FI499 Unit 3 Capstone Assumption Set Example

Reviewed by Chester Goodwin, MBA Bachelor's Capstone in Finance Purdue University Global Free custom sample in 24 to 48h

This FI499 Unit 3 assumption set numbers the twelve inputs every later unit of the capstone must agree with. Purdue Global FI 499, Bachelor's Capstone in Finance, asks BS in Finance students to commit to their case's assumptions before valuing anything. In the sample's composite deal, where Tidewell eyes Paddlemark's schools, rows A1 to A12 give each input a value, a source and a confidence grade, from a 2 percent first-year revenue dip and a margin path of 25, 26 and 27 percent to $350,000 of savings, a 10.5 percent discount rate and the 3.5-times covenant. Three rows are marked critical because the answer leans on them hardest.

CourseFI499 Bachelor's Capstone in Finance
UnitUnit 3
Paper typeAssumption set
LengthAbout 710 words, 5 pages double-spaced
FormatAPA 7 student paper
SchoolPurdue University Global
ProgramBS in Finance
UpdatedOctober 2026

Free sample paper for FI499 Unit 3

1

Twelve Numbered Inputs, Three That Carry the Answer: A Unit 3 Capstone Assumption Set for a Swim School Acquisition

[Student Name]

Purdue University Global

FI499: Bachelor's Capstone in Finance

Unit 3 Assumption Set

[Instructor Name]

[Date]

Tidewell, Paddlemark and every figure are composite; the books and article cited are real.

What this part is doingStating the number of inputs and that three are marked tells the reader how to use the list.
2

How to Read the List

Each assumption has a number that later units will cite, a value, the source in the case file or the reasoning behind it, and a confidence grade: high where the case file supplies the figure, medium where it is estimated from the file, and low where it rests mainly on judgment. Three assumptions are marked as critical because the valuation is most sensitive to them; Unit 8 will test that claim.

Revenue

A1. First-year revenue: down 2 percent from $8.40 million, to about $8.23 million. Source: judgment, informed by Paddlemark's monthly enrollment data, which shows normal churn of about 2.5 percent a month offset by new sign-ups. The 2 percent fall allows for families who leave during the rebrand. Confidence: low. Critical.

A2. Revenue growth in years two to five: 6, 5, 4 and 3 percent. Source: Paddlemark's three-year growth averaged 5.5 percent; growth is assumed to recover after the rebrand and then slow as schools fill. Confidence: medium.

A3. Growth beyond year five: 2.5 percent a year. Source: long-run inflation plus modest population growth in the suburbs served. Confidence: medium.

Margins and Savings

A4. Paddlemark's EBITDA margin: 25 percent in year one, 26 percent in year two, 27 percent from year three. Source: judgment. Tidewell runs at about 30 percent; Paddlemark ran at 28.1 percent three years ago before labor costs rose. Tidewell's scheduling system is expected to recover part of the gap. Confidence: low. Critical.

A5. Savings from combining: $350,000 a year from year two. Source: estimates for shared purchasing of pool chemicals and equipment, one fewer regional manager and a single enrollment system. Confidence: medium. Critical.

Investment and Tax

A6. Upkeep capital spending: $60,000 per school per year, $360,000 in total. Source: Tidewell's own average. Confidence: high.

A7. Conversion spending in year one: $900,000. Source: contractor estimate covering new signage, a pool filtration upgrade at two schools and the move to Tidewell's systems. Confidence: medium.

A8. Tax: 25 percent on EBITDA less $900,000 of annual depreciation. Source: combined federal and state rate; depreciation reflects the new cost basis after purchase. Confidence: high.

A9. Working capital: zero change. Source: tuition is collected in advance and suppliers are paid within thirty days, so working capital is small and stable. Confidence: high.

Discount Rate and Financing

A10. Discount rate: 10.5 percent. Source: built from debt costing about 6.2 percent once interest is deducted for tax, and a required return on equity of 13.5 percent, at roughly 40 percent debt, rounded down from 10.58. Confidence: medium.

A11. Price and financing: $21.0 million, paid with a $14.0 million term loan at a floating 8.25 percent and $7.0 million of Tidewell's cash. Source: case file. Confidence: high.

A12. Covenant: debt no more than 3.5 times EBITDA. Source: loan quote. Confidence: high.

Nine of the twelve assumptions come from the case file or from Tidewell's own experience, but the three marked critical, first-year revenue, Paddlemark's margin and the savings, rest mostly on judgment, so the recommendation will be only as strong as the evidence later units can find for them.

What this part is doingThe highlighted sentence identifies where the analysis is weakest, the honest assessment graders look for in an assumption set.
3

Notes on the Critical Three

Forecasts in acquisitions tend to be optimistic about exactly these kinds of inputs, the acquired firm's margin and the savings from combining, because the people making them want the deal to work (Kahneman & Lovallo, 1993). Each critical assumption has been set below the most hopeful figure the case file would support: the margin recovers only partway to Tidewell's 30 percent, and the savings exclude a possible rent saving at one school. Valuation texts advise stating assumptions in a way that can be checked against outcomes later (Damodaran, 2012; Koller et al., 2020). Every one of these twelve can.

How the List Will Be Maintained

Any change after this unit will be logged with its date, the old value, the new value and the reason. The final recommendation will cite assumption numbers for every figure it uses.

What this part is doingEnding on a change log shows the list will stay the single source for the term's figures.
4

References

Damodaran, A. (2012). Investment valuation: Tools and techniques for determining the value of any asset (3rd ed.). Wiley.

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

Koller, T., Goedhart, M., & Wessels, D. (2020). Valuation: Measuring and managing the value of companies (7th ed.). Wiley.

FI499 Unit 3 instructions, in plain terms

Unit 3 of FI499 asks you to set out the assumptions your capstone analysis will use. Number each one so later units can cite it. For each, give the value, the source in the case file or the reasoning behind it, and a confidence grade that tells the reader how much to trust it. Cover revenue, margins, any savings, capital spending, tax, working capital, the discount rate and financing terms. Show how the discount rate is built rather than stating it. Mark the few assumptions the conclusion will depend on most, and explain how you guarded against optimism in those. Describe how changes will be logged after this unit. Keep values consistent with the case file. Cite valuation texts and research on forecasting bias in APA 7.

Inside the FI499 Unit 3 example

The sample groups its rows by topic. A1 sets first-year revenue 2 percent below $8.40 million, allowing for families who leave during the rebrand, graded low and marked critical. A2 and A3 set growth of 6, 5, 4 and 3 percent, then 2.5 percent. A4 sets the margin path, low confidence and critical, noting the rival ran 28.1 percent three years ago. A5 lists purchasing, management and software savings, also critical. A6 to A9 cover upkeep of $60,000 per school, a $900,000 conversion, a 25 percent tax rate and flat working capital. A10 builds 10.5 percent from debt and equity costs. The highlighted sentence observes that the critical three rest mostly on judgment, and the notes explain how each was set below its most hopeful value.

Where the points sit in the FI499 Unit 3 rubric

Assumption sets in FI499 earn points for completeness, traceability and candor. Graders check that every input a later schedule will need appears with a value, a source and a confidence grade, and that the list matches the case file. The rubric rewards showing how the discount rate is built, marking the assumptions the answer depends on and explaining how optimism was kept out of them. A change log signals the list will govern the rest of the term. Sets that state values without sources, grade everything high, bury critical inputs among routine ones or leave out financing terms receive fewer points. Readers return to this list when they check the final recommendation, so clarity here pays off later.

FI499 Unit 3 help: mistakes that cost points

Weak Unit 3 assumption sets give values with no source attached. Others omit inputs a later schedule needs, so values get invented midway through the term. Many give every assumption the same confidence, which hides where the analysis is fragile. Discount rates appear as single figures with no build. No assumption is marked critical, and no change log is promised. For a capstone built on a refinancing, a capital project or a new market entry, the list can be shaped to that decision's own inputs, numbered and graded the same way.

Get an FI499 Unit 3 example written to your instructions

Send the case materials and the Unit 3 prompt, along with the rubric and whatever assumptions template your section uses. Your set is drawn from your own case: numbered for citation, sourced row by row, graded for confidence, with the load-bearing inputs marked. The first one is free and usually returns in 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.

Request this unit free All FI499 units Finished samples

More FI499 papers and BS in Finance samples

FI499 Unit 3 questions, answered

How many assumptions should the set contain?

Enough to run every later schedule without inventing a number, and no more. For an acquisition case that usually means revenue, margin, investment spending, tax, working capital, discount rate and financing terms, roughly ten to fifteen rows. The sample has twelve. A list of thirty tends to bury the few inputs that actually decide the recommendation under many that never will.

Is it acceptable to change an assumption later?

Yes, if the change is recorded and carried through everything that used the old value. Capstone graders penalize the silent change, not the revision itself. The sample's change log exists for that reason: each entry gives the row, the old and new values, the date and the evidence that prompted it, so a reader can see the analysis learning rather than drifting.

Where can I find a free FI499 Unit 3 sample paper?

This page holds a full FI499 Unit 3 assumption set for a composite swim school acquisition, with twelve numbered inputs, sources, confidence grades, three critical rows and APA 7 references.

How is the 10.5 percent discount rate built?

From debt costing about 6.2 percent once interest is deducted for tax and a 13.5 percent required return on equity, weighted at roughly 40 percent debt. The result, 10.58 percent, is rounded down to 10.5 in the sample.

Why were the three critical assumptions set cautiously?

Because forecasts for an acquired business tend to be optimistic about its margin and the savings from combining. The sample sets the margin to recover only partway toward the buyer's 30 percent and leaves a possible rent saving out of the savings row.