You undertook [during the semester] a major consultancy task at Kilgors, during which you worked with the capital investment review committee to test and evaluate the new strategic capital investment evaluation model (SIM).You have already provided your initial feedback to the committee.

\fKilgors SIM Model components and weighting: evaluation is only illustrative. KILGORS Acquisition of a fully integrated wine Investment in a portfolio of luxury holiday company in China resorts and hotels Strategic Investment Assessment Model Version 10 [7 November 2016) corporate weighare Likert [-5 ..+5] -5 is very bad Ois neutral +5 is very good SCORE Likert [-5 ...+5] -5 is very bad 0 is neutral +5 is very good SCORE Financial 1 Net Present Value (NPV) 20% $5.74 million +1.4 29 $5.71 million +1.4 29 2 Payback period 20% 9.2 -4.25 (85) 9.2 -4.21 (84) Risk Management 1 strategic risk competitive landscape; market dynamics; 5% high-level opportunities low-level opportunities strategy execution +4 20 +2 10 2 operational risk process related risks 5% low risk -2 (10) medium-level risk -3 (15) 3 financial risk sensitivity of NPV estimate; liquidity; FOREX; interest rates; cost of equity 5% high-level risk -4 (20) low level opportunities +2 10 4 regulatory risk unexpected change in laws, regulations, standards, codes of practice. 5% medium-level risk -3 [15) several +0 Corporate Social Responsibility 1 social impact security, education healthy safety: employment; general welfare 5% very low-level harm -1 (5) high-level benefit +4 20 2 environmental impact air; water; sol 5% low Speel harm -2 (10)low level ham -2 (10) Other strategic factors 1 alignment with existing strategy 5% extremely consistent with intended strategy +5 25 somewho'consistent with intended strategy +3 15 2 impact on firm's reputation 5% hisignificant impact +0 insignificant impact +0 3 do we possess core competencies and capabilities 4% adequate with moderate adventopt +3 12 adequate with moderate advantage +3 12 4 impact of deciding not to invest 4% medium-level harm +3 12 medium-level harm +3 12 5 feasability of reversing the decision. 4% |losses limited to the investment +0 losses limited to the investment. +0 6 track record and ability of managers/personnel involved 3% ferry good +4 12 wy good +4 12 7 competitive advantage 5% trailing market position -2 (10) trailing market position -2 (10)standards, codes of practice. medium-level risk [1) neural Corporate Social Responsibility 1 social impact security, educationc healthy safety; employment; general welfare 5% very low-level harm -1 (5) high-level benefit +4 20 2 environmental impact air; water; soil 5% low -Level hann -2 (10) low-karl harm -2 (10) Other strategic factors 1 alignment with existing strategy 5% extremely consistent with intended strategy +5 25 somewhatconsistent with intended strategy +3 15 2 impact on firm's reputation 5% insignificant impact +0 0 insignificant impact +0 O 3 do we possess core competencies and capabilities 4% adequate with moderate adventopt +3 12 adequate with moderate advantage +3 12 4 impact of deciding not to invest 4% medium-level harm +3 12 medium-level harm +3 12 5 feasability of reversing the decision. 4% losses limited to the investment +0 losses limited to the investment +0 0 6 track record and ability of managers/personnel involved 3% very good +4 12 why good +4 12 7 competitive advantage 5% trailing market position -2 (10) trailing market position -2 (10) 100% aggregate score for this investment (45) final SIM score for this investment 0Project summary: Investment in Chinese wine industry through the acquisition of a fully integrated wine business - Acquisition of a fully integrated wine business based in China. - Estimated investment: $35m - Current performance issues: - Vineyard yields are below industry standard impacting costs and grape availability. Achieving improvements will require some additional early expenditure. - Distribution network throughout China lacks integration and cohesiveness with contracts with many different logistics organisations. This has added costs and restricted the capacity to meet customers' needs. - While the protocols of winemaking are considered to be around the industry standard, there is a view that there are still operational improvements to be made, particularly for a winery focused on a high-end strategy. This will require some additional expenditure at the outset. - Issues for consideration - The location we are looking at has experienced harsh climate conditions and some issues with access to sufficient water; though these are thought to be manageable over the longer term. - There are some concerns about the need to further develop the employees at the vineyards and winery processing plant to drive planned improvements.Current Performance and Projected Financials Current performance %% change expected post acquisition $ '000's Years 1-2 Years 3-4 Year 5 Year 6 Years 7 - 8 Years 9-10 No Revenue 3.991 change 15% 1 12% 1 15% 125% 135% Cost of vineyard operations 1,118 18% 1:4% 14% 14% No change No change Winemaking No No No No and bottling 1,038 18% 14% change change change change Utilities 399 1:3% 1:3% 13% 13% 16% 18% Marketing, sales and administrati 1 15% 120% on 479 1 10% 1 10% 1 15% 1 15% Depreciation 599 650 650 650 650 650 650 Other 67 105 140 145 145 180 220 Operating Note: 1. Any carried forward tax losses to be ignored at the project level. profit 292 2. Depreciation determined as a depreciable value of $6.5 m over 10 years