General Instructions on Project Each group needs to make only one submission using the Canvas Assignment Dropbox. Each submission should include one written report and one accompanying excel sheet. Please do not just embed or copy the sheet in the report as the professor needs to open your sheet and look over the calculations therein for grading. Write down each group member's name on the front page of the report. The professor will grade each group's project analysis according to the Rubrics posted in Canvas. Each member of the group will receive the same grade. Groups will be formed by the professor within one week after this instruction is distributed. Each group typically consists of four students. Please check Canvas to find out your group members. Note that you are responsible for setting up a scheme to coordinate each group member's efforts on this project. Free-riders are NOT welcome. The group can vote with a majority to kick the free-rider out of his/her group in that case, the one who is kicked out will receive zero grade on the project or work on the project by him/herself. You may find it useful to take a look at the slides: \"jaguar_introduction.pptx\", available in Canvas, before you get started. Recommended Format of the Project Analysis [No need to follow!!] 1. I would suggest one format of the report as follows (obviously, you do not have to follow this format and BE CREATIVE): Part I: Introduction (background analysis) Part II: Models (like valuation model, pricing model, exchange rate determination model, exposure measurement and management model, etc...) Part ITI. Results (your empirical analysis and explanations); Part IV. Conclusions (to summarize main results); Part V. Appendix (basically spreadsheets/tables/figures); Part V1. References (if any, like newspapers, journals, articles, etc) 2. Some details about the written analysis: e The bottom line is that you have to answer all 5 questions (page 2 of this Instruction) based on the given assumptions and cash-flow structure (page 3 of this Instruction). e In case you need to make additional assumptions necessary for you to solve the problems, please state clearly those in the written report. e Tips listed in page 4 of this Instruction offer some useful guidance to conduct analysis. e The report should be double-spaced, 11- or 12- font-sized, and four-to-ten-page long (not including spreadsheets/tables/figures/references). Instructions for Case \"Jaguar plc, 1984\"** In July 1984, the British Government decided to privatize Jaguar plc. Jaguar sold over 50 % of its cars in the United States, but its production was confined to Britain, so it was subject to considerable exchange rate exposure. Your task is to take into account the exposure in pricing the shares of Jaguar and value how much the firm is worth under several exchange rate scenarios. Below is a list of questions you must address in your case analysis. For each answer, be sure to attach spreadsheets showing how you obtained the answer and describe any relevant calculations in your write-up. Be sure to be as clear and concise as possible. 1) 2) 3) 4) ) (10) Discuss about Jaguar's exchange rate exposures. (57) To which currencies is Jaguar exposed? (1') What are the sources of these exposures? (47) (407) How much is Jaguar worth in sterling at the beginning of 19847 (10\") In order to focus on the issues related to risk management we provide a spreadsheet that with a framework for the valuation and the projected free cash flow for 1984 (see Jaguar.xls and the assumptions used in the next page). To finish the valuation you should make your own assumptions for 1985 and beyond. In particular, you should determine what are reasonable forecasts for the value of the $/ rate.(20) Furthermore, thoughts must be given to how these exchange rates will affect the prices and quantity of Jaguar cars sold in the U.S.(107) (20\") You are a security analyst responsible for following Jaguar's stock after it floats. (Assume the company had 100 million shares outstanding.) What is your estimate of Jaguar's stock price given a 10% drop in the real value of the dollar?(5\") What is Jaguar's market value exposure (and delta) with respect to the real dollar/sterling exchange rate? (5\")What is Jaguar's free cash flow exposure (and delta) for the years 1985 to 1989 with respect to the real dollar/sterling exchange rate? (57) Discuss the economic reasons for the size of this exposure. (57) (107) . Discuss how Jaguar could manage this exposure using forward contracts.(5\") What type of positions would they take and for how long?(5\") (207) . Consider the exposure (delta) of Jaguar to the $/ rate for a U.S. investor rather than a U.K.investor (10\"). Is the exposure to the dollar-based owners the same as that of the pound-based investors above? Why or why not? (10) ASSUMPTIONS AND CASH FLOW STRUCTURE Fixed Costs - Capital expenditure is assumed to be 11.5 million in 1984 and rises by 15% per year. Depreciation for 1984 is assumed to be 10 million (approximately 10% of fixed assets at beginning of 1984) and continues at 10% of the running balance of fixed assets plus capital expenditures each year. R&D is 18.0 million in 1984 and rises at the growth rate of total sales (in ). Distribution and administrative expenses (both assumed to be fixed costs) rise at the inflation rate from their 1983 figures of 13.3 and 22.0 million respectively. Variable Costs - All of the \"costs of sales\" in the income statement, net of depreciation, is (arbitrarily) assumed to be variable costs. Variable costs/unit rise at the inflation rate. Note that the 1983 volume used to determine unit costs should be production volume of 28.041, not sales volume. Net Working Capital - NWC in 1983 is unrealistically low for a stand-alone company. Assume that the balance in the NWC account is topped up to 30 million in 1984 and then grows at the growth rate of total revenues thereafter (the net addition each year from cash flow is the current balance times the % change in total sales). Other assumptions - Assume a tax rate of 35%. We used a growth rate of 12% over unit sales in 1983 in estimating the 1984 sales figures. The appropriate sterling discount rate is 18%, based upon average levels of inflation over the past few years. Finally you may treat sales to the \"rest of the world\" as denominated in so as to eliminate the need to directly model other non-$ currencies. Pound inflation is forecast to continue at around 5% into the foreseeable future. U.S. inflation is anticipated to average 3% per annum into the future. Indicate explicitly what your assumptions are about Jaguar unit sales growth for the future