Stage 2 (2023) – “Fun with Flags”

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Stage 2 (2023) - "Fun with Flags"

This is an actual case study that was presented to the participants of the Financial Modeling World Cup 2023, Stage 2 (March 10-13, 2023).

Case study description:

In financial modeling, a “flag” (sometimes also called a “mask”) is a technique used to track specific events or conditions and is primarily associated with timing. A flag is essentially a binary indicator that takes a value of either 1 or 0 (or TRUE or FALSE), representing whether a particular condition or event has occurred or not, which can then be used in subsequent calculations to turn things on and off.

This case seeks to test the participant’s understanding of flags using an illustrative project which has a financial close date, a construction period, and an operating period. Once operational, the project sells goods (measured in units) at a price that escalates and pays tax on the revenue generated.

Part 1 – You need to use flags to determine the timing and conditions for cash flows, revenue calculations, tax accruals, and payment. He also needs to consider the escalation of selling prices and the exclusion of theoretical volume outside the operations period.

Part 2 – You face additional complexity with non-sequential and inconsistent period dates, overlapping periods, and changes in the sales volume, price escalation rate, and tax calculation. You also need to incorporate dividend payments based on profit thresholds. The challenge is to accurately apply flags and handle the variations in assumptions and timeline to perform the necessary calculations.

The downloadable file consists of the following:
Task: PDF file with Case Materials; PDF file with Questions; Excel file with initial data and case assumptions
Solution: Excel file with full Solution Model; PDF file with correct Answers in Bold

You can also buy tickets to participate in the future FMWC Stages here.


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