ASSIGNMENT $2$ USING THE SPREADSHEET FOR DECISION SUPPORT

Assignment $2$A: Using the Spreadsheet to Gather Data

You have built the spreadsheet to model the acquisition. Mid$-$Atlantic Federal Bank manage

ment wants to know what the $2027$ earnings per share $($EPS$)$ would be in seven scenarios.

The scenarios are shown in the following shorthand notations:

$$ No Buy: The bank is not bought. Enter DB $($Don$\text{'}$t Buy$).$ Enter an N $($No$)$ value for

cross$-$selling. Enter a zero for credit$-$card loan growth. This scenario shows MidAtlantic Federal Bank's EPS without Eastern Oceanic Bank.

$$ Buy$-1$: The bank is bought, cross$-$selling works, but there is zero credit$-$card loan growth.

$$ Buy$-2$: The bank is bought, cross$-$selling works, and there is credit$-$card loan growth:

$2\%$ in $2025,3\%$ in $2008,$ and $4\%$ in $2027.$ Clearly, this is an optimistic scenario for the

bank.

$$ Buy$-3$: The bank is bought, cross$-$selling works, but credit$-$card loan growth is nega

tive: $-2\%$ in each of $2025,2008,$ and $2027.$

$$ Buy$-4$: The bank is bought, cross$-$selling does not work, and there is zero credit$-$card

loan growth. This is clearly not an optimistic scenario.

$$ Buy$-5$: The bank is bought, cross$-$selling does not work, but there is credit$-$card loan

growth: $2\%$ in $2025,3\%$ in $2008,$ and $4\%$ in $2027.$

$$ Buy$-6$: The bank is bought, cross$-$selling does not work, and credit$-$card loan growth is

negative: $-2\%$ in each of $2025,2008,$ and $2027.$ This is another pessimistic scenario.

Mid$-$Atlantic Federal Bank management wants to know the answer to these three questions:

$1.$ How important is cross$-$selling? If cross$-$selling works, does it matter if there is credit

card growth?

$8/9$

$2.$ How important is credit$-$card growth? If growth is zero or negative, can EPS still

improve?

$3.$ Under what circumstances would it be best for Mid$-$Atlantic Federal Bank not to

buy Eastern Oceanic Bank?

$4.$ What is the expected value of the purchase $($excluding the No Buy option$)$

assuming all buy scenarios have equal probabilities.

Assignment $2$B: Documenting Your Recommendation in a Memorandum

You memo must be inserted into a new sheet in Excel.