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#11




I am sorry. what do you mean by you used the 1.08 for that? do you mean that you did not do anything with the exchange rates in task 6? If yes, do we use the historical forward prices for anything?
thanks!! 
#12




I also just used 1.08. It is explicitely mentioned that the exchange has increased from 1.04 to 1.08... so why try to analyse it?
I don't think the hedging factor should be mentioned in task 6 as I don't consider it an assumption. It is a strategy and we know that they used 0.8 for the first 5 years. Why try to analyse its experience? For task 6, I don't think there's even a need to look at any projections... am I completely off? 
#13




Thanks on the FX! For the rest, this is my understanding as well. It is just a study to see what the actual experience has been, so no need to worry about projections.

#14




We can only look at the borrowing rate for when the actual experience was in the negative, correct? Likewise only the investment rate is available for recent experience, correct?
I noticed that the borrowing rate was lower to begin with, increasing until the actual cash at quarter end got in the positive. Then the investment rate was lower than expected but also increasing. Until it fluctuated each quarter and then ended up pretty close to expected by the end. I can make a clear arguement for the investment rate. But for the borrowing rate, do I go off of the principal that these two rates should move together? 
#15




What are people's approach to inflation?
The facts: Exchange rate increased 1.04 > 1.08 Actual experience: borrowing/ investment rates lower than expected at first and then returned back to where they started Lower costs of borrowing support higher inflation because of increased cash supply, right? But the rates have returned to where they were, so does that imply inflation returns to where it was? Lastly, the non labor costs using the given gold/ton experience were higher at the beginning, but then slowed down and approached expected towards the end. Do we think this is inflation driven, or the costs simply dropped as time went on? 
#16




I looked at the borrow rate for quarters 16 and the yield for the rest of the quarters. I found that the yield on average was right about what the initial assumption of .01. The cost of borrowing I wasn't totally sure. It started out at exactly .025 and then dropped. I just left it the same for now.
When I backed into inflation I found that the actual experience was less than the .007. 
#18




Quote:

#19




I used this post from the FAP forums to help with this task. I think it got deleted, but it was up there once. I didn't use linear regression, but other than that I followed this.
Since I was confused by the comments in this thread, I decided to outline the sequential steps I took to break down costs. It will also help me review what I did. 1. Use linear regression to get the fixed and variable component of labor cost. 2. Remove labor from cost 3. Remove inflation from cost. Use a cell reference for the inflation rate so that you can vary this quickly. 4. Find the inflation rate that makes costs without labor and inflation relatively flat. 5. Remove delivery from cost. Again, use a cell reference for delivery rate so that you can vary it. 6. Find the delivery rate that makes the remaining costs as flat as possible. The only other costs in the total are now fixed. 7. I don't see any definite way to split the remaining cost between equipment and energy, since both are fixed amounts that increase by inflation. It should not be necessary to split them since they operate in the same way. For the COC and investment rate, use the approach in the first post. You can back into the COC and the Investment rate using the Cash Flow and Cash at end of quarter. You can back into the exchange rate by using the forward price and the current price at time 0. I'm not sure how to get the inflation rate or the energy, delivery, and equipment cost split apart. Any ideas on these? You can find the actual inflation rate and delivery rate that makes costs as flat as possible by discounting out inflation and subtracting out delivery costs using a cell reference. Then you can use the 'Goal Seek' function in excel by setting the cost at quarter one to equal the cost at quarter 18 (quarters 19 and 20 were excluded because only one shift was ran) by adjusting the cell referenced for inflation and delivery. 
#20




These instructions assume the costs are flat through all years (only adjusted for inflation). It should be ok if energy/maintenance/delivery costs change for reasons other than inflation, right? The beginning might have costed more than anticipated, but the assumption is appropriate long term.
Is basing inflation off of the exchange rate and interest rates enough? Am I way off base here? 
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final assessment, task 6 
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