Stage 4 (2022) "Tax Doesn't Have to Be Taxing"
This is an actual case study that was presented to the participants of the Financial Modeling World Cup 2022, Stage 4 (June 10-13).
Case study description:
You are an analyst who is considering building a solar farm in the Federated States of Modellandia. Modellandia is made up of 6 different states, which due to Modellandia’s recent confederation, each has wildly different tax treatments. Differences in the shareholder return will be driven by both the weather in each state (sunnier states will obviously generate more revenue) and the tax treatment – and you have been tasked with modeling each of them.
This task is split into two parts:
Part 1 – Model the solar farm in the relatively cloudy but tax-free state of Affordiville, which will allow you to test your underlying model works. The solar farm will be financed in a special purpose vehicle (SPV), which deals only with the cashflows of the solar farm itself.
Part 2 – Then model each of the tax treatments for the other 5 states. When building your model in part 1, you may wish to consider making the model dynamic such that it is easy to switch different tax treatments on and off.
With the exception of the bonus questions, each of the different tax treatments is independent of each other, and they are not necessarily in order of difficulty.
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