Assignment Directions
Prepare a financial plan for CVS Health
Describe the business, including the type of business.
Create the business case:
• Determine why funding is needed for the company.
• Determine the sources of funding. Consider self-funding, borrowing, equity, venture capital, and so on.
o Evaluate the requirements of each funding source you determined appropriate.
o Analyze the associated risks of each funding source.
o Decide which sources are the best fit for your company based on the requirements of each. Justify your decision.
• Estimate the cost of capital for both short-term and long-term funding sources. Research current estimated APRs for your selected sources of funding. Consider creating a table or chart to display this information.
Create a profit-and-loss statement for a 3-year period. Project revenue. State any realistic assumptions, such as growth per year, in your projections.
Estimate direct costs, including capital, marketing, labor, and supply costs. Cite references to support your assignment.
Comp 3 is the most difficult assignment in this course.
Follow my outline below. Logic and consistency are key to this assignment so that you do not omit any requirements.
1) Consider yourself the CEO. You need to choose a specific project or financial goal. In other words, you need to figure out a way to add value to your firm. So, choose a project such as an expansion, specific R&D, computer upgrades, etc. Describe the project. You need to be specific as to how you plan on adding value to your firm.
2) Once you choose a project, you need to state how much funding you will need. This is your total amount of funding required. This must be stated clearly as the remaining sections depend on this figure.
3) Next, you need to tell me how you will spend this funding. Break this figure down into categories and figures. These are your direct costs. Direct costs should total the amount of funding required in #2.
4) Next, you need to explain your options as to sources of funding along with the risks. State the requirements and risks of each. Most students stick with debt, equity and self-funding.
5) Next, you need to make a choice as to which option or options you are choosing for your project. Are you going with 100% debt or 100% equity or some combination? If you choose a combination, then you need to tell me the amount of debt and amount of equity. This will be important for the next step. Debt is anything that needs to be paid back. Equity is anything that involves ownership (ie issuing new shares). If and only if, your firm has the funds available (cash or assets that can be converted into cash easily), then self-funding is also an option. Self-funding is a form of equity, however it is not considered NEW capital as you do not need to source new funds.
6) Your next section is WACC or Weighted Average Cost of Capital. You need to calculate WACC based upon your previous choices. Use an online calculate such as https://www.calkoo.com/en/wacc-calculator. The variables will depend on your previous choices. Source the variables on Yahoo Finance or online. If you are not dealing with a public firm, then source the data for a comparable firm. Don’t forget to cite this data. Also, don’t forget to include a discussion as to your variables and what the overall calculation means for your firm. If you are 100% self-funding, then you may simply source and cite a current WACC figure on the internet for your firm and use that figure with no further calculation required. However, you must qualify that you are able to 100% self-fund within your discussion and that these funds are already included in your WACC figure within the total equity variable. If you are raising new capital via debt and/or equity, then you will need to go through the calculation and revise your total debt and total equity variables accordingly.
7) Lastly, you need to give me 3 years worth of PROJECTED income statements. This means 2022-2024 as the figures are dependent on the success of your project. These are estimated figures. Also, you need to provide a discussion as you did for WACC as to growth, assumptions, etc. In other words, you need to discuss how you arrived at your estimates and what your reasoning is based upon.
Follow the steps above so that you do not omit a requirement. Logic and consistency are key to this assignment.
Again, the outline should be as follows:
1-What is your project?
2-How much funding do you need?
3-How will you spend this funding?
4-What are your options as to funding sources?
5-What is your overall choice as to funding options?
6-What is your WACC or cost of capital?
7-What is your projected net income for the next 3 years?
Finally, please make sure to include a references slide so we avoluvid any potential plagiarism issues.