ASSIGNMENT 4: WIN THE ASSIGNMENT

Task 1: The 14 consultancy is serving MAC, a producer of high end food processing machines. In 2021, MAC had 100 M revenue, HR cost of 30 M, and material cost of 50 M. Due to the gloomy economic forecasts, the company expects revenue growth rates at 5% p.a., material cost to growth at a rate of 7% p.a., and material cost even at 10% p.a. 14 promises to run a production optimization program for three years. The program calls for CAPEX of 5 M in y1 and 25 M in y2. A reskilling program for the workforce will be required at expenses of 10 M p.a. y1-3. In addition, OPEX will grow 5 M p.a. starting y3 due to additional maintenance. In turn, revenue will grow due to better production planning by additional 2%-points p.a. Furthermore, In y3, MAC is predicted to strike better deals due to improved quality by 10% on average across the product portfolio. This one time effect will last at least 5 years. Due to automated planning, HR cost will be reduced by 5% in y2. This saving will also stay for 5 y. Suppliers will allow for a 5% discount on material cost every year starting y3 due to better MAC forecasts. MAC assumes end-of-period payments, computes NPV over a 5 y period, and has a WACC of 10%. Compute the max. value added price for id if they charge 10% of the value added.

Task 2: Taking the side of MAC, outline the special contractual challenges and risks contained in 14's proposal. Come up with a well detailed fee & payment plan for the project. Provide a rationale for your choices. Outline the specific contractual clauses that will reduce the observed challenges and risk to MAC. The contractual clauses should still be reasonably acceptable to 14.