Case 2 - Advanced Corporation Finance

Case 2 Advanced Corporation Finance

Case #2 is an excel spreadsheet case. Please show your work in excel using cell references and formulas. If you do not show your work in excel, it is difficult to figure out what you are doing, and points will be deducted. Please turn in one case per group, with the group members' names on the spreadsheet. The case instructions are below:

Here is a little tidbit on how to handle the change in net working capital in the case.

Note that we want to capture the CHANGE in NWC each year in your cash flow calculations (not the total level of NWC). So, based on the case information, the net working capital requirement for year 0 is: (0.9 x Expected unit sales next year) = (0.9 x 3,000) = -$2,700 (this is treated as a cash outflow since this is cash tied up in current assets such as inventory). If the total NWC requirement increases to $3,672 in the next year (year 1), the CHANGE in NWC is the increase from year 0, or $972.

You would capture the change in NWC from one year to the next until the end of the project, at which point you would add back the sum of all the previous changes. For example, in the case, the change in NWC is subtracted in years 0 through 6, and then the total level of NWC (the sum of years 0 through 6) is added back in year 7.