CAP 2 SFMA Case Study 2016

BigBirdie · 29-10-2015 02:50PM #1

Hi All,

I understand you have been advised to work in groups for the SFMA interim assessment. With that in mind, I've set up this forum to give you a platform for discussion and for those students who may not know many others to get your questions and thoughts out there

Any questions/concerns feel free to drop me a line.

Caroline
CASSI Education Officer

ChartAccount · 21-12-2015 07:50PM

I am currently going through the case study, is there anybody out there!!

Whoisin thehouse · 22-12-2015 12:45PM

Liam Doran is delivering an overview of the SFMA case study with Chartered Grind School early in 2016 www.charteredgrindschool.com for details

ChartAccount · 22-12-2015 08:30PM

Why do they do these grinds sooo close to the exams????

Mark_23 · 24-12-2015 10:24AM

Whoisin thehouse wrote: »

Liam Doran is delivering an overview of the SFMA case study with Chartered Grind School early in 2016

Yeah what's the story with this? Is it any use?

Going through the case study now. There's only one other person in my job doing CAP2's so if anyone wants to hare ideas, give me a shout!

AtticusFinch86 · 27-12-2015 11:00AM

Has anyone any ideas on what to expect? I've read it a couple of times now and there's obviously going to be a project appraisal element. Beyond that though, I'm struggling to see any other certainties.

I'm thinking...

Project Appraisal
Possibly Company Valuation or Sourcing Finance
Foreign Exchange Risks

Those are the first few that come to mind.

Edit.....

Just to add to the above, I'm thinking there may be a Decision Making element to it i.e. how long should International Show be run. 1 year? 2 years? 3 years? etc.

The way the info is laid it, it sort of facilitates a Decision Making matrix.

ChartAccount · 27-12-2015 02:47PM

I just had a read through assignment, can others contribute something that they have from their initial read of the case study??

From the online class about this assesment, there are usually 3/4 areas examined. The numbers are the competency statement areas. This is how the online lecturer said to go through the case study!

2.6 Company in difficulty
2.4 Div decisions
3.2 Risk
4.2 Evaluate performance product evaluation, QC BU perf non fin factors, ethics

Mark_23 · 28-12-2015 05:16PM

I can't seem to attach my excel like yourself.

I've done out a table with Ke Kp and the Bonds.

Have Cost MV Weight WACC across the top of the table also.

From the calculatons ive done ive Ke 10.1% with MV 48mill Kp: 4.2% and MV of 24mill.

Are people going along those lines? Hard to picture without the excel sheet i know

ChartAccount · 28-12-2015 06:11PM

Mark_23 wrote: »

I can't seem to attach my excel like yourself.

I've done out a table with Ke Kp and the Bonds.

Have Cost MV Weight WACC across the top of the table also.

From the calculatons ive done ive Ke 10.1% with MV 48mill Kp: 4.2% and MV of 24mill.

Are people going along those lines? Hard to picture without the excel sheet i know

You need to scroll down when writing message and you will see additional options, then manage attachments...

mel7284 · 29-12-2015 01:15AM

Work colleagues have highly recommend these courses, particularly the one in Cork on the 6th January. Acarevision.ie.

Mark_23 · 29-12-2015 09:42AM

ChartAccount wrote: »

You need to scroll down when writing message and you will see additional options, then manage attachments...

I must need a certain amount of post as the only parts to that section are "thread subscription" and "rate thread".

Mark_23 · 29-12-2015 04:09PM

For the first case i've totaled up each of the cost and have split them into Fixed/Variable and there is a mixture in most of the amounts.

For example:

Transport:

Total Variable Fixed
37920 25920 12000

25920 = (3cars x 120km x 48trips) * €1.50

12,000 = 4,000 x 3 (fixed lease payments)

Anyone else willing to contribute?

Jsmac67 · 29-12-2015 04:55PM

Mark_23 wrote: »

For the first case i've totaled up each of the cost and have split them into Fixed/Variable and there is a mixture in most of the amounts.

For example:

Transport:

Total Variable Fixed
37920 25920 12000

25920 = (3cars x 120km x 48trips) * €1.50

12,000 = 4,000 x 3 (fixed lease payments)

Anyone else willing to contribute?

Definitely on the right track I feel. It'll be a project feasibility, given more figures and budget constraints I'd imagine. So yeah all that is relevant!

As for the first section, definitely finance anyhow lol. Reference is made to the Wacc in particular so definitely a hint I feel! Haven't got into the ins and outs of it but will post here when I do

Cap22016 · 30-12-2015 02:50PM

I have the same answers for transport.
And staff costs are working out as :

Band : (6staff x €2750 x 3months) = €49500 - is this fixed because its irrelevant of number of performances ?

Road Crew : (4staff x €8000 x 3months) = €32000 - fixed ?

Cast members : ( 18 x 4months x €2000) = €144000 - fixed ?
Plus : ( 18 x €200 x 48shows) = €172800
Total : €316800 = 144000 (fixed?) + 172800 (variable?)

Director : (1 x €5000 x 4months) = €20000 - fixed?
Plus ( 1 x €500 x 48shows ) = €24000 - variable?
Total : €44000 - 20000 (fixed?) + 24000 (variable?)

Im unsure about what to include in fixed and variable?

Jsmac67 · 30-12-2015 03:03PM

Cap22016 wrote: »

I have the same answers for transport.
And staff costs are working out as :

Band : (6staff x €2750 x 3months) = €49500 - is this fixed because its irrelevant of number of performances ?

Road Crew : (4staff x €8000 x 3months) = €32000 - fixed ?

Cast members : ( 18 x 4months x €2000) = €144000 - fixed ?
Plus : ( 18 x €200 x 48shows) = €172800
Total : €316800 = 144000 (fixed?) + 172800 (variable?)

Director : (1 x €5000 x 4months) = €20000 - fixed?
Plus ( 1 x €500 x 48shows ) = €24000 - variable?
Total : €44000 - 20000 (fixed?) + 24000 (variable?)

Im unsure about what to include in fixed and variable?

Director and cast members are both variable elements. So it'd be 18*200*number of shows done for cast for example, that's the variable element. I'd imagine on the day you'll be given the actual number of shows etc...

Mark_23 · 31-12-2015 10:34AM

I've the same figures as above too.

For them all i've split them into Variable/Fixed if they contain both.

From this I expect we'll be getting the revenue.

Then perhaps find the contribution and break even point?

As this is a short term project i presume it has to have a residual amount of €250,000 (per the start of the case study) and the second part must have a residual of €2,000,000 after discounting?

Trying the second proposal now

Lyra Fangs · 31-12-2015 12:09PM

Hey guys,

Just wrapping up on the short term project, this is what I'm thinking so far:

Fixed costs -->
Venue = to be confirmed (non-refundable booking fee is a sunk cost)
Set = Materials of 10k and labour of 150k
Transport = Fuel of 25,920 and leasing costs of 12k
Staff costs = Band 49.5k; Road crew 32k; Cast 144k; Director 20k

Total fixed costs = 443,420 + venue costs not given

Variables costs -->
Staff costs = Cast (18*shows*€200); Director (1*shows*€500)
Total variable costs = ???

Breakeven point (in shows) = FC (see above)/Contribution (see below)

If on a per show basis -->
Contribution = Sales per show - variable costs per show
??? - (18 * €200) + (1 * €500)
??? - 4,100

Target profit (in shows) = FC (see above) + Target Profit (250,000)/ Contribution (see above)

Is that about the same as everyone else is thinking?

Mark_23 · 31-12-2015 12:20PM

Lyra Fangs wrote: »

Hey guys,

Just wrapping up on the short term project, this is what I'm thinking so far:

Fixed costs -->
Venue = to be confirmed (non-refundable booking fee is a sunk cost)
Set = Materials of 10k and labour of 150k
Transport = Fuel of 25,920 and leasing costs of 12k
Staff costs = Band 49.5k; Road crew 32k; Cast 144k; Director 20k

Total fixed costs = 443,420 + venue costs not given

Variables costs -->
Staff costs = Cast (18*shows*€200); Director (1*shows*€500)
Total variable costs = ???

Breakeven point (in shows) = FC (see above)/Contribution (see below)

If on a per show basis -->
Contribution = Sales per show - variable costs per show
??? - (18 * €200) + (1 * €500)
??? - 4,100

Target profit (in shows) = FC (see above) + Target Profit (250,000)/ Contribution (see above)

Is that about the same as everyone else is thinking?

For Set production i've 24*4*€125 =12,000 (as opposed to your 10,000).

I split out transport into variable and fixed but i guess it makes sense to have it all in fixed.

Do you reckon we'll be given how many crew members etc will be required per performance? Otherwise for variable costs we can multiple them 48 shows.

Lyra Fangs · 31-12-2015 12:47PM

Mark_23 wrote: »

For Set production i've 24*4*€125 =12,000 (as opposed to your 10,000).

I split out transport into variable and fixed but i guess it makes sense to have it all in fixed.

Do you reckon we'll be given how many crew members etc will be required per performance? Otherwise for variable costs we can multiple them 48 shows.

Thanks for that I read it as twenty days instead of twenty four days, I think the four members of staff required distracted me :P

Fuel is a subjective one; the leasing costs will be incurred whether they do 10 shows or a 1000 shows but the fuel costs are dependent on the number of shows so maybe it would be more appropriate to classify the 25,920 as a variable cost with the possibility of the figure changing if they decide to do more or less shows.

They say they require 1 crew member to sell tickets at the door and 3 crew members to transport the set from venue to venue so I guess 4 will be needed per performance. If you mean whether the full staff numbers specified in the table on page 6 the band and road crew are paid irrespective of performance, there's only one director so they must be at every performance and I'd say for simplicity we can assume all 18 members of cast will do every performance.

I'm sill not sure if that 48 trips (regarding fuel costs) refers to shows or if it's just a coincidence. I find it hard to believe they'd change venue every single day rather than perform in one place for several nights but then it's not real life.

Mark_23 · 31-12-2015 01:10PM

Lyra Fangs wrote: »

Thanks for that I read it as twenty days instead of twenty four days, I think the four members of staff required distracted me :P

Fuel is a subjective one; the leasing costs will be incurred whether they do 10 shows or a 1000 shows but the fuel costs are dependent on the number of shows so maybe it would be more appropriate to classify the 25,920 as a variable cost with the possibility of the figure changing if they decide to do more or less shows.

They say they require 1 crew member to sell tickets at the door and 3 crew members to transport the set from venue to venue so I guess 4 will be needed per performance. If you mean whether the full staff numbers specified in the table on page 6 the band and road crew are paid irrespective of performance, there's only one director so they must be at every performance and I'd say for simplicity we can assume all 18 members of cast will do every performance.

I'm sill not sure if that 48 trips (regarding fuel costs) refers to shows or if it's just a coincidence. I find it hard to believe they'd change venue every single day rather than perform in one place for several nights but then it's not real life.

By crew members, i meant cast members

So for their performances I have 48*18*200 as I assume a cast members will be required for each show. Might be the case where for smaller shows not all the cast members would be required?

I also assume the director will be required for each of the shows so have 48*500.

Transport also threw me. Maybe we will be provided with a schedule?

For the long-term project the maximum contract for cast members is 4 years, so hopefully we will be given how long it should last.

For the set costs:

As it needs to be set up one month in advance, in year 1 would you count for the 400,000 in year 0? Or include it in year 1 so therefore have 9*400,000 and year 2 have 8*400,000

Mark_23 · 31-12-2015 01:11PM

Lyra Fangs wrote: »

Thanks for that I read it as twenty days instead of twenty four days, I think the four members of staff required distracted me :P

Fuel is a subjective one; the leasing costs will be incurred whether they do 10 shows or a 1000 shows but the fuel costs are dependent on the number of shows so maybe it would be more appropriate to classify the 25,920 as a variable cost with the possibility of the figure changing if they decide to do more or less shows.

They say they require 1 crew member to sell tickets at the door and 3 crew members to transport the set from venue to venue so I guess 4 will be needed per performance. If you mean whether the full staff numbers specified in the table on page 6 the band and road crew are paid irrespective of performance, there's only one director so they must be at every performance and I'd say for simplicity we can assume all 18 members of cast will do every performance.

I'm sill not sure if that 48 trips (regarding fuel costs) refers to shows or if it's just a coincidence. I find it hard to believe they'd change venue every single day rather than perform in one place for several nights but then it's not real life.

By crew members, i meant cast members

So for their performances I have 48*18*200 as I assume a cast members will be required for each show. Might be the case where for smaller shows not all the cast members would be required?

I also assume the director will be required for each of the shows so have 48*500.

Transport also threw me. Maybe we will be provided with a schedule?

For the long-term project the maximum contract for cast members is 4 years, so hopefully we will be given how long it should last.

For the set costs:

As it needs to be set up one month in advance, in year 1 would you count for the 400,000 in year 0? Or include it in year 1 so therefore have 9*400,000 and year 2 have 8*400,000

Lyra Fangs · 31-12-2015 01:41PM

Mark_23 wrote: »

By crew members, i meant cast members

So for their performances I have 48*18*200 as I assume a cast members will be required for each show. Might be the case where for smaller shows not all the cast members would be required?

I also assume the director will be required for each of the shows so have 48*500.

Transport also threw me. Maybe we will be provided with a schedule?

For the long-term project the maximum contract for cast members is 4 years, so hopefully we will be given how long it should last.

For the set costs:

As it needs to be set up one month in advance, in year 1 would you count for the 400,000 in year 0? Or include it in year 1 so therefore have 9*400,000 and year 2 have 8*400,000

You can calculate variable costs for cast and directors if you assume a total of 48 shows. Maybe just note down that the number of shows is subject to change up or down.

I'm not sure if there will be smaller shows - nothing is mentioned to suggest performances will be tailored to the venue but I suppose it's something to bear in mind. It would be an awful lot of consider though given the time constraint of the exam and what we have to do already. On the other hand if we can safely assume 48 shows then the only things we're missing are venue costs and ticket sales.

I'm going to put fuel costs as a variable cost because it is dependent on the number of shows.

I would consider the 400k for the long term project to be included in initial outlay in year 0 after which they will incur 900k in movement expenses (assuming the set must be moved 8 times between venues and then brought back to Ireland). Then again its a little ambiguous whether we should include transport back to Ireland as a cost.

Mark_23 · 31-12-2015 01:46PM

Lyra Fangs wrote: »

You can calculate variable costs for cast and directors if you assume a total of 48 shows. Maybe just note down that the number of shows is subject to change up or down.

I'm not sure if there will be smaller shows - nothing is mentioned to suggest performances will be tailored to the venue but I suppose it's something to bear in mind. It would be an awful lot of consider though given the time constraint of the exam and what we have to do already. On the other hand if we can safely assume 48 shows then the only things we're missing are venue costs and ticket sales.

I'm going to put fuel costs as a variable cost because it is dependent on the number of shows.

I would consider the 400k for the long term project to be included in initial outlay in year 0 after which they will incur 900k in movement expenses (assuming the set must be moved 8 times between venues and then brought back to Ireland). Then again its a little ambiguous whether we should include transport back to Ireland as a cost.

Seems like more work for the LT project so i think we might be just missing the revenue for the ST project.

I presume 9 times as in December it'll need to be set up for the following January show, in year 2.

Lyra Fangs · 31-12-2015 02:16PM

Mark_23 wrote: »

Seems like more work for the LT project so i think we might be just missing the revenue for the ST project.

I presume 9 times as in December it'll need to be set up for the following January show, in year 2.

The way I see the set transports is: brought to S, to LA, to C town, to T, to S, to LA, to C town, to tokyo --> that's eight times. Then do they bring it home to Ireland for the Dec break? I doubt they bring it to Shanghai and leave it there for a month. The again what happens to the set during the break months that occur during the year?? It doesn't really tell us if it's brought home each time of just left in the next venue for a month.

Lyra Fangs · 31-12-2015 03:38PM

Mark_23 wrote: »

I can't seem to attach my excel like yourself.

I've done out a table with Ke Kp and the Bonds.

Have Cost MV Weight WACC across the top of the table also.

From the calculatons ive done ive Ke 10.1% with MV 48mill Kp: 4.2% and MV of 24mill.

Are people going along those lines? Hard to picture without the excel sheet i know

I got the same values as you for the:

MV of pref shares = 24 million
Kp = 4.17%
MV of OSC = 48 million

But I got a different answer for Ke -->

Ke = (Do (1+ g) + g
Po

Ke = (.2(1 + 10%) + 10%
2.4

Ke = 0.091666667 + 10% = 19.2%

Mark_23 · 31-12-2015 04:38PM

Lyra Fangs wrote: »

I got the same values as you for the:

MV of pref shares = 24 million
Kp = 4.17%
MV of OSC = 48 million

But I got a different answer for Ke -->

Ke = (Do (1+ g) + g
Po

Ke = (.2(1 + 10%) + 10%
2.4

Ke = 0.091666667 + 10% = 19.2%

Ahh, that was a decimal error on my part.

19.2 is what i've now.

Lyra Fangs · 31-12-2015 04:44PM

Mark_23 wrote: »

Ahh, that was a decimal error on my part.

19.2 is what i've now.

Great! Nice to be on the same page as someone else

For the narrative piece I'm thinking foreign currency risk reduction would be a possibility.

I know there are several ways of hedging the risk but are there any non-hedging methods applicable to Strand plc?

Lyra Fangs · 31-12-2015 04:51PM

AtticusFinch86 wrote: »

Has anyone any ideas on what to expect? I've read it a couple of times now and there's obviously going to be a project appraisal element. Beyond that though, I'm struggling to see any other certainties.

I'm thinking...

Project Appraisal
Possibly Company Valuation or Sourcing Finance
Foreign Exchange Risks

Those are the first few that come to mind.

Edit.....

Just to add to the above, I'm thinking there may be a Decision Making element to it i.e. how long should International Show be run. 1 year? 2 years? 3 years? etc.

The way the info is laid it, it sort of facilitates a Decision Making matrix.

Hey,

Can you explain a little more what you mean by decision making matrix please?

JM_3487 · 03-01-2016 04:56PM

Lyra Fangs wrote: »

Hey guys,

Just wrapping up on the short term project, this is what I'm thinking so far:

Fixed costs -->
Venue = to be confirmed (non-refundable booking fee is a sunk cost)
Set = Materials of 10k and labour of 150k
Transport = Fuel of 25,920 and leasing costs of 12k
Staff costs = Band 49.5k; Road crew 32k; Cast 144k; Director 20k

Total fixed costs = 443,420 + venue costs not given

Variables costs -->
Staff costs = Cast (18*shows*€200); Director (1*shows*€500)
Total variable costs = ???

Breakeven point (in shows) = FC (see above)/Contribution (see below)

If on a per show basis -->
Contribution = Sales per show - variable costs per show
??? - (18 * €200) + (1 * €500)
??? - 4,100

Target profit (in shows) = FC (see above) + Target Profit (250,000)/ Contribution (see above)

Is that about the same as everyone else is thinking?

On the cast costs (under fixed staff costs above), I interpreted the cast payments as being €2000 for September and then €200 per performance after that. So total fixed costs for cast as €36000

Lyra Fangs · 03-01-2016 06:50PM

Lyra Fangs wrote: »

Hey guys,

Just wrapping up on the short term project, this is what I'm thinking so far:

Fixed costs -->
Venue = to be confirmed (non-refundable booking fee is a sunk cost)
Set = Materials of 12k and labour of 150k
Transport = Leasing costs of 12k
Staff costs = Band 49.5k; Road crew 32k; Cast 36k; Director 20k

Total fixed costs = 311,500 + venue costs not given

Variables costs -->
Transport = Fuel of 25,920
Staff costs = Cast (18*shows*€200); Director (1*shows*€500)
Total variable costs = ???

Breakeven point (in shows) = FC (see above)/Contribution (see below)

If on a per show basis -->
Contribution = Sales per show - variable costs per show
??? - (18 * €200) + (1 * €500) + (1*120*1.5*3)
??? - 4,640

Target profit (in shows) = FC (see above) + Target Profit (250,000)/ Contribution (see above)

Is that about the same as everyone else is thinking?

JM_3487 wrote: »

On the cast costs (under fixed staff costs above), I interpreted the cast payments as being €2000 for September and then €200 per performance after that. So total fixed costs for cast as €36000

Good spot!

So many ways to get tripped up by the reading of this. I have updated my workings to reflect the change in cast fixed costs, the corrected material costs and the fuel costs being reclassified to variable costs.

Cap22016 · 04-01-2016 10:21PM

Just wrapping up on the first page of the case study, I cannot attach my excel workings but i will summarise what i have done here.

( a ) Calculation of Cost of equity and Cost of preference share equity :

In Summary

Ke = 19.17 % MV Ordinary Shares ( 2.4 x 20mil ) = 48 Mill

Kp = 4.17 % MV Preference Shares ( 6 x 4mil ) = 24 Mill

( b ) Calculation of Irredeemable Bonds :
- Do not have enough information to finish this at present, will be given on the day.

(c ) WACC - I have tried to fill this out without the irredeemable bonds.

WACC so far excluding irredeemable bonds : 14.17%

- Am i on the right track or is everyone going down a different path ?

CAP 2 SFMA Case Study 2016

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