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Can anyone help me start this out?? I am completely lost. Instructions In this fictitious case, you are a financial analyst on the Automotive Strategy
Can anyone help me start this out?? I am completely lost.
Instructions In this fictitious case, you are a financial analyst on the Automotive Strategy team of Luxury Motors, a global manufacturer of premium automotive vehicles and products. Your responsibilities include evaluating the financial and strategic implications of corporate investment decisions Attached are relevant e-mails and data you have received from the Economics, Manufacturing, Marketing, Product Development, and Tax Counsel teams. For your meeting with the Ford Finance interviewers: 1. Review the attached material and prepare a one-page executive summary that addresses the alternative strategies outlined in the series of e-mail communications. 2. Please include the following items in your summary: a. Financial analyses for the alternative provided, as directed by Jess Wanderlust in her e-mail b. Your recommendation if the alternative should be chosen c. Additional information that would assist you in your evaluation of the alternative 3. Bring two additional copies of your one-page executive summary to the interview. Please bring your back- up calculations and any supplemental analyses that you have done. 4. It is expected that you will work independently, and that you will keep your work confidential. E-Mail for Analyst From: To: Subject: Date: Jess Wanderlust Analyst FW: Localization of Our Products June 26, 2019 Analyst I need your help in preparing a study to localize our luxury product Alpha to the country of Rica. Rica's currency (abbreviated RIC) has weakened considerably in the past year against the U.S. dollar (USD) causing the profit translation of our revenue from our Rica sold units to degrade significantly. The leadership team has requested that we find a way to mitigate this currency volatility. One way we can do this is better match the currency of our costs to the currency of our revenue. As our sales in Rica constitute a larger mix of the total global sales of our multi-vehicle portfolio going forward, localizing Alpha and creating some RIC cost exposure may help balance our overall currency portfolio and minimize the profit impact of volatile currency movements. See the note below for additional texture and key financial data that will be required for the analysis. Your analysis should provide a profit impact sensitivity analysis using the range of RIC:USD provided below. Here are my guidelines / tips for you: 1. Your profit impact analysis should focus on a decision analysis for the localization alternative. The U.S. sourcing location is in our present Business Plan. Provide an incremental view to our Business Plan shown in $ Millions. 2. The localization alternative will have no impact on our sales revenue, so all the data that I have sent over is cost related. There is no need to include revenue in the incremental decision analysis. 3. Given the tight timing on this request, assume a One Period Analysis for this study (i.e., calculate the profit impact for one year only). At a later date, with better data and an aligned cost of capital, we will analyze the entire five- year product cycle. 4. Bryan from the Corporate Economics team suggested that we study a three-point range for RIC:USD (5:1, 6:1, and 7:1). As you will see, there are trade-offs with the localization alternative. Let me know your recommendation based on the available data. And let me know other risks or concerns (financial and non-financial) that we should communicate to our leadership team. If you need any more data from my team, just let me know. Thanks for your help on this one. Jess Wanderlust Manager - New Model Programs E-Mail Between Seymore Dinero & Jess Wanderlust From: To: Subject: Date: Seymore Dinero Jess Wanderlust Localization of Our Products July 20, 2019 Jess, As a follow-up to our discussion, here is the necessary data to complete the localization study requested by the leadership team prior to the next Board Meeting. U.S. Source (reflects our present Business Plan): Investment - $600 Million for re-tooling an existing facility where the new vehicle will be produced Contribution Costs - All shown in USD Rica Source: Investment-$1.0 Billion will enable us to build a new facility where the new vehicle will be produced Contribution Cost - All costs sourced in RIC. Data shown has been converted using the noted exchange rate as assumed in our latest business plan Luxury Motors Global Finance Team KEY DATA FOR VEHICLE FOOTPRINT STUDY Alpha Program - Launch Date January 2020 U.S. Rica Manufacturing Source Sales Location Rica U.S. Rica Annual Sales (Units) 45,000 55,000 45,000 55,000 600 Investment (Mils) $ N/A NA $ 1,000 $ $ S $ Contribution Cost Impact (Per Unit) Material Cost Freight Variable Labor Duty & Tax Total Contribution Margin Impact (20,500) (1,000) (1,600) (100) (23,200) (20,000) (2,500) (1,600) (10,000) (34,100) (18,500) (2,500) (800) (800) (22,600) (18,000) (1,000) (800) (3,000) (22,800) $ $ S $ Exchange Rate (RIC:USD) N/A N/A 6.0 al 6.0 al Note: All costs shown are in USD. Exchange rate used to convert Rica based costs to USD is shown. al All costs (incl. investment) in Rica localization scenario are sourced in RIC Seymore Dinero Finance Lead - Global Strategy Instructions In this fictitious case, you are a financial analyst on the Automotive Strategy team of Luxury Motors, a global manufacturer of premium automotive vehicles and products. Your responsibilities include evaluating the financial and strategic implications of corporate investment decisions Attached are relevant e-mails and data you have received from the Economics, Manufacturing, Marketing, Product Development, and Tax Counsel teams. For your meeting with the Ford Finance interviewers: 1. Review the attached material and prepare a one-page executive summary that addresses the alternative strategies outlined in the series of e-mail communications. 2. Please include the following items in your summary: a. Financial analyses for the alternative provided, as directed by Jess Wanderlust in her e-mail b. Your recommendation if the alternative should be chosen c. Additional information that would assist you in your evaluation of the alternative 3. Bring two additional copies of your one-page executive summary to the interview. Please bring your back- up calculations and any supplemental analyses that you have done. 4. It is expected that you will work independently, and that you will keep your work confidential. E-Mail for Analyst From: To: Subject: Date: Jess Wanderlust Analyst FW: Localization of Our Products June 26, 2019 Analyst I need your help in preparing a study to localize our luxury product Alpha to the country of Rica. Rica's currency (abbreviated RIC) has weakened considerably in the past year against the U.S. dollar (USD) causing the profit translation of our revenue from our Rica sold units to degrade significantly. The leadership team has requested that we find a way to mitigate this currency volatility. One way we can do this is better match the currency of our costs to the currency of our revenue. As our sales in Rica constitute a larger mix of the total global sales of our multi-vehicle portfolio going forward, localizing Alpha and creating some RIC cost exposure may help balance our overall currency portfolio and minimize the profit impact of volatile currency movements. See the note below for additional texture and key financial data that will be required for the analysis. Your analysis should provide a profit impact sensitivity analysis using the range of RIC:USD provided below. Here are my guidelines / tips for you: 1. Your profit impact analysis should focus on a decision analysis for the localization alternative. The U.S. sourcing location is in our present Business Plan. Provide an incremental view to our Business Plan shown in $ Millions. 2. The localization alternative will have no impact on our sales revenue, so all the data that I have sent over is cost related. There is no need to include revenue in the incremental decision analysis. 3. Given the tight timing on this request, assume a One Period Analysis for this study (i.e., calculate the profit impact for one year only). At a later date, with better data and an aligned cost of capital, we will analyze the entire five- year product cycle. 4. Bryan from the Corporate Economics team suggested that we study a three-point range for RIC:USD (5:1, 6:1, and 7:1). As you will see, there are trade-offs with the localization alternative. Let me know your recommendation based on the available data. And let me know other risks or concerns (financial and non-financial) that we should communicate to our leadership team. If you need any more data from my team, just let me know. Thanks for your help on this one. Jess Wanderlust Manager - New Model Programs E-Mail Between Seymore Dinero & Jess Wanderlust From: To: Subject: Date: Seymore Dinero Jess Wanderlust Localization of Our Products July 20, 2019 Jess, As a follow-up to our discussion, here is the necessary data to complete the localization study requested by the leadership team prior to the next Board Meeting. U.S. Source (reflects our present Business Plan): Investment - $600 Million for re-tooling an existing facility where the new vehicle will be produced Contribution Costs - All shown in USD Rica Source: Investment-$1.0 Billion will enable us to build a new facility where the new vehicle will be produced Contribution Cost - All costs sourced in RIC. Data shown has been converted using the noted exchange rate as assumed in our latest business plan Luxury Motors Global Finance Team KEY DATA FOR VEHICLE FOOTPRINT STUDY Alpha Program - Launch Date January 2020 U.S. Rica Manufacturing Source Sales Location Rica U.S. Rica Annual Sales (Units) 45,000 55,000 45,000 55,000 600 Investment (Mils) $ N/A NA $ 1,000 $ $ S $ Contribution Cost Impact (Per Unit) Material Cost Freight Variable Labor Duty & Tax Total Contribution Margin Impact (20,500) (1,000) (1,600) (100) (23,200) (20,000) (2,500) (1,600) (10,000) (34,100) (18,500) (2,500) (800) (800) (22,600) (18,000) (1,000) (800) (3,000) (22,800) $ $ S $ Exchange Rate (RIC:USD) N/A N/A 6.0 al 6.0 al Note: All costs shown are in USD. Exchange rate used to convert Rica based costs to USD is shown. al All costs (incl. investment) in Rica localization scenario are sourced in RIC Seymore Dinero Finance Lead - Global StrategyStep by Step Solution
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