3.1 The Investment Case

Module 3.1 review and final assessment

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Case briefing video coming soon

Apply The Investment Case

Read the full narration

You have now built the tools in The Investment Case. The next task is to apply them to the supplied fictional case. Start with the objective and constraints. Record your first decision and the evidence supporting it. Work the numbers using consistent definitions and units. Invite the strongest reasonable challenge. When new information arrives, keep your first record and explain what changes. Finish with a conditional conclusion: what you would do, why, what remains uncertain and what evidence would trigger a review. This is a teaching exercise with fictional information. The quality of your reasoning matters more than whether a simulated outcome later looks favourable.

Review the investment case.

Attempt these four groups of five questions before opening feedback. Aim for 16/20, revisit misunderstood ideas and retry. This website practice gives immediate explanatory feedback. The written case assesses your reasoning rather than a prescribed investment stance or personality.

Part 1

Check your understanding · choose one

A thesis should identify…

Correct. It explains a decision rather than merely describes a company.

Reconsider this choice. It explains a decision rather than merely describes a company. Try another answer.

Check your understanding · choose one

£25,000/.10 to £40,000/.10 gives…

Correct. The no-growth perpetuity is a stated teaching simplification.

Reconsider this choice. The no-growth perpetuity is a stated teaching simplification. Try another answer.

Check your understanding · choose one

The upper estimate £400,000 versus £300,000 price is a gap of…

Correct. 100,000/300,000=33.33%, not a promised return.

Reconsider this choice. 100,000/300,000=33.33%, not a promised return. Try another answer.

Check your understanding · choose one

A voluntary poll mainly describes…

Correct. Inspect who responded and what was asked.

Reconsider this choice. Inspect who responded and what was asked. Try another answer.

Check your understanding · choose one

A source register should retain…

Correct. Make the evidence reproducible and relevant.

Reconsider this choice. Make the evidence reproducible and relevant. Try another answer.

Part 2

Check your understanding · choose one

Price+5% and units−3% imply revenue growth…

Correct. 1.05×.97−1=.0185.

Reconsider this choice. 1.05×.97−1=.0185. Try another answer.

Check your understanding · choose one

The controlled new-price example gives revenue…

Correct. 97,000×5.25=509,250.

Reconsider this choice. 97,000×5.25=509,250. Try another answer.

Check your understanding · choose one

That example’s profit with cost £3 and fixed 150k is…

Correct. 97,000×2.25−150,000=68,250.

Reconsider this choice. 97,000×2.25−150,000=68,250. Try another answer.

Check your understanding · choose one

A launch with 120k units at 4.50, variable 3 and fixed 180k earns…

Correct. 120,000×1.50−180,000=0.

Reconsider this choice. 120,000×1.50−180,000=0. Try another answer.

Check your understanding · choose one

A strong opposing case…

Correct. Fair treatment does not require equal evidential weight.

Reconsider this choice. Fair treatment does not require equal evidential weight. Try another answer.

Part 3

Check your understanding · choose one

Base contribution per unit at price 5 and variable 3 is…

Correct. 5−3=2.

Reconsider this choice. 5−3=2. Try another answer.

Check your understanding · choose one

Base break-even with fixed 150k is…

Correct. 150,000/2=75,000.

Reconsider this choice. 150,000/2=75,000. Try another answer.

Check your understanding · choose one

At 90k units and variable 3, profit is…

Correct. 90,000×2−150,000=30,000.

Reconsider this choice. 90,000×2−150,000=30,000. Try another answer.

Check your understanding · choose one

At 90k units and variable 3.30, profit is…

Correct. 90,000×1.70−150,000=3,000.

Reconsider this choice. 90,000×1.70−150,000=3,000. Try another answer.

Check your understanding · choose one

A 10% volume decline supplies its probability…

Correct. Shock magnitude and likelihood are different concepts.

Reconsider this choice. Shock magnitude and likelihood are different concepts. Try another answer.

Part 4

Check your understanding · choose one

Cash 100k, reserve 50k and spend 80k leaves a reserve shortfall of…

Correct. Remaining 20k is 30k below reserve.

Reconsider this choice. Remaining 20k is 30k below reserve. Try another answer.

Check your understanding · choose one

Option B spending 40k from 100k leaves…

Correct. 100,000−40,000=60,000.

Reconsider this choice. 100,000−40,000=60,000. Try another answer.

Check your understanding · choose one

20k transactions at 4.50 plus 80k at 5 gives…

Correct. 90,000+400,000=490,000.

Reconsider this choice. 90,000+400,000=490,000. Try another answer.

Check your understanding · choose one

Corrected revenue 490k less costs 300k and 150k gives…

Correct. 490,000−300,000−150,000=40,000.

Reconsider this choice. 490,000−300,000−150,000=40,000. Try another answer.

Check your understanding · choose one

A justified revised memo should…

Correct. A transparent revision can change or retain the conclusion with reasons.

Reconsider this choice. A transparent revision can change or retain the conclusion with reasons. Try another answer.

DailyCup · the revised investment case

Complete the practice-lab first memo before the new-information reveal. Then write a 300–450 word revised committee note at the fictional £300,000 equity asking price. Use the corrected payment data and clearly state which future effects are assumed.

  • Separate the observation, calculation, forecast and judgement.
  • Reconcile corrected revenue/profit and, if used, the cash bridge.
  • Compare the initial and conditional revised value ranges with price; do not call them probabilities or annual returns.
  • Present the strongest opposing explanation, a justified next action and two verification or review conditions.

Original classroom rubric · 15 marks

  • Evidence and calculations (4 marks): Uses relevant sources, accurate arithmetic and explicit assumptions.
  • Analysis and alternatives (4 marks): Explains causal mechanisms and treats the strongest contrary case fairly.
  • Judgement and revision (4 marks): Weights the evidence, gives a conditional action and explains changes or retained views.
  • Communication and process (3 marks): Clear dated record, priority unknowns and useful review conditions; no hindsight rewriting.
Indicative response after your own attempt

The payment card corrects revenue to £490,000 and operating profit to £40,000. Under the optional tax/reinvestment bridge, FCFF is £15,000 rather than £22,500. Only if the £7,500 annual cash reduction persists with other forecast assumptions unchanged does the earlier £250,000–£400,000 range become £175,000–£325,000. That narrows support for £300,000, while promotion duration and future economics remain uncertain. A defensible note may defer, negotiate, decline or continue specified diligence; it must explain why and retain the first memo.

This is an On Judgement practice rubric, not an official AQA mark scheme.

What comes next

Continue to The Human Side: examine the person and process behind the investment case.

Continue to The Human Side