Roll It Out!

(1000 points + 500 bonus points available)

CASE BACKGROUND
This case was specifically created for “The Order.Co” battle. This battle is the final part of Stage
6/2023 where the 8 top performers of the stage compete in an additional streamed battle for the
extra prize fund of $5,000. The prize fund for the stage was provided by our generous supporters at
Order.co. - a spend management software with embedded financing with a mission to simplify
buying for businesses.
This case comprises the best from FMWC and Excel Esports formats. The questions are finance-
related, but the case and the question layout will be created in a spectator-friendly format, just like
we do on the Microsoft Excel World Championship.
You will have to answer questions about financials of a retail company that plans to roll out in a
jewelry segment. Working capital management and cashflow optimization are tough at the initial
stages of development of the business – and these are exactly the topics where financing products
of Order.co might make a difference for a business.
The case was created by FMWC founder & CEO Andrew Grigolyunovich, CFA, MFM.

THE STORY
After a successful expansion to the foreign market (see Case 2 of this stage – “Order It!”), luxury
retailer Excellux now wants to expand into the jewelry segment of luxury market. They plan to
establish a new company named Jewellux and put $5,000,000 to finance its operations. Jewelry
market is quite capital-intensive, stock turnover is very slow and financing products by Order.Co
come in handy for Jewellux.

FINANCIAL MODEL
You are provided with pre-created key assumptions on the Assumptions tab in the financial model
file. Your goal is to create a 10-year monthly financial model for Jewellux and answer questions
about the company’s financials.
We have prepared 24 questions as well as 4 bonus questions. The questions are split by 6 different
categories. Most of the categories (except for the final one) can be solved separately from others.
Note that different question categories provide different point values. Plan your strategy wisely – it
might not be the best idea to start with obvious items that bring you the least point value. Or maybe
it might?
Do not round your calculations at any point. It is OK to go with partial customers or units.
RETAIL NETWORK, SALES AND COGS
Please note the following about the retail network of Jewellux:

• Jewellux will open 10 stores at different locations (named Alpha, Bravo, etc.). They plan to
open 1 store every 6 months starting from July 1, 2024.
• Similar to what you saw in Case 2 of this stage, each store has a forecasted number of daily
passers-by, the % of them entering the store, the % of store visitors making a purchase as
well as an average check per customer.
• The initial 6 months of operations of each store are the “rollout period”. Each month during
that period will have different values for entrance rates, purchase rates and average check
per customer (all expressed as % of regular values).
o E.g. if regular entrance rate for Charlie store is 1.8% and entrance rate during Month
2 of operations is 50% of regular, this means that only 0.9% (1.8% x 50%) of
passers-by will enter the store during Month 2 of operations of that particular store.
o E.g. the average check for Foxtrot is expected to be $938 in regular months and 70%
of regular during the first month of operations. This means that the average check at
Foxtrot will be as little as $656.60 ($938 x 70%).
• Inflation is forecasted at 3% per year, starting from January 2024 (month 1 of your model).
Calculate monthly inflation coefficients on an actual/actual basis. Remember that years
2024, 2028 and 2032 have 366 days.
• Apply inflation coefficient to your sales forecast.
• Additionally, seasonality influences the number of passers-by. Each calendar month’s
seasonality coefficient (as % of regular months) is provided in the model for you.
• The average mark-up is expected to be 125.00%. Using this number, you should calculate
the cost of goods sold (COGS) backwards from forecasted sales.

OPEX
Please note the following about the operating expenses of Jewellux:

• Each store will employ a certain number of employees (provided in the model). Each
employee will receive a fixed salary of $50,000 per year, adjusted by inflation. The annual
salary is split on a 30/360 basis.
• Additionally, employees will receive a 5% bonus from sales.
• Employees are being hired 2 months before the store opens. I.e. the employees at Alpha
store will start working on May 1, 2024, exactly 2 months before the opening date.
• Each store will bear annual OPEX of $150,000. Similarly, as for salaries, you should split it
monthly on a 30/360 basis and apply inflation. A store’s OPEX starts when the employees
are hired (i.e. 2 months before the opening date).
• In addition to store OPEX, the company will also bear corporate SG&A expenses. Similar to
store OPEX and salaries, you should split these on 30/360 basis and apply inflation. Note
that corporate SG&A expenses are $300,000 per year initially (starting from Jan 1, 2024).
Later they increase to $450,000 and $600,000 as Jewellux reaches 4 stores and 7 stores
respectively. Assume immediate increase as soon as the 4th and the 7th stores are added. A
 store is considered to be active when the employees are hired (i.e. 2 months before the
opening date).
• Remember that OPEX and SG&A numbers are provided in real 2023 dollars and need to be
adjusted by inflation.

CAPEX
Please note the following about the capital expenses of Jewellux:

• Furniture, in-store construction works and other CAPEX is planned at $500,000 per store in
real 2023 dollars.
• Construction starts 6 months before the opening date. CAPEX is paid at the end of each
month according to the following schedule: 20% -10% - 10% - 10% - 10% - 40% of the fixed
amount of CAPEX that was fixed for each store.
• The exact amount of CAPEX per store is fixed at the beginning of construction, i.e. 6 months
before the opening date. This means that CAPEX for Alpha was fixed on December 31, 2023
and bears no inflation (i.e. Alpha’s CAPEX is $500,000 nominal). Consequently, CAPEX for
Bravo will be fixed at prices as of June 30, 2024 and will be $507,404.
• Fixed assets are depreciated in 7 years using straight-line depreciation. Remember that
depreciation starts only when the store is operational, i.e. depreciation for Alpha’s CAPEX
will start in July 2024, even though $100k were paid as early as in January. As usual, 30/360
convention is used for straight-line depreciation.

DEBT
Jewellux’s bank was ready to provide expansion financing against Excellux corporate guarantees on
the following conditions:

• $350,000 nominal per store. This amount is fixed in 2023 as the loan agreement is signed
and does not increase with inflation.
• The disbursement of the loan happens according to the same schedule as each store’s
CAPEX: 20% -10% - 10% - 10% - 10% - 40%
• Interest rate is 8%, payable every month based on the opening balance of the month. Use
30/360 convention.
• Each store’s disbursement should be repaid in equal principal repayments over 60 months
since the opening of the store with a 6-month grace period. This means that the $350,000
loan that was disbursed to finance Alpha’s CAPEX will be repaid from Jan 2025 till June
2029 in 54 monthly installments.
PURCHASES AND ORDER.CO FINANCING
Jewellux has the following inventory management policy:

• Each store’s initial stock is planned at $500,000 in real 2023 dollars. The initial stock is
being purchased and paid for 1 month before the store opening (i.e. in June 2024 for Alpha
store). This amount is expressed in 2023 prices and should be increased with inflation.
• Then the store keeps the same amount of inventory by purchasing exactly the same amount
of stock as they have sold during the month.
• Assume no lead time and no supplier credit – the stock gets delivered and paid for on the
last day of the month.
• Jewellux plans to use the Portioned Preferred Advance product offered by Order.co to
improve their cashflow. They plan to move all of their stock purchases through Order.co.
See the key parameters of these products on the next page.
• Hint: Jewellux’s cashflow goes negative if the Portioned Preferred Advance is not being
used.

P&L AND CF
Here are the final inputs you will need to put together Jewellux’s financials:

• Corporate Income Tax rate is 27%. Income tax is payable every month on the month’s
profit. If the profit is negative, no tax is paid, but previous month losses do not offset profits
of next months.
• Starting cash balance is $5,000,000. If the cash balance goes above $5,000,000 all the excess
cash is being paid out as dividends.
• You will not be required to put together a balance sheet.
• The company’s enterprise value at the end of 10 years is expected to be 10.0x of the EBITDA
for 2033. When calculating the value of equity, don’t forget to subtract not only the bank’s
debt, but also the outstanding balance of Order.co facility.
Preferred Advance - Standard Product Calculator
Advance Amount: $5,000,000.00
Start Date: July 17, 2023

Singular Preferred Advance

Fee (2%): $100,000
Total Amount: $5,100,000

Date Action Opening Total Payment Closing Customer

Balance Balance
July 17, 2023 Purchase + $5,100,000 $0 $5,100,000
Invoice
August 31, 2023 Payment $5,100,000 $5,100,000 $0

Portioned Preferred Advance

Fee (5%): $250,000
Total Amount: $5,250,000
Schedule: 4 Payments - 4 months (Net 30, -60, -90, -120)

Date Action Opening Total Payment Closing Customer

Balance Balance
July 17, 2023 Purchase + $5,250,000 $0 $5,250,000
Invoice
August 16, 2023 Payment $5,250,000 $1,312,500 $3,937,500
September 15, 2023 Payment $3,937,500 $1,312,500 $2,625,000
October 15, 2023 Payment $2,625,000 $1,312,500 $1,312,500
November 14, 2023 Payment $1,312,500 $1,312,500 $0

Delayed Preferred Advance

Fee (5%): $250,000
Total Amount: $5,250,000
Schedule: Invoice 60 days post purchase, 3 payments Net 15, -30, & -45.

Date Action Opening Total Payment Closing Customer

Balance Balance
July 17, 2023 Purchase $5,250,000 $0 $5,250,000
September 15, 2023 Invoice $5,250,000 $0 $5,250,000
September 30, 2023 Payment $5,250,000 $1,750,000 $3,500,000
October 15, 2023 Payment $3,500,000 $1,750,000 $1,750,000
October 30, 2023 Payment $1,750,000 $1,750,000 $0