Posted: February 21st, 2023

Homework 9

Reading for discussion 1

• Apply the Decision Tree Analysis Technique (An explanation of How to use Decision Tree Analysis): https://www.youtube.com/watch?v=BB6gjBgC6uM
• Behavioral Finance: The Role of Psychology: https://www.youtube.com/watch?v=0ZLNbxWH8Lc&feature=results_main&playnext=1&list=PLF1D4FCC29FD666C2
• Break Even Lecture (The Breakeven even and the contribution margin analysis): https://www.youtube.com/watch?v=69mVcnewPbw
• Efficient Market Hypothesis: Exclusive Interview with Gene Fama Jr. (Explanation of the efficient market hypothesis): https://www.youtube.com/watch?v=gK-cELjRfoY&feature=related
• Ethics and Professional Standards, Sue White, Ph.D: https://www.youtube.com/watch?v=ZoytAkVctTs&feature=results_main&playnext=1&list=PLB168EB4489215943
• Ethics in Corporate Finance (Aaron Beam on Ethics in Corporate Finance): https://www.youtube.com/watch?v=8mkXSLN8UXs
• Excel Finance Class 89: Sensitivity Analysis For Cash Flow & NPV Calculations (Using Sensitivity Analysis for NPV calculations and cash flow): https://www.youtube.com/watch?v=22WAAnPH600
• Financial Analysis Using Excel, Part 4 (Investment Decision Making): https://www.youtube.com/watch?v=VfjiWmVK2Z4
• Five Factors in the Investment Decision Making Process: https://www.youtube.com/watch?v=h1fBPeqQvow
• Introduction to Monte Carlo Simulation: https://www.youtube.com/watch?v=pDExObTMHTs&feature=related
• Market Efficiency (Explanation of market efficiency): https://www.youtube.com/watch?v=0YUz3aQBfrM
• Monte Carlo Simulation – NPV example (Using Monte Carlo Simulation with NPV): https://www.youtube.com/watch?v=Q3rv3yF0bPA
• Real options and project evaluation. (Part 1): https://www.youtube.com/watch?v=tJPQ2sHalUU

Discussion 1

Using NPV will lead to the correct decision when evaluating projects with very different cash flow patterns over time. The firm can use the IRR on the incremental cash flows of the long-term project compared to the short-term project in order to achieve the correct decision, i.e., the same decision that NPV would recommend.
Discuss the following:
Marie LeBlanc has decided to move forward and acquire the drilling rigs to start a new line of service for her company. It is a very expensive undertaking. It is the first time she has personally borrowed $30 million and she is quite nervous that all works right. Recognizing she needs to make sure there is no stumbling along the pathway to success she assigns you, the CFO, to take the lead. Enlighten Ms. LeBlanc to your capital budgeting process.

Cite your source(s) and respond to the response below.

Ms. LeBlanc, thank you for the opportunity to take the lead on the drilling rigs acquisition project. To keep you in the loop, I would like to explain my capital budgeting process.
Capital budgeting is a process of evaluating which capital projects will increase the value of the company Fabozzi & Peterson Drake, 2009). Analysis of three items start the process: the project’s future cash flows, the degree of uncertainty associated with future cash flows of the project, and the value of the project’s future cash flows taking into account their uncertainty Fabozzi & Peterson Drake, 2009). A good evaluation technique should consider all future incremental cash flows, the time value of money, the uncertainty associated with future cash flows, and objective criteria by which to select a project Fabozzi & Peterson Drake, 2009).
We have completed a thorough analysis of this and have decided to move forward with borrowing $30 million for the acquisition of drilling rigs for this new line of service.
Net Present Value (NPV) can help us get there. NPV is the difference between the present value of cash inflows and the present value of cash outflows over a period to analyze the profitability of an investment project (Fernando, 2021).
To calculate NPV:
NPV= TVECF-TVIC
Where:
TVECF= Today’s value of the expected cash flows
TVIC= Today’s value of invested cash
(Fernando, 2021).

References
Fabozzi, F. J. & Peterson Drake, P. (2009). Finance: Capital Markets, Financial Management, and Investment Management. New Jersey: Wiley.

Fernando, J. (2021, March 1). CORPORATE FINANCE & ACCOUNTING FINANCIAL RATIOS Net Present Value (NPV). Retrieved from https://www.investopedia.com/terms/n/npv.asp

Reading for discussion 2

Berry, T. (n.d.). How to write an executive summary | Bplans. Retrieved from http://articles.bplans.com/writing-a-business-plan/writing-an-executive-summary/207

Business Development Bank of Canada. (n.d.). How to write a strategic plan | BDC.ca. Retrieved from https://www.bdc.ca/en/articles-tools/business-strategy-planning/define-strategy/pages/how-write-strategic-plan.aspx

Isaac, L. (n.d.). Strategic planning: How to write a strategic plan. Retrieved from http://www.leoisaac.com/planning/strat025.htm

Search academic databases to learn best practices on developing a strategic plan

Who should be involved in strategic planning? (n.d.). Retrieved from http://work911.com/planningmaster/faq/processwho.htm

Discussion 2

Discuss the elements necessary in a strategic action plan executive summary.

Cite your source(s) and respond to the response below.

Elements that are necessary in a strategic action plan executive summary would include a letter/introduction, executive summary, about the organization, and goals, strategies and tactics. In the letter/introduction would present a cover letter that introduces the plan to readers and approval, this will give an insight on the action plan and address the parties that I will be presenting to. In the executive summary, it will summarize the strategic plan and provide the mission, vision and values. This section will give an overview of the process used to create the plan and include an outline how the plan will be evaluated and those involved in the funding and creation of this plan. This section is important to help with agreement and approval about the future of the organization. In the about the organization section, this will provide a background about the organization and will summarize the mission, vision and values as well as the history and achievements of the organization. Last section focusing on goals, strategies and tactics is where the strategic action plan will be presented and the goals and strategies will be in detail. This will be supported by providing the strategies and its financial projections. An executive summary as mentioned Lavinsky, D. 2013, summarizes each of the other sections of your strategic plan, it is important because it will help key constituents understand the development in hopes to support your plan for the company.

Lavinsky, D. (2013). Strategic Plan Template: What To Include In Yours. Forbes. Retrieved 2 April 2021, from https://www.forbes.com/sites/davelavinsky/2013/10/18/strategic-plan-template-what-to-include/?sh=130565bc47e1.

Berry, T. (n.d.). How to write an executive summary | Bplans. Retrieved from http://articles.bplans.com/writing-a-business-plan/writing-an-executive-summary/207

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