Prompt: In Milestone One, you will select one of the three companies and one of the two scenarios to be the focus of your final project throughout the duration of this course. Take time to start thinking about the information pertaining to the company that you will need to research in order to execute your modeling framework. Refer to the Milestone One Rubric for specific elements to consider as you select your organization.
Note: You are encouraged to access the Fortune 500 website prior to accessing the individual corporationâ€™s home page. A snapshot of the company that you select will be provided once you type in the name of the company. Information such as a SWOT analysis and a snapshot of the companyâ€™s current financials is also available. This will prove useful in your assessment of which company to use for your final project.
Next, review the two case study scenarios below and choose one hypothetical for the company you chose above. Scenarios:
1. Seeking global success is not a new concept to Fortune 500 companies, and it fuels the argument that all company activities should serve to maximize the wealth of its shareholders. Penetrating new markets is a path to potentially large-scale opportunities and increased return on investment (ROI). Evaluating the feasibility of securing a global presence or expanding locally (in other words, shoring up their domestic presence) is the key capital investment trade-off decision facing the organization. As the chief financial officer (CFO), determine the critical elements that will influence your decision using actual company data as guided by the factors outlined in the Final Project Guidelines and Rubric document.
2. Acquiring the competition is often an option for penetrating untapped markets, increasing market share, and realizing elevated stock performance. As the CFO, you have identified a clear opportunity to become the dominant leader in retail pharmaceutical sales through the acquisition of your principal competitor. The key capital investment trade-off decision facing the organization is whether your organization should acquire the competitor or expand by building new stores throughout the continental United States. What factors will influence your decision?
Finally, construct a 250- to 350-word synopsis that analyzes the scenario and addresses the following critical elements:
I. Analysis of Scenario
- Analyze the financial structure of the firm you have chosen in order to determine the appropriate inputs that should go into the model, paying close attention to those that are used in the calculations of the weighted average cost of capital (WACC). Describe why each variable you select is an important driver in this scenario.
- Present and analyze the current U.S. interest rate environment with a particular focus on the shape and levels of the treasury yield curve. Discuss what the current shape and levels can tell us about the current economic environment. Describe the connection between the interest rate environment and the risk-free rate.
- Analyze the future outlook for the overall economy and future market conditions to determine possible changes that could impact the companyâ€™s cost of equity and cost of debt. Discuss how the outlook you have identified will impact future calculations of the WACC for your company.
- Discuss the importance that variables such as future economic and market conditions play in utilizing financial models that effectively achieve strategic objectives.
Prompt: In this module, you will start building your model and begin the analysis. You should be looking at the procedures you would implement in your model. Articulate why the model is necessary and what its purpose is, and justify how your calculations will add value and benefit the organization overall. All of these factors are interconnected.
Specifically, the following critical elements must be addressed:
II. Appropriate Procedures
- Describe why the modeling framework is needed in the decision-making process, and define its purpose in terms of providing optimal results. Be sure to defend your rationale.
- Based on the purpose you defined and the necessary variables you identified, describe the process for applying the framework to the decision- making process and translating the results into action.
- Describe how and why the calculations will provide value and benefit to the company. Be sure to explain the concepts behind the output.
- 350-500 word submission