CAP 2 SFMA Case Study 2016

s15r330 · 05-01-2016 11:17AM

Cap22016 wrote: »

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 ?

Yep I have that!

mel7284 · 05-01-2016 01:47PM

s15r330 wrote: »

Yep I have that!

I'm also getting those answer!!!!

Cap22016 · 05-01-2016 08:10PM

For the Short Term Proposal I have separated out the Fixed and Variable Costs as the following ? I have used the number of shows as 48 from the suggested number in case study, i know this could change on the day.

Summary Variable Costs :

1) Cast Members(18cast x 48shows x €200per show ) = 172,800
2) Director (1director x 48 shows x €500 per show ) = €24,000
3) Set Makers (4set makers x 24days x 125 per day ) = €12,000
4) Motor Fuel (3vehicles x 120km x 48trips x 1.50pertrip) =€25,920

Total Variable Costs = €234,720

Summary Fixed Costs :

1)Materials = €150,000
2) Leased Vehicles (3vehicles x €4000 per quarter) = €12,000
3) Band ( 6 x 3months x €2750 ) = €49,500
4) Road Crew ( 4 x €8000 ) = €32,000
5) Cast Members ( 18 x 1month x €2000 ) = €36,000
6) Directors ( 1 x 4months x €5000 ) = €20,000
7) Venue Costs = ??

Total Fixed Costs = €299,500

donmoister · 05-01-2016 09:08PM

Any more late grinds courses coming up? I just missed one today and another one is full fro SFMA

Or are these courses essential to do well?

Lyra Fangs · 05-01-2016 10:39PM

Cap22016 wrote: »

For the Short Term Proposal I have separated out the Fixed and Variable Costs as the following ? I have used the number of shows as 48 from the suggested number in case study, i know this could change on the day.

Summary Variable Costs :

1) Cast Members(18cast x 48shows x €200per show ) = 172,800
2) Director (1director x 48 shows x €500 per show ) = €24,000
3) Set Makers (4set makers x 24days x 125 per day ) = €12,000
4) Motor Fuel (3vehicles x 120km x 48trips x 1.50pertrip) =€25,920

Total Variable Costs = €234,720

Summary Fixed Costs :

1)Materials = €150,000
2) Leased Vehicles (3vehicles x €4000 per quarter) = €12,000
3) Band ( 6 x 3months x €2750 ) = €49,500
4) Road Crew ( 4 x €8000 ) = €32,000
5) Cast Members ( 18 x 1month x €2000 ) = €36,000
6) Directors ( 1 x 4months x €5000 ) = €20,000
7) Venue Costs = ??

Total Fixed Costs = €299,500

I have the same calculations as you but I categorised the set labour costs as fixed rather than variable. I consider the output to be the number of shows so the labour cost of 12k will be 12k whether they put on 10 shows or 100 shows or even if the cancel the whole event altogether.

Cap22016 · 06-01-2016 09:26AM

Lyra Fangs wrote: »

I have the same calculations as you but I categorised the set labour costs as fixed rather than variable. I consider the output to be the number of shows so the labour cost of 12k will be 12k whether they put on 10 shows or 100 shows or even if the cancel the whole event altogether.

Good point

i have updated my workings.. thank you!

Cap22016 · 06-01-2016 09:28PM

Has anyone prepared anything on the foreign exchange risk ? I'm a bit lost on what to look at.

rcoffey · 06-01-2016 09:54PM

Cap22016 wrote: »

Has anyone prepared anything on the foreign exchange risk ? I'm a bit lost on what to look at.

i think sessions 6 and 7 deal with fx risk, i think we might be asked how to manage this risk

rcoffey · 06-01-2016 09:59PM

has anyone any ideas on the short term project, i am thinking a decision making question but unsure what form it will take

Lyra Fangs · 06-01-2016 10:20PM

Cap22016 wrote: »

Has anyone prepared anything on the foreign exchange risk ? I'm a bit lost on what to look at.

I think it will be the narrative piece, you need to provide ways tailored to Strand Plc that they could avail of to reduce their exposure to foreign exchange risk.

Lyra Fangs · 06-01-2016 10:21PM

rcoffey wrote: »

has anyone any ideas on the short term project, i am thinking a decision making question but unsure what form it will take

If you look at the earlier posts in this thread some people think we might be asked to calculate how many shows would be required to breakeven and then how many on top of that to achieve the required profit of 250k.

s15r330 · 07-01-2016 08:01AM

Lyra Fangs wrote: »

If you look at the earlier posts in this thread some people think we might be asked to calculate how many shows would be required to breakeven and then how many on top of that to achieve the required profit of 250k.

I think so too. Breakeven and i'd say a target profit part considering we have the €250k

rcoffey · 07-01-2016 09:15AM

Lyra Fangs wrote: »

If you look at the earlier posts in this thread some people think we might be asked to calculate how many shows would be required to breakeven and then how many on top of that to achieve the required profit of 250k.

Yeh i seen that, but i cant help thinking there will be more to it, maybe a mix to get the highest cont/profit, or a limiting factor, or am i off the mark here

acurry89 · 07-01-2016 06:31PM

Has anyone any thoughts on report number 2?? I take it the theory will be on managing foreign exchange risk, but for the numbers side?

Lyra Fangs · 08-01-2016 08:58PM

acurry89 wrote: »

Has anyone any thoughts on report number 2?? I take it the theory will be on managing foreign exchange risk, but for the numbers side?

Its an NPV calculation.

AtticusFinch86 · 09-01-2016 01:49PM

Having read the case study a few times and done a few calculations, I'm fairly confident I'm on the right track bar a complete curveball being lashed at me.

I'm thinking the following will be asked...

WACC (relevant info given and we will need it for NPV anyway)
Project appraisal - do projects meet assessment criteria (for both projects - NPV for international project)
Risk Management (FX risk will almost certainly come up, and possibly general risk. We'll probably be asked to discuss risks and how to mitigate)
BreakEven Point and/or MoS
Lifecycle - what is the optimum lifecycle of the "international Production".

I'd say 3 of those are likely to come up.

Domestic Production
Fixed Costs €375,500.00
Variable Costs €222,720.00 or €4640 per show

Internation Production

Cast Member Costs Y1 €65,250.00
Producer Costs Y1 €180,000.00
Set Transport Y1 €800,000.00
Fixed Costs €400,000.00 *Set Production

I've attached some of my workings but the above is the jist of what I have done. The main calculations are in the last 3 tabs. Is anyone else getting these figures?

Anum24 · 09-01-2016 02:22PM

Cap22016 wrote: »

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 ?

Hi, how did you get the 14.17% for the WACC?

Cap22016 · 09-01-2016 03:19PM

Anum24 wrote: »

Hi, how did you get the 14.17% for the WACC?

Ordinary Shares : MV= 48mil / Weighted=66.67%(48/72) / Cost=19.17% / WACC =12.78% (66.67x19.17%)

Preference Shares : MV=24mill / Weighted=33.33%(24/72) / Cost=4.17% / WACC =1.39% (33.33x4.17%)

Irredeemable Bonds : MV=?? ?? ?? ??

Totals : MV = 72mil / Weighted= 100% / Total WACC = 14.17% (12.78+1.39)

This is just an estimate, The irredeemable bonds still need to be added in, we should be given the Market value of them on the day.

lightspeed · 09-01-2016 04:45PM

just looking through what you have for project appraisal tab.

I got notes from one of the revision days and some costs on it are different from what you have.

I think you have an error for cost of road crew at €96000 as I think it should be €32000.

its says in the case study "Each member of the road crew will be employed for the three months of the proposed tour at a contract rate of €8000 each for the duration of the tour"

Notice it is the duration of the tour and not for each month as you have calculated it at.

We are not paying out €8000 to each road crew member each month only €8000 for each tour. So if tour was 3, 6 12 months etc, we would still only be paying out €32000 in total (€8000 per tour * 4 road crew members).

Also I'm not sure where you got the figure for cast members at €208800.

Revision notes I have, have it as follows:

Rehearsal: 18*2000 = 36000
Performance: 18*200*48 = 1728000

Cast member Total cost: 290300

s15r330 · 09-01-2016 06:12PM

lightspeed wrote: »

just looking through what you have for project appraisal tab.

I got notes from one of the revision days and some costs on it are different from what you have.

I think you have an error for cost of road crew at €96000 as I think it should be €32000.

its says in the case study "Each member of the road crew will be employed for the three months of the proposed tour at a contract rate of €8000 each for the duration of the tour"

Notice it is the duration of the tour and not for each month as you have calculated it at.

We are not paying out €8000 to each road crew member each month only €8000 for each tour. So if tour was 3, 6 12 months etc, we would still only be paying out €32000 in total (€8000 per tour * 4 road crew members).

Also I'm not sure where you got the figure for cast members at €208800.

Revision notes I have, have it as follows:

Rehearsal: 18*2000 = 36000
Performance: 18*200*48 = 1728000

Cast member Total cost: 290300

I think your calculator is broken, 172,800 + 36000 = 208,800

lightspeed · 09-01-2016 11:55PM

Apologies, I was just getting that figure from revision notes I have but out some figures for that total. The total figure of 290300 comes from the following

Road crew cost: 4 *8000= 32000
Band: 6*2750*3 months= 49500

Cast members
Rehearsals: 18 * 2000 = 36000

Performance: 18*200*48 shows = 172800

Total: 32000+49500+36000+172800= 290300

s15r330 · 10-01-2016 09:28AM

lightspeed wrote: »

Apologies, I was just getting that figure from revision notes I have but out some figures for that total. The total figure of 290300 comes from the following

Road crew cost: 4 *8000= 32000
Band: 6*2750*3 months= 49500

Cast members
Rehearsals: 18 * 2000 = 36000

Performance: 18*200*48 shows = 172800

Total: 32000+49500+36000+172800= 290300

I wouldn't lump them in like that, cast members are a specific group with specific costs, as are road crew etc. Besides, some is fixed and some is variable so you definitely want them split for breakeven if it comes.

Cap22016 · 10-01-2016 10:02AM

AtticusFinch86 wrote: »

Having read the case study a few times and done a few calculations, I'm fairly confident I'm on the right track bar a complete curveball being lashed at me.

I'm thinking the following will be asked...

WACC (relevant info given and we will need it for NPV anyway)
Project appraisal - do projects meet assessment criteria (for both projects - NPV for international project)
Risk Management (FX risk will almost certainly come up, and possibly general risk. We'll probably be asked to discuss risks and how to mitigate)
BreakEven Point and/or MoS
Lifecycle - what is the optimum lifecycle of the "international Production".

I'd say 3 of those are likely to come up.

Domestic Production
Fixed Costs €375,500.00
Variable Costs €222,720.00 or €4640 per show

Internation Production

Cast Member Costs Y1 €65,250.00
Producer Costs Y1 €180,000.00
Set Transport Y1 €800,000.00
Fixed Costs €400,000.00 *Set Production

I've attached some of my workings but the above is the jist of what I have done. The main calculations are in the last 3 tabs. Is anyone else getting these figures?

Hey I have most of the same figures as you, the only difference is the road crew figure.. i have €32,000 ( €8,000 x 4crew).

AtticusFinch86 · 10-01-2016 11:34AM

lightspeed wrote: »

just looking through what you have for project appraisal tab.

I got notes from one of the revision days and some costs on it are different from what you have.

I think you have an error for cost of road crew at €96000 as I think it should be €32000.

its says in the case study "Each member of the road crew will be employed for the three months of the proposed tour at a contract rate of €8000 each for the duration of the tour"

Notice it is the duration of the tour and not for each month as you have calculated it at.

We are not paying out €8000 to each road crew member each month only €8000 for each tour. So if tour was 3, 6 12 months etc, we would still only be paying out €32000 in total (€8000 per tour * 4 road crew members).

Also I'm not sure where you got the figure for cast members at €208800.

Revision notes I have, have it as follows:

Rehearsal: 18*2000 = 36000
Performance: 18*200*48 = 1728000

Cast member Total cost: 290300

You're right, just read it again. Must have misread it the first time. I had assumed it was a monthly salary. THanks for that, you've saved me a mark or two. God knows I need them all!

Cap22016 · 10-01-2016 12:00PM

Whats everyone thinking on the ways to manage the foreign risk ? Transaction/Economic risk? Which Hedging Techniques do ye reckon would be best ?

Lyra Fangs · 10-01-2016 12:08PM

AtticusFinch86 wrote: »

You're right, just read it again. Must have misread it the first time. I had assumed it was a monthly salary. THanks for that, you've saved me a mark or two. God knows I need them all!

Hey, I have the same calculations as you once you correct the road crew salary.

However, just to point a few things for the long term project:
- We haven't been told if cast/producers get paid during the break months so be wary of that
- The producers salary rises by 10% in the 2nd year - it says nothing about it continuing to rise after that.

rcoffey · 10-01-2016 03:47PM

Cap22016 wrote: »

Whats everyone thinking on the ways to manage the foreign risk ? Transaction/Economic risk? Which Hedging Techniques do ye reckon would be best ?

there is alot of info in the notes about managing fx risk, but it seems very little can be related to the scenario we have here as we wont be able to guarantee how much we will be needing to change as it is not a fixed contract, currency options would seem to be the best option, although we may just be asked to come up with some general methods.

In relation to general risk should we be looking at the risk posed by putting all our eggs in the one basket in relation to taking the one show on for both our short term national show and also for our international show, also about the risk posed to running the show in certain countries such as South Africa

tagan10 · 12-01-2016 01:20PM

hi, by looking at the extract of the balance sheet, would you say that Strand is highly geared? also, fuel cost for the short term project-i get 8640eur as im assuming 48 trips in total i/o by vehicle

abyrne24 · 12-01-2016 03:50PM

If you look on home page of chartered grind school, it gives the workings they've done out. Its called workings file.

Paul C · 13-01-2016 10:33PM

When we have to calculate the NPV for the international option, should we put the €400,000 for the Set Production cost in as a year 0 outflow or should it be included in year 1?

CAP 2 SFMA Case Study 2016

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