By: Annas Aman

Final Exam
Case Studies in Finance
Tutor: Dr. Nadia Iftikhar
Working of Ferrari:- Ferrari Working - Google Sheets
Working of Sneakers 2013:- Sneakers 2013 Working - Google Sheets

(questions are removed because of plagiarism)

Question 1:

Answer:

Financial Ratios:

Ferrari stands apart from other brands in terms of ratios. The case study shows that
Ferrari is doing far better than its competitors in the business based on a review of its
financial margins compared to its rivals. While its rivals spend an average of 5% on
R&D, Ferrari spends 20% of its sales on the same, while Porsche spends roughly 11%,
the second-highest percentage in the automotive industry. With unprecedented gross
and net profit margins, Ferrari dominates the international automobile sector. Ferrari has
a gross margin that is 45 percent higher than its competitors. When lined up with
automakers that serve other types of consumers, the profit disparity becomes striking.
Rival premium automakers like BMW and Audi have profit margins that are comparable
to Ferrari's. With a margin of 14.1% for operations and 9.6% for net profit, Ferrari
dominates the market. It is able to achieve the greatest operating margin in the car
business because of its premium pricing and cautious cost structure. Its rivals had
bigger sales and revenue volumes and more employees, yet it nevertheless managed
to generate a 31.4% disparity in operating and gross margins, compared to other luxury
manufacturers' average of 12%.

Diversification:

Ferrari only has a few products. Only eight cars make up 70% of sales, which means
there isn't as much variety. This can be a problem because sales are skewed toward a
few products. The small number of cars Ferrari sells means that customers may have to
wait, and the company could lose possible customers to rivals who can offer cars faster
and with more options.

Production:

When it comes to production, Ferrari's goal is to maintain exclusivity while controlling

expansion in both established and developing markets. Slow volume expansion is
emphasized by the corporation in order to retain scarcity. Scarcity is a key component of
Ferrari's value, and the brand actively limits sales volumes to keep the cars exclusive.
Conventional car companies take a different approach to expansion by concentrating on
massive production levels to satisfy the needs of a wider range of consumers.

Question 2:

Answer:

Price to Earnings (P/E):

When looking at price-to-earnings ratios (P/E), Ferrari comes out on top, with the
exception of Hermes. That Ferrari's profits are fetching a premium relative to
competitors in similar sectors is a sign that investors value the company highly.

Price to Earnings Forward:

With the exception of Hermes, Ferrari has a higher forward P/E ratio, suggesting that
investors are optimistic about the company's future profits potential.

Price to Book Value:

In comparison to other premium brands, Ferrari has a lower price-to-book value ratio
(5.2) compared to the car sector (1.4). This indicates that Ferrari's book value isn't the
primary determinant of its worth to investors; rather, growth and future profits potential
are more important.

Price to Sales:
Aside from Hermes, no other luxury brand has a greater price to sales ratio than Ferrari.
This may indicate that Ferrari's investors are ready to pay a higher price per unit sold.

Price to Cash Flow:

The market places a higher value on Ferrari's cash flow, so the company beats others
while falling short of Hermes, BMW, and LVMH in this price to cash flow ratio.

Yield to Dividend:
Unlike numerous firms in both categories, Ferrari does not issue a dividend.

EV/EBITA:
The case study's Exhibit 8 shows that the EV/EBITDA ratios of similar organizations
span a wide range, from 8.9 to 18.3. This indicates that the market has different views
and expectations about the future profitability of these luxury goods firms. If Ferrari is
undervalued or less lucrative than other premium brands, that would explain why its
EV/EBITDA ratio is lower than usual. Ferrari's percentage is comparable to that of
Kering and Moncler, two other luxury fashion brands with devoted consumer bases and
well-known, high-quality items. Burberry and Prada are struggling to maintain their
market share and profitability in the cutthroat luxury business, whereas Ferrari's
percentage is far greater. The three most rare and costly brands in the table—Hermes,
Luxottica, and Brunello Cucinelli—have strong margins and expansion potential,
whereas Ferrari's percentage is much lower.

Finally, rather than the automotive business, I would compare Ferrari to the luxury
goods sector if I had the option, because:

● Like luxury products, Ferrari's business strategy, target market, and product
qualities aren't really typical autos.
● Margin, research and development costs, and growth rates are more typical of
luxury products than conventional autos when analyzing Ferrari's financial
performance.
● Compared to more conventional autos, Ferrari's PE and EV/EBITDA value
multiples are more in line with those of luxury products.
Question 3:

Answer:

With the use of four critical variables — WACC, the growth rates of terminal value,
research and development (R&D), and capital expenditures (CAPEX) — I have
conducted sensitivity analysis for the premium sports car company Ferrari. While
keeping everything else constant, I have modified each component independently to
see how it affects the company value, equity value, value per share, and terminal value.
A simultaneous change in all four parameters was also made by me in order to see the
combined impact; however, using this method is not something I would recommend.

I have opted not to alter the values in the individual sensitivity analyses all at once since
doing so might obscure the factors' relative elasticity and sensitivity. The elasticity of a
function is defined as the degree to which its output value may be affected by a
specified percentage change in its input value. The sensitivity of a system is defined as
the degree to which an input value can affect the output value by a certain amount. I
can easily see the magnitude of the change in Ferrari's value for each unit change in a
factor by adjusting it independently.

Change in the WACC.

● A decrease of 1.5 percentage points leads to an increase in the equity value of

12,464 million euros and a per-share value of €66.
● However, if growth is 1.5%, the equity value drops to €7,890 million and the value
per share drops to €42.
● Negative relation with share price and equity value.

The sensitivity analysis shows that there is a negative relationship between valuation
metrics and the WACC, highlighting how important the cost of capital is in establishing
the enterprise's worth. When the WACC goes down, it means the corporation can
generate cash flows in the future for less money. The present value grows, which in turn
raises the company's worth, as the discount rate used to these cash flows is reduced. A
rise in the WACC, or weighted average cost of capital, will lead to a higher discount
rate. The value of the company would fall because of this since it would reduce the
present value.

Change in Cost of capital (

WACC )

Factors 1.5 % 1 % 0.5 % Base 0.5% 1% 1.5%

Changed Decrease Decrease Decrease Increase Increase Increase

Value per
share 66 61 56 52 48 45 42

Equity
value ( 12,464 11,439 10,545 9,760 8,445
millions of 9,064 7,890
€)

Terminal
Value 16,662 15,579 14,627 13,785 13,035 12,362 11,755
(2025)
 Firm
Value 12,974 11,949 11,055 10,270 8,955
9,574 8,400

Change in terminal value growth rate:

● A decrease of 1.5 percentage points in the rate of growth of R&D leads to a fall in
the value of each share to €47 and a total equity value of €8,800 million.
● With an increase of 1.5 percent, the equity value drops to €11,119 million euros
and the value per share falls to €59.
● Positive relation with share price and equity value.

To show how sensitive the business is to changes in this parameter, the table shows
how the terminal value growth rate affects the firm's worth. As a large chunk of a
company's total value is the terminal value, a more conservative projection of future
cash flows is indicated by a slower growth rate used to calculate the terminal value. The
entire worth of the corporation decreases as a consequence of this tendency towards
caution, which lowers the present value of the terminal value. Conversely, future cash
flow estimates will rise in tandem with the growth rate. A higher terminal value and an
increase to the company's total worth will result from this.

Change in Terminal value growth rate )

Factors 1.5 % 1 % 0.5 % Base 0.5% 1% 1.5%

Change Decreas Decreas Decreas Increase Increase Increase
d e e e

Value
per 47 48 50 54 56 59
share 52

Equity
value ( 8,800 9,405 9,760 10,157 10,607 11,119
millions 9,087
of € )

Terminal 11,579 12,238 12,969 13,785 14,700 15,734 16,912

 Value
(2025)

Firm
Value 9,310 9,915 10,270 10,667 11,117 11,629
9,597

Change in growth rate of R&D:

● A decrease of 1.5 percentage points in the rate of growth of R&D leads to a fall in
the value of each share to €54 and a total equity value of €10,244 million.
● With an increase of 1.5 percent, the equity value drops to 9,216 million euros and
the value per share falls to €49.
● Negative reaction with share price and equity value.

The below table shows that the value of the company is sensitive to changes in the rate
of growth of R&D, highlighting the importance of this component. The capacity to
innovate and create future revenue is heavily dependent on a company's investment in
R&D. Weakening expectations for future profitability are the direct outcome of slower
innovation, which is shown by falling R&D growth rates. The lower expectation causes
the firm's value to go down. Alternatively, if R&D spending is increasing at a faster rate,
it suggests that people are more optimistic about future innovations, which in turn
increases their hopes for future earnings and the worth of the firm as a whole.

Change in R&D Growth Rate

Factors 1.5 % 1 % 0.5 % Base 0.5% 1% 1.5%

Change Decreas Decreas Decreas Increase Increase Increase
d e e e

Value
per 54 53 53 51 50 49
share 52

Equity
value ( 10,244 10,089 9,927 9,760 9,404
millions 9,585 9,216
of € )
Terminal 14,486 14,263 14,029 13,785 13,530 13,263 12,985
Value
(2025)

Firm
Value 10,754 10,599 10,437 10,270 10,095 9,914
9,726

Change in growth rate of CAPEX:

● There is little change to the value per share and equity value when the rate of
rise of capital expenditures is reduced by 1.5 percent.
● A 1.5% increase results in €9,908 in equity and a little decrease in share value to
€51.
● No absolute relation.

According to the tables, other factors have a more significant impact on value indicators
than the growth rate of capital expenditures. Funds allotted for the purchase of
long-lasting assets are referred to as capital expenditures, or CAPEX. A little impact on
values can be caused by a slowdown in the growth rate of capital expenditure, which
means less investment in future expansion. The analysis show that CAPEX does not
have much effect on the parameters

Change in Capex Growth

Rate

Factors 1.5 % 1 % 0.5 % Base 0.5% 1% 1.5%

Change Decreas Decreas Decreas Increase Increase Increase
d e e e

Value
per 52 52 52 51 51 51
share 52

Equity
value ( 9,908 9,811 9,760 9,652
millions 9,860 9,707 9,595
of € )
 Terminal 14,008 13,937 13,862 13,785 13,705 13,621 13,534
Value
(2025)

Firm
Value 10,418 10,370 10,321 10,270 10,217 10,162 10,105

The last table shows the results of the simultaneous sensitivity analysis. The analysis
shows that the value of Ferrari is most sensitive to changes in the cost of capital
(WACC), followed by the terminal value growth rate, the R&D growth rate, and the
capex growth rate. This is consistent with the theory that the discount rate and the
terminal value are the most important drivers of the DCF valuation.

The simultaneous sensitivity analysis shows the combined effect of changing all four
factors at the same time. It shows that the value of Ferrari ranges from 42.88 to 61.54
per share, depending on the assumptions. This indicates that the valuation is subject to
a high degree of uncertainty and variability. Therefore, it is important to use realistic and
reasonable assumptions and to test different scenarios to capture the range of possible
outcomes.

All Parameters Sensitivity Analysis Tables

Sensitivity
Analysis
Table

Parameters Discou Terminal R&D Capex

to be nt rate value growth growth growth
Changed rate rate rate

All Parameter 1.5 % 1 % 0.5 % Base 0.5% 1% 1.5%

Change % Decre Decrease Decrea Increa Increa Increa
ase se se se se

Value per 61.54 58.10 54.80 51.64 48.60 45.68 42.88

share
Equity value ( 11632 10982 10358 9760 9185 8634 8105
millions of € )

Terminal 14489 14270 14036 13785 13517 13230 12925

Value (2025)

Firm Value 12142 11492 10868 10270 9695 9144 8615

Question 4:
Answer:

Change in Assumptions:

Some of the changes in the assumptions are given below:

Volume growth:

● Demand for Ferraris may increase in developing nations, particularly China, due
to the country's large middle class and its penchant for high-end consumer
products. The shifting demographics of the target market, as well as an increase
in the size and purchasing power of that market, can be good news for Ferrari.
Alternatively, Ferrari may see a decline in demand for its vehicles in more
developed areas as a result of changes in economic circumstances, customer
tastes, and environmental rules. Other premium automakers, like Aston Martin,
Lamborghini, or Porsche, can pose a threat to Ferrari if they provide comparable
or better goods at less pricing or with more innovation. So, I would recommend a
rate based on the historical average of 4.09%, it should be decreased to 4%.

Price Growth:

● Maintaining its uniqueness and scarcity while appealing to the desire to pay off
its devoted and wealthy consumers requires Ferrari to boost its average price of
vehicles by more than 2% every year, just like it has done in the past (7.04%
historical growth). Profits and sales for Ferrari may rise if the company made use
of its name and history to provide customers with more customized choices and
services.

Additional income:

● It's all about the company's reputation; if increasing engine, sponsorship,

commercial, and brand activity revenue by more than 3% annually boosts the
company's reputation and competitiveness, then I say go for it. On the other
hand, if Ferrari's competitive advantage or brand appeal were to diminish, or if
 the company were to encounter legal or regulatory challenges like antitrust
investigations or penalties, it would likely see a decline in income from these
endeavors.

Cost of sales changes and gross margin:

● If the sales volume is going to be increased then the cost of producing them will
also have to increase from 2.1% to 3%. Therefore, Ferrari must take use of
technical advancements like automation, digitization, or electrification in addition
to operational savings and economies of scale.

Selling , general and administrative, and Research and development expenses:

● Ferrari should increase its selling, general and administrative costs growth to
3-4% per year. In this way, businesses will be able to promote their primary and
secondary goods more efficiently. Additionally, they should prepare for the era of
electrification by increasing research and development expenditures to 4-5%
growth.

Depreciation and capex:

● No need to increase this as it is mentioned in case study that Ferrari has enough
PPE to cover their increase in production. So, if a new purchase is done then
there is no need to increase it further than the current growth rate.

Terminal Growth Rate:

● If Ferrari aspires to dominate the premium market, its terminal value must be
more than zero percent. Depending on how active the management is, a growth
of 1-2 percent should be sufficient.

Cost of capital:

● Given Ferrari's stellar credit, the company should pay less in interest on its loans.
With over $1 billion raised after the IPO, its cost of equity should be lower.

Base Assumptions

The main assumptions of the case study are:

Volume growth 4.4% per year

Price growth 2% per year

 Revenues from engines, sponsorship, 3% per year
commercial and brand activities

Formula 1 income 1% per year

Cost of sales and labor costs 2.1% per year

Selling, general and administrative costs 2% per year

Research and development costs 2.5% per year

Net working capital cycle 180 days for receivables, 70 days for
inventory, and 130 days for payables.

Terminal value growth rate 0%

Weighted average cost of capital 8.686%

Question 5:

Answer:

Based on my analysis of Ferrari's stock price since its announcement Initial Public
Offering (IPO), I have come to the conclusion that the current market value is an
overvaluation, mainly caused by the irresistible pull of the brand. I believe the valuation
is overvalued, even if the discounted cash flow (DCF) analysis shows it to be
appropriate. This is because there are crucial assumptions inside the DCF model that
need to be reviewed.

The DCF assumptions were viewed as unreasonable by me, particularly the expected
gross margin growth of 62% by 2025, which casts doubt on the dependability of the
share price that is determined from DCF. Thanks to the DCF model's overly optimistic
assumptions about sales volume, price, and cost of sales, the margin rise is overstated.
These assumptions are optimistic by nature, which might lead to an inflated valuation
that doesn't reflect Ferrari's true value.
In an attempt to address this, the sales volume growth forecast was revised from 4.40%
to a more cautious 3%. After making this adjustment, the fundamental share price came
out at €38.74, which is closer to a reasonable value of the comparable table. The
change is based on the understanding that it is inconsistent to expect a premium brand
focused on exclusivity to have a 4.40% increase in sales volume. The rapid expansion
runs counter to the brand's fundamental principles since it would mean the product is
less exclusive, which is key to its economic model.

Working of Ferrari:- Ferrari Working - Google Sheets

Thus, the revised value represents a more realistic projection, taking into account the
complexities of the high-end market and the need to prudently reevaluate bullish
assumptions.

Sneakers 2013
Question 6:

Answer:

Building a factory and purchasing/installing of the equipment:

● All projects include beginning expenditures like this, and they have an effect on
the NPV. They provide tax benefits over the project's lifetime and are also
depreciable. Hence, the cash flow estimates should account for them.
Research and development cost:
● The cost of research and development is a "sunk cost" because it has already
been paid for and can't be recouped. That has nothing to do with the choice of
whether to accept or reject the idea. Thus, the cash flow estimates should
exclude it.
Effect on other sneakers sales:
● The opportunity cost of introducing a new product to the market is the money that
might have been made by selling other items, in this case, shoes. The project's
profitability is impacted by this pertinent cash flow. This should be accounted for
as a negative cash flow in the cash flow projections.
Interest costs:
● The capital structure of the company determines the financing expenses, which
include interest. Since they are already included into the discount rate, they do
not pertain to the project evaluation. So, don't include them in your cash flow
calculations.
Changes in current assets/current liabilities accounts:
● The investment in operational assets and liabilities is reflected in the changes in
the current assets/current liabilities accounts, which are changes in net working
capital. These financial flows are important since they impact the project's
liquidity. Hence, depending on whether they go up or down over time, they
should be included into the cash flow estimates as positive or negative cash
flows.
Taxes:
● Spending on taxes lowers the project's after-tax cash flows. The project's
profitability is impacted by these essential cash flows. Consequently, we should
factor them in as a negative cash flow when you predict your cash flows.
Cost of goods sold:
● The cost of goods sold is a variable expense that changes as a function of both
the product's unit cost and the amount of sales. It is an important cash flow that
impacts the project's profitability. Thus, it needs to be accounted for as a negative
cash flow in the cash flow estimates.
Advertising and promotion expenses:
● Promoting the goods and getting people to buy it incurs fixed expenditures, and
those costs include advertising and marketing. The project's profitability is
impacted by these essential cash flows. Consequently, you should factor them in
as a negative cash flow when you forecast your cash flows.
Charges for depreciation:
● The project's taxable revenue is reduced by these non-cash costs. These
revenue flows are significant because they provide tax breaks over the project's
lifetime. Cash flow predictions should thus account for them as a positive cash
flow.

Question 7:

Answer:

There cannot be a terminal value for either footwear, given that they both have a limited
existence, or project life. Additionally, no exit multiple exists (the alternative method for
determining a terminal value).

Few assumptions have been made in order to derive the cash flow if the final year value
is regarded as the terminal value.

For sneakers, the capital working change has been calculated as percentage of
revenue and cost of sales for the six years of the project. In the end all the capital
workings have been recovered. For Persistence, the capital workings is not spread
through the project’s life but in the end it is recovered.

Question 8:

Answer:
NPV - Net Present Value
IRR - Internal Rate of Return

The NPV and IRR are two of the most important mathematical measures for
determining if an investment project is worth the effort. Investment prospects' expected
profitability and attractiveness can be better gauged with the use of these financial
metrics.

A key metric for project appraisal is NPV, which assesses the net contribution of a
project to the firm's worth. It determines the net present value of all cash flows by
subtracting all cash outflows. If the NPV is positive, then the project is likely to be
profitable for the company.

Analyzing the Net Present Values of the Sneakers 2013 and Persistence
initiatives:

Sneakers 2013 NPV: $67 million

Persistence NPV: $8 million

Both initiatives are anticipated to provide value to the company, as shown by their
positive NPV. In contrast to Persistence's NPV of $8 million, Sneakers 2013 has a far
greater NPV of $67 million. Since Sneakers 2013 guarantees a larger net contribution to
the firm's wealth, it is the most financially feasible option from a quantitative perspective
of NPV.

Internal Rate of Return (IRR):

The discount rate at which a project's NPV equals zero is known as the IRR. It is a
measure of the project's profitability and the rate of return it has incorporated.

Comparing the IRRs of Sneakers 2013 and Persistence projects:

● Sneakers 2013 IRR: 21%

● Persistence IRR: 21%
The internal rate of return (IRR) for the Sneakers 2013 and Persistence initiatives is
21%. This homogeneity implies that the ROI for the two projects is the same. Therefore,
looking at the IRR makes both projects seem equally appealing.

Payback Period:

Another important statistic in investment research is the payback period, which shows
how long it takes for an investment to earn back its original investment. Quicker capital
recovery is indicated by a shorter payback time, which is typically considered beneficial.

Comparing the payback periods of Sneakers 2013 and Persistence projects:

● Sneakers 2013 Payback Period: 3.57331 years

● Persistence Payback Period: 2.35 years

The payback time for Sneakers 2013 is 3.57331 years, which is somewhat longer than
the 2.35 years for the Persistence project. When comparing the two projects,
Persistence comes out on top in terms of payback time since it returns investment more
quickly than Sneakers 2013. Because it indicates a faster return of money and reduces
the related financial risk, a shorter payback time is typically favored.

Lastly, the quantitative analysis highlights the feasibility of the Sneakers 2013 and
Persistence projects via the use of metrics such as payback duration, IRR, and NPV.
The choice between the two projects is based on the relative importance of long-term
profitability and the rate of initial investment recovery, even if both projects have positive
net present values and an IRR of 21%. A greater NPV for Sneakers 2013 suggests the
possibility of significant long-term value development. On the other hand, Persistence
shows a speedier ROI with a payback duration of only 2.35 years.

In light of the above, Persistence stands out as the superior choice for those who
value a well-rounded strategy that prioritizes both short-term profits and a
quicker return on original investment.

Comparison

Sneakers Persistence
NPV 67 8

Payback Period 3.57331 2.35

IRR 21% 21%

Question 9:

Answer:

New Balance's Michelle Rodriguez weighs two initiatives, Sneaker 2013 and
Persistence, before making a crucial choice. Featuring Kirani James, an Olympic gold
winner, the Sneaker 2013 campaign aims to reach the male demographic between the
ages of 12 and 18, who are currently untapped. The project has a positive NPV and an
IRR of 21%, however there are worries regarding a sluggish recovery of capital due to
its extended payback time. The Persistence project, on the other hand, has a shorter
payback time of 2.35 years and intends to join the growing active walking and hiking
market.

Comments on Sneaker 2013:

Though Sneaker 2013 has a great deal of potential in the long run, reaching the
younger generation will be difficult from a marketing perspective. There is an element of
risk in the case study since it considers how the recession can affect sales of sports
shoes.

Comments on Persistence:
The considerations for Persistence include a shorter capital recovery time and an
emphasis on the rapidly expanding hiking industry. Problems in convincing customers to
embrace a new trend and a high technical learning curve are obstacles to the project's
progress.

Final recommendation is that Persistence is clearly the way to go for those who want
a balanced approach that considers both long-term success and short-term gains. Both
of the projects have a positive net present value (NPV), hence New Balance ought to
move forward with both of them assuming they do not have any restrictions on their
money.
Risks Considered:
The footwear market is susceptible to inherent risks due to its dynamic nature, which is
shaped by economic conditions and evolving consumer preferences. According to
industry research, the average age of athletic footwear buyers is changing. This means
that marketers need to come up with a more sophisticated approach to target both
younger consumers and the people who buy them, who tend to be parents. Also,
Although it might be more difficult to sell without a celebrity sponsor, the risks and
expenses involved are lower. A substantial upfront cost of $50 million for design
technologies and production standards warrants cautious consideration.

Prevention Methods:
In order to lessen the impact of potential problems, New Balance should study the
industry thoroughly and use adaptable promotional tactics for the Sneaker 2013. Both
projects may benefit from keeping an eye on market trends, adjusting production
capabilities, and taking a phased approach to making them more resilient.

Comments on Risk:
Keeping a level head is essential while deciding between Persistence and Sneaker
2013. A phased launch plan may help you figure out how the market will react by
balancing short-term profits with long-term profitability. To keep up with the
ever-changing shoe industry, New Balance should keep an eye on customer trends and
economic conditions.

Summary
The iconic Italian automobile manufacturer Ferrari is a brand that is synonymous with
elegance, performance, and exclusivity. In addition to a dedicated following of buyers,
the firm is known for its remarkable technical prowess, long history of success in racing,
and powerful brand recognition. Fiat, the parent company of Ferrari, raised
approximately $1 billion in the much-anticipated initial public offering (IPO) that took
place in October 2015. Since Ferrari is up against a number of obstacles and unknowns
in its future, the market value of the firm is still up for debate. If you're looking for two
ways to value Ferrari, this example gives you two: discounted cash flow (DCF) and
comparative valuation. The discounted cash flow (DCF) approach calculates an
estimate of Ferrari's future cash flows and uses volume, price, cost, and capital
structure assumptions to arrive at a present value. Ferrari is seen as more of a premium
brand than a conventional automaker according to the valuation using comparables
technique, which compares the company's financial multiples with those of other firms in
the automotive and luxury goods sectors.
Michelle Rodriguez must navigate complex financial data in order to make a crucial
choice for New Balance's Sneaker 2013 project. The Sneaker 2013 project's baseline
information is laid out in detail, including everything from proposed retail pricing to
expected sales volumes. The cash flow estimates are carefully examined, taking into
account factors like the cost of construction of a plant, the investment in research and
development, and the potential effect on sales of other shoe models. The cash flows for
the Persistence project and Sneaker 2013's final year are explained, along with the
assumptions that were used to arrive at these figures. We use NPV and IRR as
quantitative metrics to evaluate the initiatives' potential for success. Considering the risk
considerations, we provide advice for project selection.

The complexities of financial decision-making are highlighted in both case studies,

which highlight the need for thorough analyses and critical evaluation of assumptions. A
sophisticated valuation strategy is required in the automobile industry to account for
Ferrari's unique market position. Contrarily, a thorough analysis of many cash flow
components is required by the Sneaker 2013 project, which highlights the complex
nature of capital planning. The case studies highlight the critical need for
well-thought-out financial planning and skilled risk management in many industrial
settings.