Case studies are an opportunity for you to apply a methodology from this course
ID: 2747338 • Letter: C
Question
Case studies are an opportunity for you to apply a methodology from this course to a real world situation. Or it could be a chance to integrate topics from another course with our quantitative methodologies. Each student/team will apply a topic from this course to a local business situation of their own choosing. They will present their analysis formally to the class for review and discussion (3-5 minutes What are the methods examined in this course: Break even analysis Depreciation scheduling (straight-line model) Forecasting using Regression, trend analysis Regression- correlation Cash flow analysis applying time value of money, NPV or IRR Lease vs purchase A successful project should contain the following at a minimum: Problem statement and goal The business or organization studied A conceptualization of the problem A Graph of the analysis (scatterplot, trend line, equilibrium, break even) Data from the observations (if appropriate) Analysis using the mathematics/Excel (regression, FV, PV, etc) Summary and recommendationExplanation / Answer
1.Break-even analysis is an analysis is the point at which revenue received equals the cost associated with receiving the revenue.
In case of Leasing a car Vs buying a new car, if the cost received by leasing the card equals the cost for buying new car break even will be achieved.
2. Depreciation schedule straight line method:
Straight line depreciation is the default method used to gradually reduce the carrying amount of a fixed asset over its useful life.
For eg: a person buys a car for $X amount. It has estimated salvage value of $Y for a useful life of 5 years. Depreciation for the car is:
Purchase cost $X - Estimated salvage value $Y= Depreciation asset cost
1/5 years useful life= 20% depreciation rate per year
20% of depreciation asset cost= annual depreciation.
3. Forecasting using regression trend analysis:
Linear trend modal Y= intercept+Slope*t were t is the time for each time period.
Slope= Change iny/Change in x
4. From correlation we can only get an index describing the linear relationship between two variables;
In regression we can predict the relationship between more than two variables and can use it to identify which variables x can predict the outcome variable y.
variables can be defined bybthe faactors influncing buying or leasing car.
5.
Time value of money: sum of money is more valuable the sooner it is received, due to its capacity to earn interest
NPV is the present value of cash inflows minus the present value of cash outflows, which arrives at a dollar amount that is the net benefit to the organization.
The IRR, or internal rate of return, is defined as the discount rate that makes NPV = 0
6. By buying a car is that you may actually own it one day.
By leasing you are renting the car for a fixed number of months