DECA BFS-24 Business Finance Financial Analyst Role Play Instructions

DECA BFS-24 Business Finance Financial Analyst Role Play

Specifications

• Career Cluster: Finance
• Event: BFS-24 District Event 1
• Career Pathway: Corporate Finance
• Instructional Area: Financial Analysis

Product Usage Instructions

Event Situation Overview

You are to assume the role of the senior accountant at FISHER INDUSTRIES. Your task is to analyze a potential investment of $130,000 in new equipment for the company. The new equipment is expected to last 10 years with no salvage value at the end of its useful life. Your analysis should focus on cash flows, payback period, and net present value.

Steps to Follow

Step 1: Analyze Investment

Review the provided information on the investment including the estimated useful life, cash flows, and discount factor. Identify potential issues that should be considered before making the investment decision.

Step 2: Calculate Cash Payback

Determine the cash payback period for the investment by dividing the initial investment cost by the net annual cash flow. This will help assess how quickly the initial investment will be recovered.

Step 3: Calculate Net Present Value (NPV)

Calculate the NPV by discounting the future cash flows back to the present value using the given discount factor. Compare the NPV to the initial investment amount to evaluate the profitability of the investment.

Step 4: Present Findings

Prepare a summary of the issues considered, cash payback period, and net present value calculations. Role-play a meeting with your manager (judge) to present your findings and provide your opinion on whether the investment should be made.

BUSINESS FINANCE SERIES EVENT

PARTICIPANT INSTRUCTIONS

• The event will be presented to you through your reading of the 21st Century Skills, Performance Indicators and Event Situation. You will have up to 10 minutes to review this information and prepare your presentation. You may make notes to use during your presentation.
• You will have up to 10 minutes to make your presentation to the judge (you may have more than one judge).
• You will be evaluated on how well you demonstrate the 21st Century Skills and meet the performance indicators of this event.
• Turn in all of your notes and event materials when you have completed the event.

21st CENTURY SKILLS

• Critical Thinking – Reason effectively and use systems thinking.
• Problem Solving – Make judgments and decisions and solve problems.
• Communication – Communicate clearly.
• Creativity and Innovation – Show evidence of creativity.

PERFORMANCE INDICATORS

• Explain the nature of capital investment.
• Explain methods used to analyze capital investments (e.g., payback period, discounted break-even, net present value, accounting rate of return, internal rate of return, etc.).
• Explain the impact of the cost of capital on capital investments.
• Calculate capital investment return.
• Identify project benefits and costs.

Even Situation

You are to assume the role of the senior accountant with FISHER INDUSTRIES. Your manager (judge) wants you to analyze a potential investment and determine issues that should be considered.
Your manager (judge) is considering an investment of $130,000 in new equipment for the company. The new equipment is expected to last 10 years. It is expected to have a zero-salvage value at the end of its useful life. Additional information is summarized below.

The manager (judge) wants you to provide a summary of the issues that should be considered before the investment is made. You will also calculate the cash payback and net present value for the investment. You will report these numbers to the manager (judge) and give your opinion on the investment based on these numbers.
You will present the information to the manager (Judge) in a role-play to take place in the manager’s (judge’s) office. The manager (judge) will begin the role-play by greeting you and asking to hear your ideas. After you have presented the information and have answered the manager’s (judge’s) questions, the manager (judge) will conclude the role-play by thanking you for your work.

JUDGE INSTRUCTIONS

DIRECTIONS, PROCEDURES AND JUDGE ROLE

In preparation for this event, you should review the following information with your event manager and other judges:

1. Participant Instructions, 21st Century Skills and Performance Indicators

2. Event Situation

3. Judge Role-Play Characterization
   Allow the participants to present their ideas without interruption unless you are asked to respond. Participants may conduct a slightly different type of meeting and/or discussion with you each time; however, it is important that the information you provide and the questions you ask be uniform for every participant.

4. Judge Evaluation Instructions and Judge Evaluation Form
   Please use a critical and consistent eye in rating each participant.

JUDGE ROLE-PLAY CHARACTERIZATION

You are to assume the role of a manager at FISHER INDUSTRIES. You want the senior accountant (participant) to analyze a potential investment and determine issues that should be considered.
You are considering an investment of $130,000 in new equipment for the company. The new equipment is expected to last 10 years. It is expected to have a zero-salvage value at the end of its useful life. Additional information is summarized below.

You want the senior accountant (participant) to provide a summary of the issues that should be considered before the investment is made. The senior accountant (participant) will also calculate the cash payback and net present value for the investment. The senior accountant (participant) will report these numbers and give their opinion on the investment based on these numbers.

The participant will present information to you in a role-play to take place in your office. You will begin the role-play by greeting the participant and asking to hear about his/her ideas.
During the course of the role-play, you are to ask the following questions of each participant:

1. What is the weakness of the cash payback technique?
2. What would happen to the analysis if a higher discount rate was used to calculate the net present value of the project?

Once the senior accountant (participant) has presented the information and has answered your questions, you will conclude the role-play by thanking the senior accountant (participant) for the work.
You are not to make any comments after the event is over except to thank the participant.

SOLUTION

Considerations relevant to the capital budgeting decision include:

• Availability of funds to finance the investment but also cover other expenses that are deemed essential
• The relationship among proposed projects – is the acceptance or rejection of the new equipment going to affect other business issues (such as staffing)
• The risk associated with this project, including the financial returns, obsolescence, market considerations, etc.

Cash Payback

NPV

A positive NPV indicates an acceptable condition for the project to be approved. Judges Questions:

1. The cash payback technique ignores the time value for money and the useful life of alternative projects.
2. If a higher discount rate is used in calculating the net present value of a project, the resulting net present value will be lower and thus the project will be less likely to be accepted.

EVALUATION INSTRUCTIONS

The participants are to be evaluated on their ability to perform the specific performance indicators stated on the cover sheet of this event and restated on the Judge’s Evaluation Form. Although you may see other performance indicators demonstrated by the participants, those listed in the Performance Indicators section are the critical ones you are measuring for this particular event.

Evaluation Form Interpretation

The evaluation levels listed below and the evaluation rating procedures should be discussed thoroughly with your event director and the other judges to ensure complete and common understanding for judging consistency.

BUSINESS FINANCE SERIES 2024

Did the participant:| Little/No Value| Below Expectations| Meets Expectations| Exceeds Expectations| Judged Score
---|---|---|---|---|---
PERFORMANCE INDICATORS
1.| Explain the nature of capital investment?| 0-1-2-3-4| 5-6-7-8| 9-10-11| 12-13-14|

2.

| Explain methods used to analyze capital investments (e.g., payback period, discounted break-even, net present value, accounting rate of

return, internal rate of return, etc.)?

|

0-1-2-3-4

|

5-6-7-8

|

9-10-11

|

12-13-14

|
3.| Explain the impact of the cost of capital on capital investments?| 0-1-2-3-4| 5-6-7-8| 9-10-11| 12-13-14|
4.| Calculate capital investment return?| 0-1-2-3-4| 5-6-7-8| 9-10-11| 12-13-14|
5.| Identify project benefits and costs?| 0-1-2-3-4| 5-6-7-8| 9-10-11| 12-13-14|
21 st CENTURY SKILLS
6.| Reason effectively and use systems thinking?| 0-1| 2-3| 4| 5-6|
7.| Make judgments and decisions, and solve problems?| 0-1| 2-3| 4| 5-6|
8.| Communicate clearly?| 0-1| 2-3| 4| 5-6|
9.| Show evidence of creativity?| 0-1| 2-3| 4| 5-6|
10.| Overall impression and responses to the judge’s questions| 0-1| 2-3| 4| 5-6|
TOTAL SCORE|

Publishing

Published 2024 by DECA Inc. Copyright © 2024 by DECA Inc. No part of this publication may be reproduced for resale or posted online without written permission from the publisher. Printed in the United States of America.

FAQ

Q: What is the purpose of analyzing the potential investment?

A: The analysis helps in evaluating the financial viability of investing $130,000 in new equipment by considering factors like cash flows, payback period, and net present value.

Q: How should I approach presenting my findings to the manager (judge)?

A: Present a clear summary of issues, cash payback period, and net present value calculations in a role-play meeting with the manager. Be prepared to explain your analysis and provide a recommendation based on the numbers.

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