| Course | FIN 5003 Financial Decision Making |
|---|---|
| Module | Module 6 |
| Paper type | Finance committee memo |
| Length | 890 words, about 3 pages plus title and reference pages |
| Format | APA 7 student paper |
| School | American College of Education |
| Program | MBA |
| Updated | October 2026 |
Free sample paper for FIN 5003 Module 6
Memo to the Finance Committee: Approve the Freezer Facility on Four Conditions, Financed With 30 Percent Debt
Student Name
American College of Education
FIN5003: Financial Decision Making
Module 6 Assignment
Instructor Name
August 7, 2028
Decision Requested
To the Finance Committee, Fenwick Cold Chain, from the Director of Finance. The committee is asked to approve construction of the 40,000-pallet freezer facility at a total cost not to exceed $69.0 million, financed with a $20.4 million bank term loan and about $48 million of owners' equity, subject to four conditions set out below. Fenwick is a composite company, and every figure in this memo is invented for teaching. If the conditions cannot be met by the date the construction contract must be signed, management will return to the committee rather than proceed. The committee is not being asked whether the project is attractive; it is being asked whether it is attractive enough once its risks are protected.
The Numbers
Discounted at the 8.8 percent rate the company now uses, the project's net present value is about $3.2 million and its internal rate of return about 9.3 percent. Most of the value depends on two assumptions: the customer renewing in year 15 and the facility's resale value in year 20. Should the customer keep only half its space after year 15, the project would lose roughly $16 million in present value. The refrigeration system selected, carbon dioxide, saves roughly a third of a million dollars a year against ammonia once the two systems' lives are put on equal terms and is included in these figures.
The project's value is thin relative to its size. The contract price could slip by less than 80 cents a pallet a month before the value vanished, and its break-even construction overrun about 4.7 percent. A simulation using Fenwick's own history of overruns and slow lease-up produced an average net present value of about negative $3 million; with the protections below, the average rose to about $0.7 million. Brealey et al. (2023) note that a positive net present value is only as reliable as the forecasts behind it, and Kahneman and Lovallo (1993) documented the tendency of managers to make optimistic forecasts for projects they sponsor. The committee should read the base case with both points in mind.
Four Conditions
Management recommends approval only if all four conditions are met before the construction contract is signed. First, renewal protection: either twenty years of initial commitment, or fifteen years plus a five-year extension right covering nine-tenths or more of the positions, with a payment owed to Fenwick if the customer walks away. Second, contract price: storage at no less than $22.00 per pallet per month, with concessions, if any, made on term rather than price. Third, cost certainty: a guaranteed maximum price construction contract capping Fenwick's exposure at 1.5 percent above the $68 million budget. Fourth, occupancy: a signed lease with at least one additional tenant for at least 2,000 pallet positions.
Each condition targets an input that the sensitivity and simulation work identified as capable of reversing the decision. Taken together, they convert a project whose average simulated outcome was negative into one whose expected value is modestly positive. Management does not recommend relaxing any condition to win the contract.
Financing
Management recommends financing with 30 percent debt. Early in its life the facility's after-tax return on cost, near 4.7 percent, sits below what borrowed money costs after tax, so heavier borrowing would lower the owners' return while raising their risk. At 30 percent, the bank's debt service coverage covenant of 1.25 holds with room even in the downside case, at about 2.0; at 50 percent, it would fail in the downside. Consistent with the preference for internal funds described by Myers (1984), the equity portion should come first from retained earnings, about $30 million, with the balance from a family capital contribution. Management will also ask the refrigeration maker's finance arm to fund that system separately, which would preserve bank borrowing capacity for the next project.
Risks the Committee Accepts
By approving, the committee accepts three risks that the conditions reduce but do not remove. The facility will concentrate more of Fenwick's revenue in one customer, raising the share from its three largest customers from 58 percent to about 64 percent. Even with the protections, the simulation indicates a roughly 45 percent chance that the project earns less than the cost of capital, though a much smaller chance of a loss large enough to threaten covenants. And the resale value in year 20 cannot be protected by contract; it rests on what refrigerated buildings will be worth to buyers in the late 2040s. Management believes these risks are acceptable for a project that expands Fenwick's largest customer relationship and adds modern capacity in a growing market, but they are the committee's to accept.
Motion
That the Finance Committee approves construction of the freezer facility at a total cost not to exceed $69.0 million, financed with bank term debt of approximately 30 percent of cost and owners' equity for the balance, and authorizes management to sign the construction contract and customer agreement only upon satisfaction of the four conditions stated in this memo, with a report to the committee confirming each condition before signature; and that management report to the committee quarterly during construction on cost against the guaranteed maximum price and annually thereafter on occupancy, net cash flow and debt service coverage against the projections.
References
Brealey, R. A., Myers, S. C., & Allen, F. (2023). Principles of corporate finance (14th ed.). McGraw Hill.
Kahneman, D., & Lovallo, D. (1993). Timid choices and bold forecasts: A cognitive perspective on risk taking. Management Science, 39(1), 17-31. https://doi.org/10.1287/mnsc.39.1.17
Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), 575-592. https://doi.org/10.1111/j.1540-6261.1984.tb03646.x
The FIN 5003 Module 6 assignment instructions
FIN 5003 Module 6 asks you to bring the course's analysis to a decision in a memo for a finance committee or board. Most prompts expect the decision requested at the top, the essential numbers, conditions, financing, risks and a motion, written concisely for readers who will not read the earlier papers. Many sections set a page limit. A finance committee memo of this kind usually runs three to four pages. The FIN 5003 Canvas instructions say whether a formal memo header and motion are required. Put the decision requested in the first sentence, so a committee member reading only that line knows what is being asked.
How this FIN 5003 Module 6 example is built
The memo opens with the decision requested: approve the freezer facility on four conditions, financed with thirty percent debt. The numbers section gives net present value, internal rate of return, payback, the break-even price and the probability of loss from the simulation, each with a pointer to its source. The conditions section lists four requirements, a contract price floor, a renewal option, a construction cost cap and a review if volume falls short, each tied to an assumption the value depends on. The financing section states the loan terms and coverage in a recession case. The risks section names what the committee is accepting, including the chance of a negative result and optimism in forecasts. The memo closes with a motion the committee can adopt.
Reading the FIN 5003 Module 6 rubric
Committee memos are graded on clarity and completeness for decision makers. Much of the weight usually sits on the opening row: the decision requested, stated first. Numbers credit requires the essential figures, including unfavorable ones, with sources. Condition marks reward requirements tied to specific value drivers. Financing marks go to terms and coverage stated briefly. Graders give credit for naming risks the committee accepts rather than hiding them. The last FIN 5003 marks go to a motion the committee can adopt, memo format and APA 7. Raters also reward a memo short enough to read in a committee meeting. Graders reward conditions written so the committee can check whether they were met. Graders also reward a memo whose first paragraph states the decision, the amount and the main risk in plain words.
FIN 5003 Module 6 help from the desk
Committee memos most often read like condensed research papers with the decision at the end. Another frequent weakness is reporting only favorable numbers. Students also approve without conditions. Lead with the decision. Give the few numbers that matter, including the break-even and the chance of loss. Tie each condition to a value driver. State the risks plainly. End with a motion. Keep it to three or four pages. If your decision is an acquisition, a refinancing or a plant expansion, the desk can draft that committee memo. Attach the earlier analyses as appendices rather than repeating them.
Write yours, or have the desk draft it
This paper is an original model document written by our desk, not a submitted student paper and not an official American College of Education document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.
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FIN 5003 Module 6 questions, answered
How should a finance committee memo be organized?
Put the decision requested first, then the essential numbers, conditions, financing and risks, and end with the exact motion. Refer to supporting analyses rather than repeating them, and include the unfavorable findings as well as the favorable ones.
Why include conditions in an approval?
Conditions protect the assumptions a project's value depends on. Approving on conditions lets the committee support a project while ensuring that management returns if the protections cannot be obtained.
Where can I find a free FIN 5003 Module 6 sample paper?
This FIN 5003 Module 6 page holds the complete finance committee memo. It opens with "Decision Requested" and ends with "Motion".
What is a motion in a committee memo?
It is the exact wording of the decision the committee is asked to adopt, such as approving a project on stated conditions, so members can vote on it as written.
Why do forecasts tend to be too optimistic?
Kahneman and Lovallo describe how planners focus on the case at hand and its best path rather than outcomes of similar past projects, which biases forecasts toward success.