USA: +1(669)289-8683 
Sign in
Assignment 3 – Foreign Direct Investment Written Assignment Portion
NAME: ______________________________________________________________________________
Instructions:
After you have completed your analyses and have your results and work book completed please write a report answering the questions asked below. The document will be turned in at the end of the assignment and scored as part of this assignment.
Report and Questions:
1. Write a ONE to TWO PAGE business analysis assessment report using your EU and SA findings.
Use the following
expected value (profit) rule for your report recommendations
: a project must have an
expected value of $20 million or more to be recommended. If both projects meet the requirement only
recommend the one with the highest expected value. If neither meets the required expected value minimum
recommend that neither project be undertaken.
In your report answer these questions:
a) What project (s) were you asked to assess? Describe each project.
b) What project(s) do you recommend any why?
c) What information were you given to do your analyses?
d) How did you calculate your results? Compare the key calculations for the two projects using a table with notes.
e) What additional calculations would you recommend to improve this analysis?
**********************************************************************************************************************************
Your report is to be written for an executive who must make the decision to begin or not begin these projects. Write the report as the Lead Analyst knowing that others may read the report and view the calculations and results work
book.
(Start report on the next page and use the front and back as two pages.)
Results
FDI
| RETURN ON INVESTMENT FOR FOREIGN DIRECT INVESTMENT FINANCED BY IN REGION | SA | ||||||||||||||||||||||||||||||
| RETURNS = SALES – COSTS | |||||||||||||||||||||||||||||||
| VIEW 1 | 2019 | 2020 | 2021 | 2022 | |||||||||||||||||||||||||||
| RETURN | EU | ||||||||||||||||||||||||||||||
| RETURN SA | |||||||||||||||||||||||||||||||
| View 2 | |||||||||||||||||||||||||||||||
| View 3 | |||||||||||||||||||||||||||||||
| Present Value of Returns in 2016 Dollars | |||||||||||||||||||||||||||||||
| View 1 | |||||||||||||||||||||||||||||||
| Constant | |||||||||||||||||||||||||||||||
| EXPECTED VALUE | |||||||||||||||||||||||||||||||
| COMPLETE EACH OF THE FOLLOWING TASKS AFTER YOU HAVE CALCULATED AND RECORDED YOUR RESULTS. | |||||||||||||||||||||||||||||||
| 1. Be sure to show all your calculations in a second work sheet and link the needed information into the results summary. | |||||||||||||||||||||||||||||||
| 2. Explain what you have done to distinguish your analysis work from other teams. | |||||||||||||||||||||||||||||||
| 3. Complete the Report as instructed in the 2018 Assignment 3 Report document (attached in the Sakai Assignment). |
RETURNS ANALYSIS FOR FOREIGN DIRECT INVESTMENT
WITH VARYING EXPORTS (EU AND SA PROJECTS)
Sales Financing Function (Bamboo Foresting Company)
EU SFEU = 11.0 + 124 (ExpEU – 1.55%)
where SFEU is sales revenue (in millions) for the Bamboo Foresting Company EU Division and ExpEU is the growth in U.S. exports to EU countries.
SA SFSA = 12.0 + 102 (ExpSA – 0.50%)
where SFSA is sales revenue (in millions) for the Bamboo Foresting Company South America (SA) Division and ExpSA is the growth in U.S. exports to South American countries
Time Value of Money EU 6.2% SA 4.5%
US Export Growth for EU (ExpEU) by Year:
2019 2020 2021 2022
View 1 3.65% 1.50% 2.00% 3.50%
View 2 -3.50% 2.00% 3.00% 1.30%
View 3 1.50% 1.50% 1.50% 1.50%
US Export Growth (ExpSA) for SA:
2019 2020 2021 2022
View 1 9.35% -2.40% -1.56% 3.67%
View 2 -7.67% 3.30% 4.50% 2.36%
View 3 2.50% 2.50% 2.50% 2.50%
Building and Maintenance Costs (in millions)
2019 2020 2021 2022
EU $15.00 $3.00 $1.75 $1.75
SA $12.00 $2.50 $3.00 $4.00
Uncertainty: Likelihood of Views
View 1 View 2 View 3
EU 30% 50% 20%
SA 45% 35% 20%
The Returns on Foreign Direct Investments when Exports are uncertain
1. The Bombay Bamboo Company is considering an expansion into 1-2 additional geographic regions. It grows bamboo forests in countries around the world to use for its bamboo furniture manufacturing business.
2. The Bombay Bamboo Company finances its investments in foreign countries using sales from the countries in the region. It has found that international sales are closely tied to U.S. export growth in the regions.
3. Formulas for sales revenue for the European Union (EU) and South America (SA) regions have been estimated and are provided to you for use in your analysis. Sales formulas are expressed in millions of dollars of sales revenue based on given U.S. export growth rates.
4. You are being asked to determine the returns (sales minus costs) for foreign direct investments in the EU and SA. Based on your results you will recommend which country (if any) to invest in.
5.
All returns are expected to be provided in 2018 dollars. The time value of money is provided on the information sheet.
6. Three alternative views of the each region are being tracked. The views are labeled View 1, View 2 and View 3. Four years of export growth data for the U.S. in SA and in the EU have been estimated and provided to you for your analysis.
7. The cost of building the bamboo forests and maintaining them over a four year period are also provided.
8. Finally the likelihoods that each of the views will occur in each region are provided so you can account for uncertainty and estimate expected returns.
9. Follow the instructions for the assignment as posted in Sakai and prepare the required analysis and report. Be sure to identify what distinguishing features your team has put into the project.
