuss the implications of these results.

· Discuss in detail the implications of the results of all the evaluation criteria

· The final recommendation (based both on quantitative and qualitative criteria) -The report should include a brief introduction and conclusion displaying some understanding of the 3d printer market and the potential of the project.

Indicative structure:

· Introduction (that also reviews the relevant market)

· Main Part (containing sub-sections for the indicative steps mentioned earlier)

· Conclusion

Submission:

Assignments should be 1500 words long with 12-size font and double-spacing between lines. A maximum of +-10% deviation from the word limit is acceptable. Above this you lose 5% for every extra 10% deviation. (if you are 30% above the limit, you lose 10%, 33% you lose 15% etc…) Assignments must be typed and submitted electronically on the day they are due via email to the instructor. Concerning the files sent (doc file with the report & (EXCEL) xls file with all the calculations),.

· they should contain the name of the student as well as the name of the assignment as follows:

FIN202CBAProject_Name1_

· Where coursework is submitted late and there are no accepted extenuating circumstances it will

be penalized in line with the following tariff: Submission within 6 days: a 10% reduction for each day late down to the 40% pass mark and no further.

Submission that is late by 7 or more days: submission refused, mark of 0.

You are reminded of the consequences of plagiarism.

FURTHER INSTRUCTIONS:

General referencing rules

References must comply with the Harvard system (you can consult the ACT library if you are uncertain).

Your essay must comply with rules governing academic integrity.

You should avoid plagiarism by citing all the papers that you have used.

If you quote what others have said, you should place these within quotation marks (“ ”) and cite the source and page number. Do not lift sentences from original sources and insert them into your writing without enclosing them in double-quotation marks. Doing so is tantamount to plagiarism, and your essay will be liable to penalties.

Use direct quotes very sparingly, if at all, only when it is necessary. In most cases, essays in economics/finance do not need direct quotes, since we are mostly referring to information such as facts, figures, theories, etc. (i.e., you are not referring to artistic or literary works, famous historical remarks or speeches, etc.). This means that you must paraphrase original sentences, rather than depending on direct quotes (paraphrased sentences must be accompanied by parenthetical in-text references).

Do not cite / refer to “lectures” (this module or otherwise). Refer instead to available sources (mostly books and journal articles) that contain the relevant information.

Please note that any form of cheating will not be tolerated. The module leader reserves the right to ask you to provide evidence that the essay submitted is your own work. This may require that you attend a viva (oral exam) on the coursework. In particular, you are strongly advised not to copy material from papers, which are available on the internet and present this as your own work. This can be easily detected, and appropriate disciplinary action will be taken.

The 3d Printer Project

ACME Inc. has had a great performance in the last several years producing printers and scanners. Given the momentum and potential of the 3d printing technology, the firm wishes to enter the market in order to diversify their operations and adapt to the future by developing a 3d printer of their own.

The Project

ACME wishes to develop their own innovative 3d printer. You have been asked to make the assessment whether ACME should invest in this project.

You have been provided with the following information:

1.

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