You're staring at the FIN 320 Module Four case study. Again. Maybe it's 11 p.m., maybe you've got three other assignments due, and the instructions feel like they were written in a language you only sort of speak.
Been there Most people skip this — try not to..
The thing about this module — and honestly, about most corporate finance case work — is that the numbers aren't the hard part. The hard part is figuring out what the numbers are actually telling you, and then explaining it like you're talking to a decision-maker, not a professor.
Let's walk through what this case usually asks for, where students get stuck, and how to turn in something that doesn't just check boxes.
What Is FIN 320 Module Four Case Study
FIN 320 is typically a corporate finance course. Module Four usually lands right after capital budgeting basics and right before cost of capital or risk analysis — which means this case study is almost always about evaluating an investment decision under uncertainty.
You're given a scenario. That's why a company wants to buy a machine, launch a product, expand a facility, acquire a competitor. You get cash flow projections, maybe a WACC, maybe a tax rate, maybe some qualitative details about market conditions or strategic fit Took long enough..
Your job: run the numbers (NPV, IRR, payback, maybe MIRR or PI), then write a recommendation memo.
Sounds straightforward. Think about it: it isn't — because the case is designed to have tension. The NPV might be positive but barely. Consider this: the IRR might conflict with NPV. The payback might exceed the company's hurdle. There's usually a qualitative factor that doesn't show up in the spreadsheet but changes the answer.
That's the assignment. Not the math. The judgment.
Typical Case Variants You Might See
- Replacement decision: Keep the old asset or buy the new one? Incremental cash flows only.
- Expansion project: New product line, new market. Revenue projections are guesses.
- Mutually exclusive projects: Pick Project A or Project B. Different lives, different scales.
- Capital rationing: Budget constraint. You can't fund everything with positive NPV.
If your case doesn't match these exactly, the framework still holds No workaround needed..
Why This Case Study Matters
This isn't busywork. It's the first time in the course where you have to integrate everything: time value of money, incremental cash flow estimation, risk adjustment, and communication.
Employers care about this skill more than your ability to calculate NPV on a calculator. Anyone can punch numbers. Not everyone can look at a messy projection, spot the aggressive assumptions, and say "here's why we should walk away" — or "here's why the risk is worth it.
The memo format matters too. Finance professionals write memos. Not essays. Practically speaking, not slide decks. Practically speaking, memos. Here's the thing — one page, maybe two. And bottom line up front. Evidence follows.
If you treat this like a math problem with a paragraph at the end, you'll get a B. If you treat it like a business recommendation, you'll get an A — and you'll actually learn something It's one of those things that adds up..
How to Approach the Case (Step by Step)
1. Read the Case Twice — Once for Story, Once for Numbers
First pass: what's the business situation? But who's the decision-maker? In real terms, what's at stake? What are the strategic implications?
Second pass: highlight every number. Initial outlay. Operating cash flows. Terminal value. Tax rate. Discount rate. On top of that, working capital changes. Because of that, salvage value. Day to day, depreciation method. Hurdle rates. Required payback period.
Don't start calculating yet. Just map the inputs Most people skip this — try not to..
2. Build Your Spreadsheet Before You Write a Word
Open Excel. Not Google Sheets — Excel. You need proper formatting, named ranges, and the ability to audit formulas.
Structure it clean:
- Assumptions tab: every input variable in one place, labeled clearly, sourced from the case
- Cash flow tab: year-by-year incremental after-tax cash flows
- Analysis tab: NPV, IRR, MIRR, payback, discounted payback, PI
- Sensitivity tab: data tables for key variables (discount rate, units sold, variable cost, salvage value)
Name your cells. WACC, TaxRate, InitialOutlay. Future you will thank you.
3. Calculate Incremental Cash Flows — This Is Where Points Die
Sunk costs? Practically speaking, ignore them. Allocated overhead? Think about it: ignore unless it changes. Interest expense? Never in project cash flows — it's in the discount rate.
What does count:
- Initial investment (equipment + installation + shipping + working capital increase)
- Annual after-tax operating cash flow:
(Revenue - Cash Expenses - Depreciation) × (1 - Tax Rate) + Depreciation - Terminal year: final operating cash flow + recovery of working capital + after-tax salvage value
Depreciation tax shield matters. MACRS vs straight-line changes the timing. The case will tell you which to use. If it doesn't, state your assumption and move on.
4. Run the Metrics — All of Them
NPV at the given WACC. That's your primary decision rule It's one of those things that adds up..
IRR — but watch for multiple IRRs or non-normal cash flows. On the flip side, if the project has more than one sign change, IRR is unreliable. Note it.
MIRR — use the finance rate (WACC) and reinvestment rate (WACC or a stated rate). It fixes the IRR reinvestment assumption.
Payback and discounted payback — if the case gives a hurdle, calculate both. Discounted payback is more honest.
Profitability Index — useful if capital rationing is in play.
Put them in a clean summary table. Even so, label units ($ thousands? millions?Round to two decimals. ).
5. Sensitivity Analysis — Don't Skip This
Pick the three most uncertain inputs. In practice, usually: unit sales, variable cost per unit, discount rate. Maybe salvage value.
Build a data table showing NPV across a range for each. Tornado chart if you're fancy.
What you're looking for: which variable swings NPV negative first? That's your key risk. Mention it in the memo.
6. Scenario Analysis (If the Case Supports It)
Best case / base case / worst case. Assign probabilities if you can. Expected NPV = Σ(probability × NPV).
This takes 15 minutes in Excel. It shows you thought about uncertainty, not just the point estimate.
7. Write the Memo — Bottom Line Up Front
To: [Decision Maker from Case] From: [Your Name], Financial Analyst Date: [Current Date] Re: Recommendation — [Project Name]
Recommendation: Accept / Reject the [project]. Expected NPV of $X million at the corporate WACC of Y%. Key drivers: [2-3 bullet points]. Primary risk: [one sentence].
Analysis Summary: (one short paragraph — NPV, IRR, payback vs hurdle, sensitivity highlight)
Key Assumptions & Risks: (bullet list — aggressive revenue growth? single supplier? regulatory risk? technology obsolescence?)
Appendices: Reference your spreadsheet tabs.
8. Stress-Test the Obvious (And the Not-So-Obvious)
Before you hit send, pressure-test the model against the case narrative. ” Tax that gain. Day to day, the case probably says “salvage value is 10% of original cost. Now, only if the project truly ends — if it’s a replacement project, the new project absorbs the old working capital. Does the terminal year assume the machine gets sold for book value? Practically speaking, does working capital get fully recovered? Don’t double-count recovery.
Check for cannibalization. Same for overhead: if the new project uses existing factory space, the opportunity cost is the rental income you could have earned leasing it out. If the new product steals 15% of sales from an existing line, the incremental revenue isn’t the new product’s full revenue — it’s the new revenue minus the lost contribution margin on the cannibalized sales. That’s a real cash outflow Practical, not theoretical..
Watch for sunk costs dressed up as “allocated corporate overhead.Think about it: strip it out. Still, ” If the $200k “management fee” appears whether you take the project or not, it’s not incremental. If the case says “this includes $50k of specific project supervision,” keep the $50k. Kill the rest.
9. Format for the Grader (or the CFO)
- One printable page for the memo. Two max. Executives don’t read appendices.
- Spreadsheet hygiene: Inputs in blue, formulas in black, links in green. One assumption cell per variable — no hardcoded numbers inside formulas. Label every row. Freeze panes. Print to PDF with gridlines and row/column headers.
- Version control:
ProjectName_Valuation_v3_FINAL.xlsxis a joke. UseProjectName_Valuation_20241024.xlsx. - Cross-foot: Does the sum of annual depreciation equal the depreciable base? Does working capital return to zero in the terminal year? Does the NPV formula reference the WACC cell, not a typed number?
10. The “So What?” Test
Read your recommendation aloud. “We should accept Project Titan because NPV is $4.2M.And ” Weak. Now, *“We should accept Project Titan. At the 11% WACC, NPV is $4.Also, 2M driven by the depreciation tax shield on the accelerated MACRS schedule and the working capital recovery in Year 5. The project breaks even on a discounted basis in Year 3.Consider this: 2 — well inside the 4-year hurdle. The kill shot is variable cost: if it drifts above $18.Day to day, 50/unit, NPV turns negative. Procurement needs to lock in the supplier contract before we commit.
That gets a decision.
Conclusion
Capital budgeting isn’t a math exercise — it’s a discipline of incremental thinking wrapped in a spreadsheet. Now, stress the drivers. Every case tries to distract you with sunk costs, allocated overhead, financing side effects, and accounting profits. Write the memo like someone’s career depends on it. But build the model clean. The formulas are commodities; the judgment calls are the product. Your job is to ignore the noise, isolate the incremental after-tax cash flows, discount them at the opportunity cost of capital, and tell the decision-maker exactly how much value gets created — and which assumption could destroy it. Because sometimes, it does That alone is useful..
