Case #5 – USEC Inc. Capital structure capital budgeting, cost of capital, sensitivity and decision analysis. (Ivey) (UVA-F-1546) 

Assess reporting systems, data quality and the analytical models used to support financial analysis and decision-making (5.1.3) 

Case presentation requirements 

a) Assess the underlying alternative inputs in analytical models 
b) Evaluate the quality of the alternative inputs and determine the most appropriate inputs 
c) Develop analytical models 
d) Evaluate the outputs from analytical models in the context of the entity 
e) Explain the limitations of the specific analytical models used 

Evaluate the entity’s cost of capital (5.2.5) 

a) Determine the entity’s cost of capital using a range of methodologies 
b) Evaluate the sensitivity of an entity’s cost of capital to potential changes in its operations, underlying risk factors, and capital structure 

Develops or evaluates capital budgeting processes and decisions (5.3.1) 

a) Identify situations where the use of a formal capital budgeting process would assist in decision-making 
b) Apply various tools, benchmarks, and methods to evaluate and critique capital projects based on accepted practices 
c) Evaluate the feasibility of a capital project, incorporating the tax considerations 
d) Recommend an appropriate course of action, considering the entity’s objectives