D

Question 1

Stress testing - Robert Simons 4x

Answer 1

Prioritisation - who is primary customer and core values must prioritise these customers

Measurement - “what gets measuerd gets done”
What KPIs have you set? What strategic boundaries have you set (focus means saying no to the other hundred good ideas)?

Productivity - how are you creating tension (disagreemtn challenges norms!)
Are employees helping each other?

Flexibility - strategic uncertainties keep you awake at night? (customer needs change, tech is changing)

Question 2

Advantages of sensitivity analysis

Answer 2

Provides mgmt with more information
Calculates extent a variable would need to change before decision changes
Identifies areas that are crucial to success of project
Facilitates SUBJECTIVE judgement
Identifies critical cash flows

Question 3

Tax loss assumption for projects

Answer 3

Where a tax loss arises from the project, assume there are sufficient taxable profits elsewhere in the organisation to allow the loss to reduce any relevant tax payment (and therefore it can be treated as a cash inflow) and that the company has sufficient taxable profits to obtain full benefit from tax depreciation

If the company is not making TAXABLE profits, taxable losses on this project can’t benefit from tax depreciation

Question 4

Monte Carlo Simulation output

Answer 4

uses random numbers and probability statistics to show the effect of >1 variable changing at the same time.

can be used to give view of the linkely range and level of outcomes

Question 5

Profit centre measures

Answer 5

Contribution, controllable profit

Question 6

Investment centre measures

Answer 6

ROI
residual income = controllable profit - notional interest on capital (capital * cost of capital)
EVA