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Need help- ACC7001:Managerial Finance

  Need help- ACC7001:Managerial Finance



MODULE TITLE:                   Managerial Finance (1)

MODULE CODE:         ACC7001

ISSUE DATE:              10th Oct

HAND IN DATE:          11th Dec,  12.00 PM Midday

HAND BACK DATE:   13th Jan, Next Year

Learning outcomes and pass attainment level:


1.    Evaluate the financial performance of an organisation using financial and narrative information.
2.    Apply appropriate costing and budgeting techniques to assist in making management decisions.
3.    Evaluate investment projects using various appropriate techniques.






General guidance


The assessment for this unit is one coursework assignment. The required mark has been set at 50%.


This is an individual assessment. Whilst there is no objection to you discussing the content of this assignment with your peers, your final submission must be completely your own work. Plagiarism and copying will not be tolerated and may lead to subsequent penalties being imposed. This is an individual assignment and all calculations, analysis and narrative submitted must be your own work.


The assignment will require a considerable personal investment of time and effort.

Structure of the assignment


There are THREE separate questions included within the assignment and you should attempt all THREE questions. When determining the amount of effort and words for each section of the assignment it will be advisable to examine the weighting of the marks allocated to each question. If any part of the assignment is ignored then this reduces the maximum marks which could potentially be earned.


The word limit to any potential narrative question in the third section alone will be a maximum of 1,500 words excluding the cited references. There is no word limit to questions 1 and 2.

Submission of the assignment


All THREE questions must be attempted and submitted in one document. You are advised to prepare your assignment in Word format and copy and paste contents from Excel where spreadsheets have been used to support your work.


Your student ID number should be shown on each page of your assignment.


Your assignment should be submitted electronically via Moodle and you are advised to do this well in advance of the submission deadline to avoid any system related issues. Feedback on your assignment will also be provided via Moodle once the marking has been completed.



Marking of the assignment


The matrix on the following page has been provided to assist you in completing your assignment and is an indicative guide only, not a formal marking scheme.










Indicative marking guide









Question 1
A lack of breadth and depth of financial analysis techniques accompanied by incorrect formulae or calculation without appropriate explanation.

Poor layout or presentation in anything other than business report style. Inadequate grammar and lacking in overall knowledgeable synthesis.


Evidence of some financial analysis techniques but with errors of formulae and calculation with insufficient explanation and adequate presentation.

Attempt at a business report format with some supportive appendices. Mainly descriptive with some attempt at synthesis. Grammar and structure being adequate.

Wide range of financial analysis techniques evident and supported by full disclosure of formulae and accurate calculation in a clear format.

Presented in business report format and coherently structured. Supported by referenced appendices. Effective and well-reasoned narrative discussion.

An excellent range of financial analysis techniques which are supported by full disclosure of formulae and accurate calculation in a clear format.

Excellent business report format and well structured. Supported by fully referenced appendices. Excellent analytical and justified explanations showing synthesis and application.

Question 2
A lack of understanding of preparing cash budget and capital budgeting techniques is evident. Unable to correctly prepare cash budget and apply techniques of capital budgeting. Has limited or no narrative discussions.


Some understanding of preparing cash budget and capital budgeting techniques is evident. Partially correct cash budget and application of techniques of capital budgeting. Narrative analysis partially covers the requirements.


A good understanding of preparing cash budget and capital budgeting techniques is evident. Correct cash budget and A good application of techniques of capital budgeting in the given scenarios. Narrative analyses are adequate and explain the use of financial information for decision making.


Excellent understanding of preparing cash budget and capital budgeting techniques is evident. Cash budget and application of techniques of capital budgeting in the given scenarios are both correct and exceptionally well presented including workings. Narrative analyses are quite objective and well-written and explain in detail the use of financial information for decision making. .
Question 4
Failure to engage with the topic and lacking credible academic argument. No evidence of research other than internet sites of dubious quality. Poorly structured and partial coverage of the contents with weak grammar.


Partial engagement with the topic with some limited evidence of research. Some analysis of the two approaches provided. Grammar, structure and layout adequate. Identification and conclusion of arguments surrounding the topic with reference to credible academic citations that are fully referenced in a bibliography. Well-structured and coherent narrative employing above average grammar and evidencing significant student research.


Thoroughly developed arguments with well referenced credible academic sources. Well-structured and presented evidencing excellent grammar and extensive student research and analysis of the topic area.

Question 1

Alliance Pharma is a British Pharmaceutical firm. The company’s financial statements for the period 2011-2015 are presented below.


Prepare a business report for Alliance’s board of directors analysing the company’s financial performance between the periods 2011-2015. Your report should utilise key ratios, horizontal and vertical analysis and make reference to relevant developments within Alliance Plc.                                                                                                                                                                                                                     Total Marks (50)

Alliance Pharma
Income Statement
2015 2014 2013 2012 2011
£000s £000s £000s £000s £000s
Revenue 48,344 43,536 45,275 44,897 45,957
Cost of sales -19,614 -18,493 -17,944 -19,779 -21,469
Gross profit 28,730 25,043 27,331 25,118 24,488
Operating Expenses:
Admin & Marketing Exps -17,480 -12,510 -12,917 -11,856 -11,235
Amortisation of Intangible assets -199 -488 -422 -573 -735
Share-based employee remuneration -615 -571 -632 -369 -179
Share of joint venture profits 194 319 -48 0 0
Total operating expenses -18,100 -13,250 -14,019 -12,798 -12,149
Operating profit/loss excluding Exceptional items) 10,630 11,793 13,312 12,320 12,339
Exception Items 6,332 -622 0 0 0
Operating profit/loss 16,962 11,171 13,312 12,320 12,339
Finance cost -1,780 -1,014 -1,303 -1,511 -1,627
Profit before taxes 15,182 10,157 12,009 10,809 10,712
Taxation -2,490 -1,772 -2,425 -2,119 -2,076
Profit for the year 12,692 8,385 9,584 8,690 8,636




Alliance Pharma Plc
Balance Sheet
2015 2014 2013 2012 2011
£000s £000s £000s £000s £000s
Non-current assets
Intangible assets 259,945 88,875 87,111 79,890 66,130
Property, plant and equipment 1,013 396 592 564 765
Joint Venture investment 1,465 1,271 533 0 0
Joint Venture receivable 1,462 1,462 1,462 0 0
Deferred tax asset 418 194 0 0 0
Other non-current assets 122 0 443 0 0
Total non-current assets 264,425 92,198 90,141 80,454 66,895
Current assets
Inventories 12,910 5,914 5,468 5,393 5,652
Trade and other receivables 11,630 8,322 10,641 10,145 8,660
Cash and cash equivalents 3,229 1,434 687 4,634 1,079
Total current assets 27,769 15,670 16,796 20,172 15,391
Total assets 292,194 107,868 106,937 100,626 82,286
Ordinary share capital 4,682 2,641 2,641 2,430 2,401
Share premium account 108,308 29,388 29,380 25,297 24,866
Share option reserve 2,610 1,995 1,424 792 423
Reverse takeover reserve -329 -329 -329 -329 -329
Other reserve -98 -103 350 0 -4
Translation reserve 32 0 0 0 0
Retained earnings 47,237 37,188 31,202 23,658 16,771
Total equity 162,442 70,780 64,668 51,848 44,128
Non-current liabilities
Long term financial liabilities 58,968 19,235 20,881 20,225 15,225
Convertible debt 0 0 0 0 4,460
Other liabilities 1,496 0 0 20 40
Derivative financial instruments 120 129 0 0 0
Deferred tax liability 37,413 6,309 6,294 6,124 4,064
Provision for other liabilities 0 0 199 364 510
Total non-current liabilities 97,997 25,673 27,374 26,733 24,299
Current liabilities
Cash and cash equivalents 31 414 2,125 1 1
Financial liabilities 15,776 2,895 2,895 6,250 4,250
Convertible Debt 0 0 0 4,189 0
Corporation tax 2,075 959 1,154 1,322 1,046
Trade and other payables 13,873 6920 8,531 10,086 8,367
Derivative financial instruments 0 0 0 0 6
Provisions for other liabilities 0 227 190 197 189
Total current liabilities 31,755 11,415 14,895 22,045 13,859
Total liabilities 129,752 37,088 42,269 48,778 38,158
Total equity and liabilities 292,194 107,868 106,937 100,626 82,286
  2015 2014 2013 2012 2011
Alliance Pharma 49.75 33.75 32.5 32.1 29.3
FTSE100 6960.6 6598.4 6430.1 5737.8 6069.9



Question 2


  1. a) Cash Budget

On December 1, 2016, Zipper Co. is attempting to project cash receipts and disbursements through January 31, 2017. On this latter date, a note will be payable in the amount of £50,000. This amount was borrowed in September to carry the company through the seasonal peak in November and December.

Selected general ledger balances on December 1 are as follows:

Cash                                      £ 44,000

Inventory                                  32,600

Accounts payable                                        £68,000

Sales terms call for a 3% discount if payment is made within the first 10 days of the month after sale, with the balance due by the end of the month after sale. Experience has shown that 50% of the billings will be collected within the discount period, 30% by the end of the month after purchase, and 14% in the following month. The remaining 6% will be uncollectible. There are no cash sales.

The average selling price of the company’s products is £50 per unit. Actual and projected sales are as follows:

October actual                                                                                  £ 140,000

November actual                                                                                 160,000

December estimated                                                                          165,000

January estimated                                                                              125,000

February estimated                                                                             120,000

Total estimated for year ending June 30, 2017                       £1,200,000

All purchases are payable within 15 days. Approximately 60% of the purchases in a month are paid that month, and the rest the following month. The average unit purchase cost is £40. Target ending inventories are 500 units plus 10% of the next month’s unit sales. Total budgeted marketing, distribution, and customer-service costs for the year are £300,000. Of this amount, £60,000 are considered fixed (and include depreciation of £15,000). The remainder varies with sales. Both fixed and variable marketing, distribution, and customer-service costs are paid as incurred.



Prepare a cash budget for December 2016 and January 2017. Supply supporting schedules (workings) for collections of receivables; payments for merchandise; and marketing, distribution, and customer-service costs.        (15 Marks)


  1. b) Capital Budgeting

John Cooper Plc. is an international clothing manufacturer. One of its manufacturing units in Milan, Italy will become idle on December 31, 2016. You have been asked to look at three options regarding the plant.

Option 1: The plant, which has been fully depreciated for tax purposes, can be sold immediately for €225,000.

Option 2: The plant can be leased to the Anderson Corporation, one of John Cooper’s suppliers, for four years. Under the lease terms, Anderson would pay John Cooper €55,000 rent per year (payable at year-end) and would grant John Cooper a €10,000 annual discount off the normal price of fabric purchased by John Cooper. (Assume that the discount is received at year-end for each of the four years.) Anderson would bear all of the plant’s ownership costs. John Cooper expects to sell this plant for €37,500 at the end of the four-year lease.

Option 3: The plant could be used for four years to make souvenir jackets for the Olympics. Fixed overhead costs (a cash outflow) before any equipment upgrades are estimated to be €5,000 annually for the four-year period. The jackets are expected to sell for €27.50 each. Variable cost per unit is expected to be €21.50. The following production and sales of jackets are expected: 2017, 9,000 units; 2018, 13,000 units; 2019, 15,000 units; 2020, 5,000 units. In order to manufacture the jackets, some of the plant equipment would need to be upgraded at an immediate cost of €40,000. The equipment would be depreciated using the straight-line depreciation method and zero terminal disposal value over the four years it would be in use. Because of the equipment upgrades, John Cooper could sell the plant for €67,500 at the end of four years. No change in working capital would be required.


John Cooper treats all cash flows as if they occur at the end of the year, and it uses an after-tax required rate of return of 10%. John Cooper is subject to a 35% tax rate on all income, including capital gains.



  1. Calculate net present value of each of the options and determine which option John Cooper should select using the NPV criterion. (10 Marks)
  2. Calculate the IRR for Option 3. Can the IRR of Option 2 be calculated? Explain. (2 Marks)
  3. What nonfinancial factors should John Cooper consider before making its choice?                     (3 Marks)                 Total Marks (30)



Question 3


Recent accounting scandals including Enron have been argued to be the result of rule based accounting. Companies, such as Enron, involved in accounting scandals have been claimed to have skilfully taken the advantage of the fine details of rule based accounting standards (US GAAPs) to manipulate accounting threshold for legal and illegal dealings (Ijiri, 2005).


There is now this debate that rules-based approach (such as the US GAAPs) should be abandoned in favour of a principle-based approach such as (IFRS).




Critically analyse both rules-based and principles-based approaches of financial accounting and reporting. Evaluate the merits and demerits of each approach and their implications for quality of accounting and financial reporting.  Total Marks (20)

Financial Statement Analysis of Polo Ralph Lauren

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Subject Management
Topic Financial Statement Analysis of Polo Ralph Lauren

Paper details

Prepare an eight fundamental financial analysis (excluding appendices, title page, abstract, and references page) that will cover each of the following broad areas based on the financial statements of your chosen company: Provide a background of the firm, industry, economy, and outlook for the future. Analyze the short term liquidity of the firm. Analyze the operating efficiency of the firm. Analyze the capital structure of the firm. Analyze the profitability of the firm. Conclude with recommendations for the future analysis of the company (trend analysis). The paper Must be eight double-spaced pages in length (not including title and references pages) and formatted according to APA style Must include a separate title page with the following: Must begin with an introductory paragraph that has a succinct thesis statement. Must address the topic of the paper with critical thought. Must end with a conclusion that reaffirms your thesis. Must use at least 7 scholarly sources

Need Help-Capital Budgeting Problem

Need Help-Capital Budgeting Problem

Financial Management

Ford Company

Capital Budgeting Problem


The market value of Fords’ equity, preferred stock and debt are $7 billion, $3 billion, and $10 billion, respectively. Ford has a beta of 1.8, the market risk premium is 7%, and the risk-free rate of interest is 4%. Ford’s preferred stock pays a dividend of $3.5 each year and trades at a price of $27 per share. Ford’s debt trades with a yield to maturity of 9.5%. What is Ford’s weighted average cost of capital if its tax rate is 30%?


Ford Company
Market Capitalization Weight
Equity (E)
Preferred (P)
Debt (D)




Ford Company
Weight Cost After-tax

Marginal Weight

Equity (E) X =
Preferred (P) X =
Debt (D) X =
Total X =


Need Help-Capital Budgeting Problem


Assignment Help-Individual Assignment: Owner’s Equity Paper

Assignment Help-Individual Assignment: Owner’s Equity Paper

Individual Assignment: Owner’s Equity Paper

Purpose of Assignment

This assignment requires students to understand and communicate the importance of stockholders’ equity and dilutive securities. It also requires a pragmatic emphasis on why the statements exist and why these are important to external and internal stakeholders.

Grading Guide


70 Percent



Partially Met Not Met


Explains why is it important to keep paid-in capital separate from earned capital
Explains whether paid-in capital or earned capital is more important to an investor and why
Explains whether basic or diluted earnings per share is more important to an investor, and why
The paper is no more than 1,050 words in length.
Total Available Total Earned
10.5 #/10.5
Writing Guidelines

30 Percent



Partially Met Not Met


The paper—including tables and graphs, headings, title page, and reference page—is consistent with APA formatting guidelines and meets course-level requirements.
Intellectual property is recognized with in-text citations and a reference page.
Paragraph and sentence transitions are present, logical, and maintain the flow throughout the paper.
Sentences are complete, clear, and concise.
Rules of grammar and usage are followed including spelling and punctuation.
Total Available Total Earned
4.5 #/4.5
Assignment Total # 15 #/15
Additional comments:




Individual Assignment: Owner’s Equity Paper

Assignment Help-Individual Assignment: Owner’s Equity Paper


Need Help-MBS 518 Principles of Business Governance

Need Help-MBS 518 Principles of Business Governance

                                                  MBS 518 Principles of Business Governance

                                                                 Assignment   Semester 2 2016


Edward and Johnny are brothers and love to sail together. They want to turn their sporting interest into a business. They then decided to start their own business called Everbright Sails Pty Ltd.

Edward and Johnny design and manufacture sails for all size yachts and supply wholesale to retail outlets. Their company becomes very successful and soon they need more sophisticated machinery to ensure that their business is profitable.

Edward’s cousin Julio is also in the manufacturing business, supplying plant and manufacturing equipment to factories. Julio is the sole director and marketing manager for the company Equipment Pty Ltd. On Monday Julio approaches his cousin Edward at a wedding function and offers to sell Everbright new sail making machinery that has been developed in France. Julio claims that the equipment will improve output and efficiency in the sail making factory by 30%. He said he is prepared to sell the equipment to them for only $80,000. Julio said the offer will end on Friday at 5pm, and acceptance could be by email or post.

Edward and Johnny think that Julio’s offer is a very good and one which would enable Everbright to increase production and profit. Edward and Johnny are keen to accept Julio’s offer but feel that they really should try to negotiate better terms. On Tuesday Edward sends Julio an email on behalf of Everbright which states :

Everbright Sails is very interested in your offer. However we believe that the new equipment will only deliver a 15% profit return on capital, so we are only prepared to pay you the amount of $50,000 for the machinery.

Julio happens to be on a three day conference on Tuesday, Wednesday and Thursday, so has not read his email. Meanwhile Edward and Johnny have reconsidered their position and are feeling nervous that they may have missed the deal because they have not heard back from Julio. They decide to accept Equipment Pty Ltd’s original offer and on behalf of Everbright post Julio a letter on Friday morning agreeing to purchase the French machinery for $80,000. Just to be sure, at the same time they email Julio. Due to problems with Equipment Pty Ltd ISP, the email is not received into Equipment Pty Ltd’s system until 6pm Friday.

Over the weekend Julio meets with his old friend Jack who happened to be in the market for the same French sail making machinery. Julio owes Jack a favour so wants to give the machinery to Jack instead of selling it to Everbright. On Monday morning, Julio reads his email and opens the post. He calls Edward and Johnny and says the deal is off. Edward and Johnny are very upset and want to force Julio to sell them the French machinery.

What are the risk factors involved in the above negotiations :

Students with family name A to K : Advise, using appropriate objective references,  Edward and Johnny (Everbright P/L) as to whether or not a contract exists with Julio (Equipment P/L)

Students with family name L to Z : Advise, using appropriate objective references, Julio (Equipment P/L)as to whether or not a contract exists with Edward and Johnny (Everbright P/L).

This assignment is worth 40 marks

See pages 12-14 of the UILG for more details

 Need Help-MBS 518 Principles of Business Governance

Need Help- Article Review

Need Help- Article Review

Journal Articles 

Review and provide critique of a professional journal article related to group theory or practice.  The article should come from the Journal of Specialists in Group Work or other professional journals.  It must have been written within the last five years.  The reference citation should be at the top of the first page.  The abstract is limited to two typed written pages.


Need Help- Article Review


Investment appraisal: Investment value of an office building as at December 2015.

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Investment appraisal: Investment value of an office building as at December 2015.

Word guide 2,000 words (excluding figures, tables and appendices)

The task is to calculate the investment value of an office building as at December 2015. There are three tenancies:

 The 3,000ft2 ground floor is let at £35,000 per annum. on a lease expiring in June 2017, following which there is expected to be a 12-month void. Outgoings will be incurred during the void period at the rate of £6/ft2 plus, after three months, property tax of £9/ft2. It is estimated that £50/ft2 will need to be spent on refurbishment, before achieving a re-letting subject to a 12-month rent-free period. The current market rent is considered to be £40,000 per annum, expected to increase to approximately £50,000 per annum by the June 2017 re-letting date.

 The lease of the first floor (4,000ft2) at £40,000 per annum expires in December 2019. Assume six months void, six months rent-free; void outgoings £6/ft2; property tax £9/ft2 after three months; £40/ft2 refurbishment cost. The current market rent of £60,000 per annum is expected to increase to £69,000 per annum by the June 2020 re-letting date.  The lease of the second to fifth floors (16,000ft2) at £190,000 per annum runs until

September 2023, subject to a rent review in September 2018. The current market rent is estimated to be £240,000 per annum, expected to increase to £262,000 per annum by September 2018 when a 5% market rent discount is expected to be applicable at rent review.

A five-year holding period is assumed. A 10% discount rate and an exit yield of 7.25% are considered appropriate.


Your valuation should take the form of a monthly discounted cash flow. Please explain the inputs into the cash flow and any assumptions that you make.


Excellent (70-


Good (60-69)



Poor (40-49)

Fail (0-39)

1st 2i 2ii 3 F

The following aspects will be assessed:

– The ability to identify appropriate material and data for inclusion in the report

– Accurate analysis of quantitative information provided.

– Quality of discussion of the material presented in the report.

– Understanding the implication of any quantitative analysis and other findings

– Presentation of material – in particular the layout of


Discipline: real estate investment appraisal

Project has two elements
Group appraisal/valuation exercise
Individual multiple choice test
Again, in the role of a property advisor, instructions from a pension fund client considering the purchase of an office property in Reading
Valona House in Reading town centre is a hypothetical property
Partially let with potential for refurbishment

Review the market for offices: look at a few agents’ reports and try and get a handle on general national and regional office market state, prospects and supply, demand and take up locally.
Take a view on where Reading fits into the national and regional context and the different prospects for prime and secondary property in the locality over the next few years.

b, Think about cost and value implications of various courses of action

c. How much would it cost to refurbish the property now and how much are tender prices expected to increase between now and the end of the refurbishment period (assume the tender price is paid at the end of the building work)?
BCIS on-line provides both – look for figures for “rehabilitation” and look for the document providing forecasts for all sorts of items including tender prices.
d. Find the rental value (Market Rent) of the improved property in today’s market based on comparable evidence of similar property lettings in Reading using sources such as CoStar and EGi, agent’s websites, etc.
You need to show your analysis and discuss fully in the report exactly what thought process you went through in interpreting the evidence to get to the rental valuation figure.
e)Rental growth performance
Statistical analysis
Real and nominal rental growth performance
Reference your data sources

f) Rental growth forecast: how will rents change over the next few years up to the date you decide to sell – I suspect that means over the next four years – you can obtain national figures from the IPF (I’ll provide these). You need to work out what they tell you and decide from your market analysis if Reading will behave differently.

Combining (d) and (f) will give you the projected market rent for the refurbished property at the date you decide to sell it.

g) Yield analysis
The capital value of the refurbished property at the sale date is a function of the rental value at that time capitalised at the capitalisation rate at that time.
Assume that the capitalisation rate is an average of the long term rate from the past. The past figures will be given to you so it is a statistical exercise to work it out.

h) Apply the information to an appraisal model
Set out the quarterly cash flow from the building while the leases are still in place.
Place the sale price after refurbishment in the cash flow and place the refurbishment cost in the cash flow.
Then discount the cash flow at the target rate of return, work out the NPV and IRR of the cash flow assuming it is bought for the asking price.
This will enable you to advise whether to purchase or not and also advise on the price to be offered.

i) In the cash flow you can assume that you let the property for the market rent as soon as the refurbishment is finished.
However, this task asks for a discussion of the possible alternative outcomes – lease terms, incentives, etc.
Read the BPF IPD Annual Lease Review and the RICS Red Book UKGN6 Analysis of commercial lease transactions

Maths: Compounding (1 + i)n and Discounting (1 + i)-n
Maths: Converting annual discount rates to quarterly discount rates (1 + i)¼ – 1 so you can discount each quarters cash flow
Valuation – can you value a property let at its market rent?
Identifying Net Present Values and Internal Rates of Return?
Interpreting Net Present Values and Internal Rates of Return?
Computing – setting up cash flows on the spreadsheet – using functions for statistics and goal seek for IRR


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Write pros and cons of all laws that are actually part in the discussion of each chapter in the book. The book consists 10 chapters and there are so many laws in the book, but the laws that should be covered in this paper are the only laws discussed within the chapters.
1- write the most two important advantages for each law.
2-write the most two important disadvantages for each law.
 3- write a short statement (2 to 3 sentences about each law indicating that each law is working or not, which means pros outweigh cons for each law. The ebook is attached within this inquiry.

Note: Number of pages determine according to the number of laws that going to be covered within the chapters.

Statement of purpose

Statement of purpose – MS in Finance
Subject or discipline:  Finance

Title:  statement of purpose

Paper format:   MLA

# of pages:     1

Spacing:        Double spaced

Paper details:

     Statement of purpose – MS in Finance

A little bit of short term goals and future goals.

My short-term goal is to pursue my master degree. I am now studying my last quarter at csub and concentration in finance. It’s a chance for me to complete my master degree and learn more about finance. Future term goal is to work for a big company and at the same time, work in the financial market where I heard from my father.

A little bit of background:

You might not use that but I just wrote, if you want to know about me more so if you can come up with something for the future goals. You can try to read that

I grew up in a family where my father was working at HSBC.  Since none was at home when I am done with school, I had to go to his office. Looking at the share index numbers everywhere in his office. As I grew up, my father retired as a senior executive manager at HSBC and from that time I started to stay with him more often. He taught me everything that he could.  After a year, he started to ask me to read books and analysis some stocks and discuss that with him. I was fortunate to have a father like him where he exposed to me many interesting and challenge field.  The reason behind why I choose finance as a major, it was my father.

Investment Decision- Financial perspective

Case study; Finance

Investment Decision- Financial perspective

Academic level: Master’s
Subject or discipline: Finance
Title: Investment Decision- Financial perspective
Formatting Style: APA


Paper details

Mr Murray wants to see some type of risk analysis on the project as it may look profitable, but he worries that there is a chance it might turn out to be a loser. You met with the marketing and production managers to get a feel for the uncertainties which may impact the cash flow estimates. After several rounds of discussions, they conclude that revenue at the end of the first year could vary by ±25%, and variable costs by ±35% from the initial projections.There are some calculations must be done by using excel. But the final assignment must be word document format. All other excel file should be place at appendix of word document like JPEG of the screenshots as a prove of calculations. Example file and the lecturer’s notes will be provided.
After reviewing the data provided, you realise that the revenue and cost figures have not been adjusted for inflation which is expected to average 5% per year over the next 4 to 6 years. Inflation impacts the firm’s revenues and costs at varying degrees. For both chip crushers, the sales revenues are expected to increase by 5% per year after Year 1. However, variable costs, salaries and marketing costs are expected to increase by only 3% p.a. after Year 1, because half of the costs are fixed by long-term contracts.Document Formatting
1. Your discussions should not exceed 1000 words for the entire executive summary. It needs to be readable. Use 12pt. Times New Roman font with 1.5 pt paragraph spacing.
2. Only accepts the submission of one document. Copy all Excel tables and paste them as a picture (JPEG) in your Word document.

Assignment Instructions
Neways Tractor Corporation owns and operates a transmission and axle plant. The company manufactures more than half of the transmissions and axles used in tractors and harvesting equipment servicing Australia’s agricultural industry. Extensive machining is performed on steel parts for the final assembly of transmissions and axles, so a very large amount of steel shavings and bulky steel scrap is generated at this plant. The unprocessed steep scrap is sold as a by-product of the manufacturing operation to various firms involved in the recycling process.
The executive committee wants to evaluate whether to process the scrap into different grades and types of usable steel. Using different models of chip crushers, the scrap can be grinded and compressed into either rough or fine scrap. Neways has to decide whether to invest in the high-cost chip crusher (HCC) to produce fine scrap, or the low-cost chip crusher (LCC) to produce rough scrap.
You have gathered the relevant purchase prices and operating costs of the two chip crushes from the supplier, along with information on marketing and staff costs. Key estimates of financial data (before-tax) for the two machines are summarised below:

Machine cost $400,000 $480,000
Life (years) 4 6
Depreciation Straight-line over 4 years over 6 years
Salvage value – end of useful life $80,000 $48,000
Annual interest expense on loan $48,000 $48,000
Annual revenue from scrap sales $450,000 $500,000
Annual operating costs:
– Variable costs $50,000 $150,000
– Salaries $80,000 $110,000
– Marketing $45,000 $60,000

The calculation for annual operating costs comprise of the following items:
– Variable costs are direct operating expenses incurred in the production of the rough or fine scrap.
– Salaries for the LCC machine comprise of employing two new operators at a salary of $40,000 per annum
– For the HCC machine, the company will only need to employ one new machine operator with a salary of
$40,000 per annum. The second operator who earns $70,000 per annum will be transferred to this division
from the axle assembly plant.
– Marketing costs are paid at the start of each year.
Neways is a private company, soundly financed and consistently profitable. Cash on hand is not sufficient to buy the chip crusher. However Mr Jack Murray the CEO, is confident that the cost of the chip crusher could be financed with medium-term debt. The company currently has an existing mortgage with $1 million outstanding. This is financed at a rate of 10% per annum. If the firm chooses either machine, it will arrange to borrow $400,000 at a fixed rate of 12% per annum, payable over 4 years. The firm’s has $3 million worth of issued shares, and investors expected to earn a 19% per annum rate of return. Should the firm choose to proceed with either machine and the firm commits to the new loan, this is expected to impact the company’s average cost of capital.

The company’s accountant Mr Peter Smith, pointed out to you that the revenue figures do not take into consideration the impact of this project on current sales of unprocessed scrap. The current unprocessed scrap generates a before-tax net income of $50,000 per year.
Production for the rough or fine scrap would be set up in an unused section of Neway’s main plant. This section has been unused for years and consequently had suffered some deterioration. Last year as part of a routine facility improvement program, Neways spent $75,000 to rehabilitate the very same section of the plant. Mr Smith believes this outlay which has already been paid and expensed for tax purposes in last year’s income statement, should be charged to this steel scrap project. He argues that if the rehabilitation had not taken place, the firm would have to spend the money to repurpose the site for the steel scrap project anyway.

Your task is to prepare an investment recommendation in the form of an executive summary to Mr Murray and the executive committee of Neways Tractor Corporation, indicating whether the firm should invest in the LCC or the HCC. Your recommendation should address the issues from Questions 1 to 8. Your executive summary should start by outlining your recommendation. You should also discuss the assumptions you have made, and justify your choice based on sound investment selection criterions. The committee would also like to be informed on key areas of concern impacting the feasibility of the project. Your workings and calculations must be attached at the back of your recommendation as supporting material.

Address the following when putting together your analyses and Executive Summary.

1. Estimate the appropriate Weighted Average Cost of Capital (WACC) applicable as the project’s required rate of return.

2. Discuss if the following should or should not be included in your incremental cash flow calculations:
· The yearly interest expense on the $400,000 loan.
· Salaries of the machine operators.
· The $75,000 spent to rehabilitate the plant.
· Unprocessed scrap income of $50,000 per year.

3. Prepare the incremental cash flow tables for the 4-year LCC and the 6-year HCC. Assume these are the
base case scenarios for each.

4. Which machine is recommended based on the Net Present Value, Internal Rate of Return, Profitability Index, and Payback Period criterions?

5. How would your recommendation change when the difference in project lifespans are taken into consideration?
Page 4 of 6

6. Rework your analyses from Questions 3, 4 and 5 for both machines, taking into consideration the possible variations in revenue and variable costs estimates at the end of Year 1. Report the results of your sensitivity analysis and discuss how this will impact the choice between LCC and HCC.

7. Determine the minimum level of revenues and maximum level of variable costs in order to breakeven, for the machine recommended in Question 6.

Marking Guide

Question 1 WACC calculation
4 marks

Question 2
Discussions – Explanations are clear, with reasoning, and based on correct financial principles
8 marks

Question 3
Incremental cash flow tables (base case) for LCC and HCC
14 marks

Question 4
NPV, IRR, PI and Payback Periods calculations
Discussion – comparisons of LCC and HCC, and investment recommendation.
4 marks 4 marks

Question 5
Unequal lives analysis
Discussions – comparisons of LCC and HCC, and investment recommendation.
2 marks 2 marks

Question 6
Sensitivity analysis
Discussions – comparisons of LCC and HCC, and investment recommendation.
8 marks 3 marks

Question 7
Breakeven analysis
Discussions – clear and relevant suggestions to management.
4 marks 2 marks

Quality of document presentation Language, grammar and spelling
5 marks


Neways Tractor Corporation
Neways has to decide whether to invest in the high-cost chip crusher (HCC) to produce fine scrap, or the low-cost chip crusher (LCC) to produce rough scrap.
Machine cost $400,000 $480,000
Life (years) 4 6
Depreciation Straight-line over 4 years Straight-line over 6 years
Salvage value – end of useful life $80,000 $48,000
Annual interest expense on loan $48,000 $48,000
Annual revenue from scrap sales $450,000 $500,000
Annual operating costs:
– Variable costs $50,000 $150,000
– Salaries $80,000 $110,000
– Marketing $45,000 $60,000
Variable costs are direct operating expenses incurred in the production of the rough or fine scrap.
existing mortgage $1 million
financed at a rate each year 10%
if buy borrow $400,000 payable over 4 years
fixed rate each year 12%
value worth of shares $3 million Should the firm choose to proceed with either machine and the firm commits to the new loan, this is expected to impact the company’s average cost of capital.
investors expected to earn each year 19%
income current unprocessed scrap each year $50,000
expense rehabilitate plant $75,000
revenue at the end of the first year ±25%
variable costs ±35%
Inflation each year 5% revenue and cost
sales revenue 5% increase
variable costs 3% increase
salaries 3% increase
marketing cost 3% increase
Did you notice that there’s no mention of a tax rate for Neways Tractor Corporation?
You still need to evaluate if the investment is worthwhile on a after-tax basis.
Since it’s an Australian company, use the statutory rate of 30%.
 “we recommend the board chooses….the analysis was conducted and the results indicate….the firm need to consider key risk factors such as.
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