Inflation impact analysis, Auditing

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Please present an analysis of the attached case. Your analysis should be in the form of a memo not to exceed four pages plus appropriate exhibits.

The memo should present your recommended course of action to take advantage of the opportunities or deal with the challenges presented in the case. It should be an action plan addressed to senior management. A suggested outline for the memo follows:

1. Description of proposed project and the decision situation

2. Key assumptions about volume, price, cost, discount rate, etc.

3. Base (most likely) case cash flow analysis, including determination of NPV. Use the format that converts a pro forma income statement into a cash flow projection.

4. Risk analysis. Case 1 has you do three types of risk analysis:

sensitivity analysis

scenario analysis

inflation impact analysis

In addition, think carefully about the major sources of risk. Discuss these clearly.

5. Non-cash considerations, if relevant (social, political, managerial)

6. Decision recommendation and justification, based on all the numbers you have generated


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