7-1 CVS PART ONE

Of the alternative methods to computing the variance-covariance matrix, which alternative is most appropriate for your model?

How can CVS benefit from variance-covariance matrix?

9-2 CVS FINAL PART TWO

Final Project Submission: Financial Model Report
In Module Nine, you will submit your financial model report. Your report should be 10–15 pages in length and should be a complete, polished artifact containing all of the critical elements of the final product. It should reflect the incorporation of feedback gained throughout the course. Your final submission will require you to complete Section V of the final project independently, using the knowledge and expertise that you have gained throughout the course. The final project will be graded using the Final Project Rubric.

Using the information provided, prepare a report that thoroughly describes the decision-making process and results you will arrive at. In addition to the required calculations, describe key assumptions, the method of analysis, key results, and your plans to utilize those results. To fully develop your skill set for future use in the real world, you will also discuss how you plan to present your findings to your supervisor, a group of colleagues, and a financial institution that is considering granting your company a line of credit. The rationale is that the method, tone, and slant differ depending on the audience and the ensuing objective.

Specifically, the following critical elements must be addressed:

• Analysis of Scenario
  • Analyze the financial structure of the firm you have chosen in order to determine the appropriate inputs that should go into the model, paying close attention to those that are used in the calculations of the weighted average cost of capital (WACC). Describe why each variable you select is an important driver in this scenario.
  • Present and analyze the current U.S. interest rate environment with a particular focus on the shape and levels of the treasury yield curve. Discuss what the current shape and levels can tell us about the current economic environment. Describe the connection between the interest rate environment and the risk-free rate.
  • Analyze the future outlook for the overall economy and future market conditions to determine possible changes that could impact the company’s cost of equity and cost of debt. Discuss how the outlook you have identified will impact future calculations of the WACC for your company.
  • Discuss the importance that variables such as future economic and market conditions play in utilizing financial models that effectively achieve strategic objectives.
• Appropriate Procedures

• Describe why the modeling framework is needed in the decision-making process, and define its purpose in terms of providing optimal results. Be sure to defend your rationale.

Based on the purpose you defined and the necessary variables you identified, describe the process for applying the framework to the decision- making process and translating the results into action.

Describe how and why the calculations will provide value and benefit to the company. Be sure to explain the concepts behind the output.

III. Modeling Techniques

• Define the essential inputs or assumptions you would need to execute your model, breaking each component down into its elementary parts.
• Determine the operational performance metrics that you would want your model to achieve.
• Analyze the financial processes needed to engage in building the model. In other words, describe the financial artifacts you used to gather the needed information, such as information on equity, debt, interest rates, and others.

IV. Interpretation of Results

• Calculate the operational performance metrics you selected, and analyze the results of your calculations in terms of the company’s needs and the intended purpose of the financial model.
• Discuss how you would most appropriately convey this analysis to the following decision makers, being sure to articulate the distinctions necessary to effectively present to the specific audience:
  • Your supervisor (Ensure that you defend your rationale.)
  • Your horizontal managers and/or colleagues (Ensure that you defend your rationale.)
  • The financial institution considering granting you a line of credit (Ensure that you defend your rationale.)

V. Implementation Strategies

• Based on the anticipated results of the model you would construct from this framework, recommend an implementation strategy that balances risk with return. Be sure to justify your recommendation.
• Identify key organizational stakeholders who will need to be involved in the implementation, and discuss their roles in ensuring a successful implementation. Be sure to defend your reasoning.
• Discuss how the strategy you are recommending would effectively balance risk with return. Be sure to substantiate your claims with examples and evidence.