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Explain the concepts and principles of financial modelling and the skill set required to become a financial modeller. 26 LO2 Use Excel to effectively model business problems and extract essential data from spreadsheets. 34 LO3 Illustrate best practice modelling techniques by applying strategies for user-friendly design, consistency, error reduction and data security. 36 LO4 Effectively summarise and communicate the assumptions, implications and results of spreadsheet Explain the concepts and principles of financial modelling and the skill set required to become a financial modeller. You are working as an analyst in the Corporate and Commercial Strategy (CCS) area in a growing company, Commodities Unlimited, soon to be listed on the Australian Securities Exchange (ASX), with code CUI. With this listing comes additional reporting, scrutiny and accountability. While CUI has been a well-run business to date, it has grown to be much larger and broader in operation than its initial structure and staffing allowed. You are part of a team reporting to the General Manager (GM) of CCS who acknowledges there is an area of skills yet to be properly developed within Commodities Unlimited, namely, financial modelling. Each of your small team comes from a commerce, engineering or mathematical background and shares any modelling or forecasting work on an ad hoc basis, in addition to their main workload. The GM of CCS is very busy with the upcoming listing and gives you the task of researching all he needs to know and present to argue the case for a full-time financial modelling function and the processes around this. Your findings and recommendations need to be in a professional report to be peer reviewed by your own CCS team and presented by the GM for discussion with the Senior Leadership Team (SLT), which is composed of General Managers of other departments including Human Resources. These GM’s will not necessarily have an existing knowledge of financial modelling and funding for departments will be competitive. Your General Manger needs to show how much value this function can add to decision making in other departments that CCS provides support to. To do this you will need to outline: what financial modelling is, the type and potential uses of financial models  the difference between a spreadsheet and a financial model. You should also consider:  the skill set required to fill this role internally or externally  best practices principles external governance to which financial modellers and models should be held accountable. Are there existing or perceived future compliance standards that will need to be met? Other concerns you may wish to address in your proposal might be; what risks would you warn against through not accepting your proposal? Are there theoretical or actual examples you could provide in your proposal? What processes, documentation and staff engagement or training will be required? What improvements and value will be added to the organisation by the inclusion of a dedicated financial modelling capability? Marks for this question will be awarded for: demonstrating knowledge of core concepts original thought (as opposed to copying or paraphrasing material directly from the topic notes or textbook) and relating this to the scenario  professional presentation of an appropriate standard and a cohesive argumentQuestion 3 (42 marks | Word limit: 100 words) LO2 Use Excel to effectively model business problems and extract essential data from spreadsheets. LO3 Illustrate best practice modelling techniques by applying strategies for user-friendly design, consistency, error reduction and data security. LO4 Effectively summarise and communicate the assumptions, implications and results of spreadsheet models. The CCS team are also required to support the due diligence and model the feasibility of the competitor site and operations acquisition. As previously listed, the storage and handling business being considered includes assets of: • land — 1.50 hectares, valued @ $35,000 per hectare • storage and handling facilities $850,000weighbridge $150,000. In addition to these acquisition costs, transaction costs such as conveyancing and legal fees will be $47,500. Audit of maintenance records and static inspection of the assets indicate remediation will be required to bring the facilities up to full working order. This will not be fully known until after full working inspection is made after acquisition but, an allowance from equity funding of $410,000 has been made. Your colleagues in CSS have ascertained that the facility is capable of handling and storage an average of 100,000 metric tonnes of various commodities per annum such as grain, sand and cenosphere. The average revenue charge per tonne is $4.75 and has a variable cost of $1.00 per tonne, due to power for aeration, fumigation, consumables and maintenance. The weighbridge is well located and offers services to passing trucks charging on average $0.20 per tonne weighed. It is expected 72,000 tonnes will pass over the facility each year. The weighbridge requires an annual recalibration costing $5,000. All tonnes passing through the facility have an average labour cost of $0.10 per tonne. The predicted inflation rate over the ten-year forecast period is 1.5% p.a., to be applied to all revenue and expense items. A conservative approach is to be taken with the volume of business remaining stable across the years The individual assets are not new and will be capitalised at their purchase price and depreciated/amortised over the same number of years as the acquisition loan. The current company tax rate is 30%

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