Ace Questions

1. Is this expert targeting a fair, high-end, or low-end estimate of damages?

2. In the Excel workbook provided, there are four broad accounting statements (P&L, Balance Sheet, Cash Flow, and Equity.) Which of these contains the numbers used to determine the payout amount? What specific number is the relevant target?

(Note: Throughout the analysis, it may be helpful to use the trace precedents command to see where Excel finds numbers used in calculations. To use this, click a cell, then go to Tools: Formula Auditing: Trace Precedents)

We will focus on changing this damages number. You can use the present value sheet to see the present value calculation. Note that some of the numbers are brought across from other sheets. Which sheets are used?

SALES (Sim Usage)

3. What numbers (row) from this sheet are brought into the P&L sheet? There are several numbers which go into calculating this number. Find them. Why might we expect that any of them would be too high or low? What do the escalation costs represent? Are they appropriate?

Now, your expert tells you that 4,800 hours seems too high, and the actual number should be 4,200 due to setup and repair time. (with no change for the startup years) What numbers do you suggest changing to him, as the usage numbers are calculated?

He also claims that there is no reason for the newer simulators to have a higher price, and claims that all should be $600 with the exception of 2, which is an S-105 and should charge at $425.

Given these changes to sales, what is the new estimate?

FACILITY COSTS

4. What should happen to electricity use due to lower machine use? Assume the electricity use falls by 1/16.

Your expert claims there will be a necessary improvement costing $4 million in year 1. Add this as a row called “Leasehold improvements” and add to total facility costs.

Given these changes to facility costs and sales, what is the new estimate? Which area caused a bigger change?...