Milestone Three: Risk Assessment

Overview:Inthisthirdmilestoneassignment forthefinalproject,youwill continueyouranalysis oftheNewHeritageDoll Company.Assuming theroleof EmilyHarris, the firm’sfinancial analyst,yournext stepin theprocess istoperforma riskassessmentofthe twocapital budgeting projectsbeing considered. Aswe arelearning, risk canbeidentified andquantified, andthisis a crucialstepin theevaluationof anycapital investmentproject.Forthis projectinvolvingthe NewHeritageDollCompany,wewillfocuson therelevantinternal(business)risksthatmaybepresent.Theserisksincludemarketing, distribution,ortechnical issuesthatmaycompromisethetwoprojects’success. Forthepurposeofweighing each project’smerit,howmight theserisksbemeasuredand mitigated?

 

Prompt:Tocompletethisthirdpart ofthe finalproject,you willcontinueyouranalysisbyconductinga riskassessment. Specifically,you will:

 

  • Identifythepotentialbusinessrisksthatapplyto the projectsbeing considered bytheNewHeritageDollCompany,
  • Quantifythefinancial impactsof therisk(i.e.,pricetherisk),and
  • Selectappropriatemethods formitigating those

 

Todothis,locatetherelevantnumbersfrom the casestudy and performprofitabilityindexcalculations. Aprofitabilityindexcan beused as an arbiterwhencapital constrainteffectivelymakestwoprojectsmutuallyexclusive.In thisinstance,theNPVsofthetwoprojectsarenearlythesame,but oneproject createsmoreNPVperdollarof the capital budgetexpended. Itisalsoan index maximizing choice.

 

Documentyourresults inthe“MilestoneThree”section ofeachspecificproject tabonthespreadsheettemplateyou usedforthe previoustwomilestones.Themoduleresourcesmay also beuseful.Providea written analysisofthe risksassociated with each project.Forexample,whatifthecomputersystemmalfunctions? Whatwouldbe thecosttofixit?Whatwould bethecostof an upgrade?Eachidentifiedpotential risk should bediscussed in youranalysisandpriced andreferenced,byitem,on yourspreadsheet.Citespecificevidence from the casestudy and employ atleasttwoscholarlyarticles tosupportyourclaims.

 

Notethatthecoursetextbook willalso beuseful asyou progressthrough thisproject. As financestudentsand professionals,youare alsoencouragedto useyourownexperience,understanding, andknowledgeof businessandindustrystructuretodrive youranalysis.

 

Specifically,the followingcriticalelementsmustbeaddressed:

 

  1. RiskAssessment
    1. Identify the risksto yourfirmforeachof Forexample,you should considerpossibilitiessuch as cannibalization ofcurrentproducts,newsoftware,issues withdevelopment,customerimpact,and so on.
    2. Next,quantifytheidentified risks in termsof theirpotential financial impacts(i.e.,price the risks).Justifyyourestimations andvalueswith
    3. Foreach oftheidentifiedrisks,selectappropriatemethods formitigatingIllustrateyourrecommendedstrategieswith specificexamples.

 

 

 

Thisriskassessment assignmentwillbeincorporatedintothefinalcapitalbudgeting case report.Thismilestoneis due in Module Seven.

 

Rubric

GuidelinesforSubmission:Thismilestoneassignmentshould bea2-to 3-pageMicrosoftWorddocument(notincluding thetitlepage,referenceslist,andExcelspreadsheet addendum),doublespaced,with12-pt.TimesNewRoman font, one-inchmargins,and APAformattingforyourtitlepage,citations, andreferencelist.At leasttwooutside sources arerequiredoverall forthisproject,although you may find thatmorearenecessaryto satisfytherequirementsof thefinalpresentation.

 

As necessary,copy andpaste anydataanalysisand/orgraphics fromyourExcelspreadsheet into yourWorddocument forsubmission.YoumayincludeyouroriginalExceldocumentsassupplementarymaterial ifyoubelievethiswillstrengthenyourcontribution.

 

InstructorFeedback:Thisactivityuses an integrated rubric in Blackboard.Studentscanviewinstructorfeedback in theGradeCenter.Formoreinformation,reviewtheseinstructions.

 

Notethatthe grading rubricforthemilestonesubmissions is notidenticalto thatof thefinalproject.TheFinalProjectRubricwill include an additional“Exemplary” categorythatprovidesguidanceasto howyou cangoaboveand beyond“Proficient” in yourfinalsubmission.

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