This is a case study that I have for an interview. Is there a way that you can assist me in the completion of this task?

Ford Finance Recruiting FINANCE MBA CASE FOR CAMPUS INTERVIEW Instructions In this fictitious case, you are a financial analyst in the Automotive Strategy staff of One World Automotive, a global manufacturer of 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 your manager, Les Dett. 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 with Les Dett and others. 2. Please include the following items in your summary: a. Financial analyses for each alternative you consider, as directed by Les in his e-mail b. Your recommendation for which alternative should be chosen (if any) c. A brief discussion of additional information that would assist you in your evaluation of the alternatives 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. Note: Ford Finance assessment material. Data are fictional and are not an assessment of financial performance. 1 Ford Finance Recruiting FINANCE MBA CASE FOR CAMPUS INTERVIEW E-Mail for Analyst From: To: Subject: Date: Les Dett Analyst C-Car Capacity Study June 24, 2014 1:42 pm Analyst, I need your help evaluating a manufacturing decision. If you look at the attached volume schedule, you can see that we do not have sufficient capacity to meet global demand for our small car, the Vision. There are many factors to consider as we think about how to increase our capacity, but as we enter into the discussion, I want to be armed with appropriate financial data. Would you please look at the attached data I've been able to collect and evaluate some alternatives? Here are three ideas I had. I'm not sure they all make sense, but let me know what you think: 1. We have already closed our assembly plant in Alabama because the Nomad has gone out of production. Could we reopen that plant to meet the global shortfall? 2. We could take advantage of government incentives in India and build a new facility in Chennai, taking advantage of a growing automotive supply base there. 3. We have excess C-Car capacity in Europe (at our Saarbrcken plant) for most of the business plan period. Perhaps we could use that excess capacity to meet global demand. Assume in the cases of #1 and #2 that the plants in question would have a base capacity of 350,000 units but that we could get an incremental 10% volume in each year at no cost if needed. I'll have Bob Lee in manufacturing provide you with some information on labor costs and investment levels. There's no opportunity to expand the capacity at our plant in Saarbrcken, Germany because it is landlocked. Please lay out the alternatives so we can understand the impact on the income statement (including operating margins) and do a cash flow analysis. For cash flow assume we'll stop shipping at the end of 2021 in any scenario. Let me know which one you'd recommend based on the available data, and please let me know also what other data would be required to enhance your analysis. Regards, Les Dett Controller, Automotive Strategy Note: Ford Finance assessment material. Data are fictional and are not an assessment of financial performance. 2 Ford Finance Recruiting FINANCE MBA CASE FOR CAMPUS INTERVIEW ONE WORLD AUTOMOTIVE C-Car Sales & Production Volumes US 2016 2017 2018 2019 2020 2021 Total Industry (Mils.) C-Segment (Mils.) Segmentation Percent 16.0 2.6 16% 16.5 3.0 18% 16.5 3.3 20% 16.8 3.4 20% 16.9 3.4 20% 17.0 3.4 20% OWA C-Car Volumes (000) Share of Segment 333 13% 386 13% 429 13% 437 13% 439 13% 442 13% Available Capacity (000) 250 250 250 250 250 250 Surplus/(Shortfall) (83) (136) (179) (187) (189) (192) Europe 2016 2017 2018 2019 2020 2021 Total Industry (Mils.) C-Segment (Mils.) Segmentation Percent 23.5 3.8 16% 23.5 3.8 16% 24.0 3.8 16% 24.0 4.1 17% 24.5 4.4 18% 25.0 5.0 20% OWA C-Car Volumes (000) Share of Segment 376 10% 376 10% 384 10% 408 10% 441 10% 500 10% 500 500 500 500 500 500 92 59 - Available Capacity (000) Surplus/(Shortfall) 124 124 116 Asia 2016 2017 2018 2019 2020 2021 Total Industry (Mils.) C-Segment (Mils.) Segmentation Percent 40.0 8.0 20% 42.0 8.4 20% 44.0 8.8 20% 46.0 9.2 20% 48.0 9.6 20% 50.0 10.0 20% OWA C-Car Volumes (000) Share of Segment 600 8% 672 8% 704 8% 736 8% 768 8% 800 8% Available Capacity (000) 550 550 550 550 650 650 Surplus/(Shortfall) (50) (122) (154) (186) (118) (150) Total (including other)* Total OWA C-Car Volumes (000) 1,459 1,584 1,667 1,731 1,798 1,892 * Other markets include South America, Africa, and Direct Markets Note: Ford Finance assessment material. Data are fictional and are not an assessment of financial performance. 3 Ford Finance Recruiting FINANCE MBA CASE FOR CAMPUS INTERVIEW E-Mail for Les Dett From: To: Subject: Date: Bob Lee Les Dett RE: C-Car Capacity Study - Assumptions June 23, 2014 5:35 pm Les, Here's the data my team was able to pull together. By the way, I mentioned this study to Jim in Logistics for his input and he said we don't want to forget about Freight for shipping the units. The Vision has a normal freight cost to dealers of about $450 per unit within the region where it's built, but inter-regional ocean shipping for vehicles is significantly more expensive. He said you should assume an incremental $600 per unit cost for shipping between any regions and then another $200 per unit cost for units being shipped from Asia into North America due to special ocean shipping requirements. From a Human Resources perspective, re-opening the Alabama plant would mean new jobs in the U.S. that the unions would support, but we're unlikely to get any concessions on labor costs to make it happen. If you need any more data from my team, just let me know. Bob Lee Manager Manufacturing Finance ----Original Message-----From: Loretta Call To: Bob Lee Subject: RE: C-Car Capacity Study - Assumptions Date: June 23, 2014 4:30 pm Bob, Per the discussion at our team meeting, we were able to pull together some data for the study. The Alabama plant is older but it could be retooled from truck production to build small cars for about $475 million. This would be all tooling with an expected accounting life of 5 years. We could have the plant re-tooled for production at the start of 2016. We should assume all the spending takes place in 2015. Since Chennai #1 is already at maximum capacity, a new facility would be required and is considerably more expensive than the Alabama re-tool. After government incentives, we'd need about $250 million to secure the land and facilities and another $425 million in tooling. Per corporate guidelines, the land and facilities are amortized over 50 years, but the tooling would have the same 5-year life as the Alabama tooling. We could have the plant up and running for January 2017 if we pay for land & facilities in 2015 and tooling in 2016. The good news is that Saarbrcken already builds the Vision for Europe and even though there are minor differences between the European version and the Vision sold in North America and Asia, no new tooling would be required and any other fixed costs could be absorbed within the plant's existing budget. I didn't include the labor rates here because you said Les already had that data, but let me know if you need them. I just sent the latest rates to Casey for their review so they should be up to date. Loretta Call Supervisor Manufacturing Finance Note: Ford Finance assessment material. Data are fictional and are not an assessment of financial performance. 4 Ford Finance Recruiting FINANCE MBA CASE FOR CAMPUS INTERVIEW E-Mail for Les Dett From: To: Subject: Date: Casey Bishop Les Dett Vision Per Units - Purchasing Update June 24, 2014 8:03 am Les, Further to my note below, Purchasing has just confirmed that with some changes to their supplier footprint assumptions on the Vision, we can take advantage of some lower wages and local manufacturing incentives and achieve a $200 per unit savings on material cost for any units sourced out of Asia. Casey ----Original Message-----From: Casey Bishop To: Les Dett Subject: Vision Per Units Date: June 23, 2014 2:15 pm Les, I got a call that you needed some data for the Vision. Our present assumptions are shown below and are based on the latest projections and volumes. These are global averages per unit, except as noted. Variable cost per unit is $14,000* and includes material, warranty and freight costs to the plant. I think Bob gave you the freight costs from the plant. Structural Costs are broken out as follows: Allocated Fixed Costs on existing production - $1,100 per unit Labor and Overhead - $1,200 per unit (but varies by location -- see below) Region Labor and Overhead Cost (per unit) North America (Alabama) Europe (Saarbrcken) Asia-Pacific (Chennai #1) $1,500 $2,000 $500 Marketing is still carrying a global average price of $18,000 per unit and with fuel prices the way they are and the new technology being offered on the Vision, we aren't expecting to have to offer any incentives to meet our sales projections. * There is an open assignment to Purchasing to review these costs and identify opportunities around material cost. Casey Bishop Product Development Controller Note: Ford Finance assessment material. Data are fictional and are not an assessment of financial performance. 5 Ford Finance Recruiting FINANCE MBA CASE FOR CAMPUS INTERVIEW MEMO: From: To: Subject: Date: Corporate Treasurer's Office All Global Car Finance Employees Corporate Finance Assumptions June 1, 2014 We want to take this opportunity to remind all Finance employees of the Corporate assumptions. Using these common assumptions in our analysis across the all functions and regions ensures that we provide our operating management with consistent analysis and allow them to make the best decisions for the Company. Corporate Weighted Average Cost of Capital - 12% WACC should be used as the standard hurdle rate for most decisions. Corporate Tax Rate -- 35% Depreciation Tooling & Equipment - varies based on expected life Land, Facilities - 50 years Assume straight line depreciation in all cases Operating Margin Operating margin is equivalent to Profit Before Tax divided by Total Revenue. Profit Before Tax is calculated as follows: Net Revenue Less Variable Cost Less Labor & Overhead Less Program Spending Less Other Fixed Cost Inventory Valuation Inventory should be valued on a First In, First Out basis Note: Ford Finance assessment material. Data are fictional and are not an assessment of financial performance. 6 Criteria: One Page Executive Summary Include: Financial Analyses for each alternative you consider, as directed by Les in his email, your recommendation for which alternative should be chosen, a brief discussion of additional information that would assist you in your evaluation of the alternatives. Ideas: Calculate the Net present value, Notes: Entire Concept: Capacity vs. Demand Option 1: Alabama is closed but can be retooled and the company would add facilities to accommodate the demand 350,000 units capacity o Plus 10 percent incremental growing capacity per year Cost: $475 million o Expressed over 5 years Able to begin production of unmet demand as early as 2016 Reopening will all create more jobs in the U.S. Option 2: Build facility in Chennai Has a growing automotive supply base Also has 350,000 units capacity + 10% growth (assume: not necessarily incremental) Cost Incentives: Labor costs + Investment cost Option 3: Appeal: C-Car excess capacity in Europe No additional fixed cost Shipping Costs (relatively high) $450/unit, $600 + $1200