Overview: The Final Project For This Course Is The Creation

Overview: the Final Project For This Course Is The Creation Of An Exter

The final project for this course is the creation of an external capital funding proposal. Most businesses face a landscape of uncertainty and a never-ending stream of risks and opportunities. Managers must continually project the likely financial impact of decisions, make recommendations, act on those decisions, determine how to pay for them, and evaluate the costs and effectiveness of what has been done. Many decisions are short-term, routine, and operational. Others are longer-term investment decisions that require substantial new resources, such as developing new services, expanding into new geographic markets, or undertaking business combinations or spin-offs.

Each requires managers to forecast, plan, and make decisions based on a thorough understanding of both internal and external factors that can affect a company’s financial success. For the summative assessment in this course, you will bring your finance and economics knowledge to bear by preparing an external capital funding proposal for a major international investment at a publicly traded corporation. In order to secure the support of potential financial backers, your proposal will need to lay out what the proposed investment opportunity is, how it fits within the company’s broader mission and goals, its financial impact, and the amount being requested and why (including alternative funding mechanisms considered).

In addition, it will also need to include information on the organization’s context, risk factors, and microeconomic assumptions that could affect the success of the investment.

Prompt

Submit a paper that addresses critical element IV, Risks, of the final project. Discuss any risks that might affect the success of the project and how you have planned for those contingencies. Note: The risks (and opportunities) you identify should demonstrate your understanding of the company you selected, the industry, the investment project you are proposing, and your project’s country and timing. Your estimates of financial impacts will be only preliminary; you will most likely revise them in your final submission at the end of Module Nine.

Specifically, the following critical elements must be addressed:

Section IV Risks

  1. Internal. What are the company’s most significant internal risks and opportunities related to the project? How might they affect your financial estimates and how will you address them? Support your response with specific examples.
  2. External. How will you address significant qualitative risks outside the company that might affect project success? Give specific examples. For example, how might culture or politics in the target country affect the proposed investment’s financial success? Natural disasters? How have you planned for these risks?
  3. Microeconomic. Assess the microeconomic factors that might affect decisions about the proposed investment. Support your response with specific examples. For example, how competitive is the market you will be entering? How elastic is the price for your product or service?
  4. Alternate financial scenarios. Use this section to discuss the sensitivity of your financial projections to different scenarios. Be sure to address:
    • a. How would your projected financial performance change if sales fall 20% short of or are 20% higher than your base assumption? What does your analysis of these two scenarios imply for the proposed investment? Justify your response.
    • b. What do the net present value, internal rate of return, and payback values from your base scenario and the sales variation scenarios above imply for the proposed investment? Be sure to explain how the time value of money affects your calculations and analysis.

Guidelines for Submission

Your risk assessment paper should be approximately 8-10 pages in length (excluding any tables, other exhibits, and list of references as necessary). It should be double-spaced with 12-point Times New Roman font and one-inch margins, and should use APA format for references and citations.

Paper For Above instruction

The successful execution of international investment projects hinges upon thorough risk assessment and strategic contingency planning. As organizations venture into new markets and undertake large-scale investments, understanding internal, external, and microeconomic risks becomes essential for safeguarding investments and maximizing returns. This paper aims to explore these dimensions comprehensively by analyzing a hypothetical investment proposal for a multinational corporation entering the renewable energy sector in Southeast Asia, specifically focusing on solar farm development in Vietnam.

Internal Risks and Opportunities

Internal risks within the organization primarily include operational risks, resource allocation, and management capabilities. For example, delays in procurement of equipment or construction could escalate costs and push back the project timeline. Additionally, internal capacity limitations, such as insufficient technical expertise or workforce shortages, could compromise quality and efficiency.

Opportunities include leveraging existing technological expertise, strong brand reputation, and in-house project management teams. To mitigate internal risks, the company plans to establish dedicated project management units, invest in staff training, and develop contingency budgets for unforeseen internal challenges. Such proactive measures are essential to keep the project aligned with its financial and operational goals.

External Risks and Qualitative Factors

External risks encompass political instability, regulatory changes, cultural differences, and natural disasters. Vietnam's political environment has historically been stable, yet recent changes in government policies toward foreign investment could introduce legislative risks. This could include changes in tax incentives or environmental regulations that affect project profitability.

Natural disasters like typhoons and flooding are significant concerns in Southeast Asia, particularly in coastal regions. To address these risks, the project incorporates resilient infrastructure designs, comprehensive insurance policies, and a detailed disaster response plan. Furthermore, understanding local cultural dynamics is crucial, as community opposition can delay project execution. Engagement with local stakeholders, including community leaders and regulators, forms an integral part of risk mitigation.

Microeconomic Factors

Market competition in the renewable energy sector is intense, with numerous local and international players vying for market share. The elasticity of electricity prices in Vietnam is relatively high, meaning demand fluctuations significantly impact revenue projections. This market characteristic necessitates conservative sales forecasts and flexible operational strategies.

Microeconomic analysis reveals that local economic growth, energy demand trends, and governmental policies directly influence investment viability. For instance, Vietnam’s commitment to increasing renewable energy capacity supports favorable microeconomic conditions, yet the existing competitive landscape requires strategic differentiation and cost management strategies.

Scenario Analysis: Sensitivity of Financial Projections

Analyzing scenarios where sales fall 20% short or exceed the base case provides insights into project robustness. A 20% decrease in sales markedly reduces net present value (NPV), internal rate of return (IRR), and extends the payback period, highlighting the project’s sensitivity to demand fluctuations. Similarly, a 20% increase in sales enhances profitability metrics but introduces additional operational challenges to scale efficiently.

For example, if sales decline by 20%, NPV could fall below acceptable thresholds, indicating potential investments retrenchment or reevaluation. Conversely, a 20% increase in sales could improve IRR and shorten the payback period, strengthening the case for investment. These variations underscore the importance of conservative forecasting and strategic flexibility in project planning.

The concept of the time value of money is central to these calculations, as future cash flows are discounted to their present value, reflecting the opportunity cost of capital. Understanding how these financial metrics respond to sales variability provides valuable insights into investment resilience under different economic conditions.

Conclusion

In conclusion, comprehensive risk assessment encompassing internal, external, and microeconomic factors is vital for the success of large international investments. Strategic mitigation plans, scenario analysis, and understanding of local market nuances foster more resilient and profitable projects. By thoroughly evaluating these risks and planning contingencies, firms can optimize their investment decisions, manage uncertainties effectively, and enhance their long-term financial performance in an increasingly competitive global market.

References

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  • McKinsey & Company. (2020). Unlocking the potential of renewable energy in Southeast Asia. Retrieved from https://www.mckinsey.com/industries/electric-power-and-natural-gas/our-insights/unlocking-the-potential-of-renewable-energy-in-southeast-asia
  • OECD. (2021). Political risk and investment in emerging markets. OECD Publishing.
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  • World Bank. (2022). Vietnam’s renewable energy sector: Opportunities and challenges. World Bank Report.
  • Zook, C., & Allen, D. (2021). Market competition and strategic differentiation in renewable energy investments. Harvard Business Review, 99(2), 78-85.

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