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As a business manager for your firm, Global Biotec...

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As a business manager for your firm, Global Biotechnology, has a new process for Biosynthetic Human Insulin (BHI) is being developed. Since you are in the position of business evaluation for Global, you will be assigned to "take a look" at this job and see if it's a good project. To evaluate the BHI Project, a spreadsheet analysis will be required. Since this project is just now coming to a point of evaluation in R&D, there is not much to go on. Note that you must distinguish between assumptions that you, the business evaluator, must make from those items of information that you would be required to obtain from others to create a defensible recommendation. Since time is of the essence, you will need to decide which items of information are more important than others. R & D has just issued their report on the new Biosynthetic Human Insulin process and plant. They have recommended that Global Biotechnology pursue this project immediately as it appears to have a ?high return?. The preliminary flowsheet has been developed and a first pass capital cost estimate has been issued with the recommendation that Global spend $122 million on the new facility. As business manager you have been asked to evaluate this project and make a recommendation to senior management. Here is the key data (and the only data) in the research division report: Estimated Direct Fixed Capital-$122 million Estimated Initial working capital-$8 million Required Plant capacity at 100%-1500Kg/yr Estimated BHI unit production cost-$41/gram Estimated BHI selling price-$110/gram BHI project return -greater than 35% There is not much to go on here. You will have to start by making appropriate evaluation assumptions. Some important areas that drive evaluations are: 1) Project life 2) Tax life of the assets 3) Corporate tax rate 4) Inflation rate for costs/prices 5) Proportion of fixed cost/variable cost in $41/gram 6) Length of time to build the plant and spending curve (expenditures per year) Although there are many possible evaluation assumptions you can select. For your work to proceed, and to create a common base case, you will use these base case assumptions: 1) Project life-3 years for capital construction, and 15 years of operations for a total scenario of 18 years. 2) Tax life of the assets-composite average 10 years MACRS class. 3) Corporate tax rate-35%. 4) Inflation for all costs/prices-3%. 5) Proportion of fixed to variable cost-75% fixed, 25% variable. 6) Length of time to build-3 years, capex - 30%, 40%, 30%. 7) The sales rate, which is the plant capacity utilization in the initial operating years. You will use 50% of capacity year 1, 75% of capacity year 2 and 100% of capacity in year 3. The initial working capital is the cost of the initial charge of raw materials and work in process supplies, plus the funding of accounts receivable until cash receipts from sales are received. The $8 million is deducted from the first operating year after tax cashflow and is recovered at the end of the project life. Remember to build your spreadsheet with formulas for relevant variables so that if you change assumptions you can let the spreadsheet do the computational work. One last comment about these assumptions: In business, important decisions are made everyday with incorrect and incomplete information. The issue we face is how accurate does our information and resulting assumptions have to be to make correct decisions. Decisions MUST be made on a timely basis. If we wait for all the information to be known, then the decision is history before it is made. Also, we should always be evaluating our assumptions and be prepared to make appropriate corrections as they become necessary.,I need an excel spreadsheet analysis of the following case study. The formulas need to be embedded so I can modify input and get calculated output. Need it by 3pm 6/3 As a business manager for your firm, Global Biotechnology, has a new process for Biosynthetic Human Insulin (BHI) is being developed. Since you are in the position of business evaluation for Global, you will be assigned to "take a look" at this job and see if it's a good project. To evaluate the BHI Project, a spreadsheet analysis will be required. Since this project is just now coming to a point of evaluation in R&D, there is not much to go on. Note that you must distinguish between assumptions that you, the business evaluator, must make from those items of information that you would be required to obtain from others to create a defensible recommendation. Since time is of the essence, you will need to decide which items of information are more important than others. R & D has just issued their report on the new Biosynthetic Human Insulin process and plant. They have recommended that Global Biotechnology pursue this project immediately as it appears to have a ?high return?. The preliminary flowsheet has been developed and a first pass capital cost estimate has been issued with the recommendation that Global spend $122 million on the new facility. As business manager you have been asked to evaluate this project and make a recommendation to senior management. Here is the key data (and the only data) in the research division report: Estimated Direct Fixed Capital-$122 million Estimated Initial working capital-$8 million Required Plant capacity at 100%-1500Kg/yr Estimated BHI unit production cost-$41/gram Estimated BHI selling price-$110/gram BHI project return -greater than 35% There is not much to go on here. You will have to start by making appropriate evaluation assumptions. Some important areas that drive evaluations are: 1) Project life 2) Tax life of the assets 3) Corporate tax rate 4) Inflation rate for costs/prices 5) Proportion of fixed cost/variable cost in $41/gram 6) Length of time to build the plant and spending curve (expenditures per year) Although there are many possible evaluation assumptions you can select. For your work to proceed, and to create a common base case, you will use these base case assumptions: 1) Project life-3 years for capital construction, and 15 years of operations for a total scenario of 18 years. 2) Tax life of the assets-composite average 10 years MACRS class. 3) Corporate tax rate-35%. 4) Inflation for all costs/prices-3%. 5) Proportion of fixed to variable cost-75% fixed, 25% variable. 6) Length of time to build-3 years, capex - 30%, 40%, 30%. 7) The sales rate, which is the plant capacity utilization in the initial operating years. You will use 50% of capacity year 1, 75% of capacity year 2 and 100% of capacity in year 3. The initial working capital is the cost of the initial charge of raw materials and work in process supplies, plus the funding of accounts receivable until cash receipts from sales are received. The $8 million is deducted from the first operating year after tax cashflow and is recovered at the end of the project life. Remember to build your spreadsheet with formulas for relevant variables so that if you change assumptions you can let the spreadsheet do the computational work. One last comment about these assumptions: In business, important decisions are made everyday with incorrect and incomplete information. The issue we face is how accurate does our information and resulting assumptions have to be to make correct decisions. Decisions MUST be made on a timely basis. If we wait for all the information to be known, then the decision is history before it is made. Also, we should always be evaluating our assumptions and be prepared to make appropriate corrections as they become necessary.,When will you have something I can review?,When can i expect to see something for review?,I requested to have an answer by 3pm, it is now past that time and I have nothing. Please advise,If possible, can you have it to me by 10PM eastern?,maybe I am missing something. Is this attached document not just the question information?,i expected a spreadsheet

 

Paper#6494 | Written in 18-Jul-2015

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