Agrisurge Co (ASC) case study assignment 代写
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Agrisurge Co (ASC) case study assignment 代写
125.330 S1 2017
Assignment#2 – Case text and Questions
Part A (Individual): Real options analysis
Follow-up rights to the ‘emerging’ contract inventors:
Agrisurge Co (ASC) is a successful company focusing on the search for new talents (e.g.
inventors) that contribute to the innovation of automative argicultural processes (harvesting,
fruit picking, ploughing, and others) in the Bay of Plenty area. Since ASC’s mission is to
constantly search for new inventors, it is a normal practice for the company to spin off its
rights to subsequent works which will be generated by inventors under its umbrella at the
earlier stage. In the beginning of 2017, ASC is offering to sell the rights to commercialise
subsequent inventions/patents by a portfolio of its top 30 ‘successful’ newcomers (success
defined as the first patent sold for 1 milion dollars or more). Given the variety of different
processes and type of agricultural produces, patents sold for these 30 inventors range from 1
million dollars to as high as a whopping 9 million dollars (few revolutionary technologies).
The average value of patents sold is 2 million dollars. ASC sets the price to such exclusive
rights (on 30 emerging inventors’ patents to their new inventions bundled together) as 13
million dollars.
MacGyver Farming Techonology Co (MFT) is an established nationtal (and thus more
diversified) farming technology company and is now considering ASC’s proposal. The
financial manager of MFT has been gathering the relevant information as follows:
- It will take time to work on and materialise the new patents by these 30 inventors. On
average, this will lead to the cash flows received at the end of 2019 (lumpsum for
simplification).
- Out of the whole lot of 30 inventors (one inventor is aimed for one patent/invention), it is
estimated that 80% will be able to produce something marketable. Of these marketable
inventions, the estimated revenue on selling a patent is 2.5 million dollars on average. The
discount rate used by farming technology industry is 14%.
- For the above patents to create revenues, decisions need to be made at the beginning of
2019. As a well-established and seasoned company in the field, MFT is quite ‘certain’ about
the costs involved in developing and marketing (e.g. commercialising) new patents.
According to MFT’s estimation, it will cost altogether $140 million for the whole thing
regardless of how many inventions/patents will be commercialised out of the 30 possible
inventions. This cost will incur at the beginning of 2019 ONLY if MFT decides to go forward
with these inventions at that point in time. Also assume that costs will be incurred right at the
beginning of year 2019 (for simplicity) if the decision is made to go forward.
- Risk free rate is 4% per year.
- Uncertainty in the farming technology industry is quite high. Variance in the sales/returns of
these 30 inventors as provided by ASC was 80%. MFT believes that such estimation will also
be valid for use at the end of 2019.
Answer the following questions:
1) Calculate the value of rights to commercialise follow-up patents by emerging inventors
under ASC umbrella as offered in the deal. Should MFT buy it accordingly?
( 5 points)
Agrisurge Co (ASC) case study assignment 代写
2) Assume that the nature of risk associated with the farming technology industry is
geographically oriented. In other words, there could be negative shocks in demand for
new farming technology that apply to only certain areas in the country. As a result, ASC
(Bay of Plenty based) offers to MFT (nation-wide based) the option to sell the rights
back to them at the end of year 2018 for 5 million dollars. How would this impact MFT’s
decision? Prove your point with the calculation. Assume that real asset involved in the
calculation does not erode with time.
( 5 points)
3) Continued on from Question 2) above, what is the minimum ‘sell back’ price that would
be attractive to MFT? ( 3 points)
(Total: 13 points)
Part B (group): A perspective on NZ Capital Structure (12 points)
Please criically read the following article and answer/address the questions below.
Smith, D.J., Chen, J. & Anderson, H.D. (2012). The relationship between captial structure
and product markets: Evidence from New Zealand. Review of Quantitative
Finance and Accounting, 38, 1–24.
1) Identify and explain the link between financing and investment decision within a
corporation based on the main findings of the article. ( 2 points)
2) Does any of the findings in this study consistent with the ‘Pecking Order Theory’ of
capital structure? Please provide your brief discussion. ( 2 points)
3) Explain whether ‘the trade-off model’ has received enough attention and/or treatment in
this article. If not, how will you improve it accordingly (e.g. what else to consider in the
study)? ( 3 points)
4) Provide ‘critiques’ on the conclusion that ‘main findings are possibly the effect of the
more competitive trading environment that has developed in New Zealand over the last
25 years (before 2012)’. Be clear about your counter-arguments. ( 2 points)
5) What factors do you think should actually matter to capital structure choices of New
Zealand big corporations? (you can use additional references to back up your points)
( 3 points)
(Total = 25 points, the whole assignment)
Note:
- The due date for the assignment is 26 th May 2017 at 11.55 pm. Please submit your assignment Part A
(individual) in the Assignment 2 Submission Box on Stream. This can be in the form of Excel file with three
worksheets (for Q1, Q2, and Q3 accordingly). You can put your brief answers in this Excel file. For Part B
(group), please email directly to Jeff (by the group representative, one group one Word file). Provide answers to
each question, one by one (e.g. please do not integrate them into a long report). The Word file for Assignment 2
should not be longer than 10 pages (double-spaced).
- Regarding team work, each student will get to evaluate the fellow group members’ contributions to the work.
That will be counted as ‘ability to work in the team’s environment’. Students who received collective scores
from teammates below a certain threshold (to be announced) will receive some discount in their Part B’s score.
But same as ‘communication skill’ generic learning goal (as in Assignment 1), one can still pass the course
while failing this aspect (team work ability).
- Late assignment is penalised 10% of the total score each day.
- Use Microsoft Excel application for Part A for calculations wherever possible.
Agrisurge Co (ASC) case study assignment 代写
