University : KENT institue Australia UniLearnO is not sponsored or endorsed by this college or university.
Subject Code : FINM202
Country : Australia
Assignment Task:

Learning Outcomes addressed:

1. Understand the basic concepts and theories of financial management.
2. Explain the goal of financial decisions and the importance of financial information.
3. Calculate financial ratios and interpret the outcome.
4. Examine financial instruments and their valuation.
5. Relate time value of money, risk and return, and cash flow to making informed business decisions including capital budgeting.
6. Prepare and develop a working capital management plan.

ASSESSMENT DESCRIPTION: 

Students are required to work in a group of 3 - 5 students and must register for their group with the lecturer in week 4 and 5 and are not allowed to change group members without the lecturer’s permission. Students need to analyse the following mini business case and present the finding in a form of business report. Note: Refer to ALS guideline on preparing a business report. 

Mini case Analysis 

Contact Manufacturing Ltd is considering two alternative investment proposals. The first proposal calls for a major renovation of the company’s manufacturing facility. The second involves replacing just a few obsolete pieces of equipment in the facility. The company will choose one project or the other this year, but it will not do both. The cash flows associated with each project appear below and the firm discounts project cash flows at 15%. 

Assignment

1. Calculate the payback period of each project and based on this criterion, indicate which project you would recommend for acceptance. 

2. Calculate the net present value (NPV) of each project and based on this criterion, indicate which project you would recommend for acceptance. 

3. Calculate the internal rate of return (IRR) of each project and based on this criterion, indicate which project you would recommend for acceptance. 

4. Calculate the profitability index (PI) of each project and based on this criterion, indicate which project you would recommend for acceptance. 

5. Overall, you should find conflicting recommendations based on the various criteria. Why is this occurring? 

6. Chart the NPV profiles of these projects. Label the intersection points on the x- and y-axes and the crossover point. 

7. Based on this NPV profile analysis and assuming the WACC is 15%, which project would you recommended for acceptance? Why? 

8. Based on this NPV profile analysis and assuming the WACC is 25%, which project is recommended? Why? 

9. Discuss the important elements to consider when deciding between these two projects. 

 

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  • Posted on : June 06th, 2019
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