Evaluate the role and function of finance

Assignment Help Financial Management
Reference no: EM13790592 , Length:

Learning Outcomes:

After completing the module you should be able to:

1. Critically evaluate the role and function of finance, including the presentation and analysis of financial information, in sustaining and contributing towards the competitive advantage of organisations;

2. Critically analyse information, from a number of perspectives, contained in published financial statements ranging from public, not for profit and private sectors;

3. Select, apply and critically evaluate financial decision making techniques to critically appraise projects and complex investment decisions.

4. Problem-solve and deal with complex issues of management and in doing so interpret and abstract meaning from a variety of financial and nonfinancial data.

Question

New York Limited is considering one of two new projects, A or B. It cannot carry out both projects, and therefore must choose which of the two is likely to yield the best financial results. The investment which is required in both projects is £250,000. This will be made up of £200,000 debt and £50,000 equity. The equity-holders will require 10% return and the debt holders will require a 5% return on their respective investments. The inflows and outflows for each project vary as follows:

Project A: Inflows £75,000 per annum for 4 years; outflows of £10,000 per annum for 4 years

Project B: Inflows of £275,000 in year one, and £25,000 in year 3, no other inflows exist; and outflows of £40,000 in year 4.

As noted above, both projects have a life of four years, after which time, both projects will be closed. The scrap value / residual value of the investments in both projects at this juncture is zero.

Requirements

Calculate the following:

a) The project lifetime surplus or net value for both projects

b) The undiscounted payback period for both projects

c) The NPV (Net Present Value) for both projects, you will need to calculate the WACC (Weighted Average Cost of Capital) here too

d) Given your answers above, which project is preferred - explain your decision?

e) Critically discuss the utility of the techniques used above, and whether these can be relied upon to make sound investment decisions. Draw upon academic sources where possible

Requirements:

a) Using the financial statements above for Next PLC, calculate a ratio for each of the four areas of Liquidity, Profitability, Efficiency and Investment. You should calculate each ratio for both 2014 and 2013.

b) Using your results to the ratios above, analyse the performance of the company over the two years, from the perspectives of i) the equity investors and ii) suppliers?

c) Discuss the advantages and disadvantages of the ratio analysis technique

Question Three

"Until relatively recently it would have been heresy to suggest that budgeting was not of central importance to any business .... However, there is increasing concern that, in today's harmful dynamic and competitive environment, budgets may actually be harmful to the achievement of business objectives." (Atrill, P. and McLaney, E., 2012:216)

Atrill, P. and McLaney, E., (2012), Accounting and Finance for Non-Specialists, 8th Ed., Pearson

Requirements:

a) Analyse the statement above, describing, with examples, the pitfalls of budgeting which may deem it to be harmful to the achievement of business objectives.

b) Conversely, present an argument for the ongoing use of budgeting in its traditional form within an organisation.

c) "The traditional model is based on the use of fixed targets, which determine the future actions of managers. The 'beyond budgeting' model on the other hand, is based on the use of stretch targets that can be adapted. The traditional hierarchical management structure is replaced by a network structure." (Atrill, P. and McLaney, E., 2012:218)

Analyse the key differences between traditional budgeting and 'beyond budgeting' models.

Verified Expert

Reference no: EM13790592

What would be the future value-interest on investment

What would be the future value (FV) of $19,378 invested now if the money remains deposited for eight years, the annual interest rate is 18 percent, and interest on the investm

What if it is to be delivered at the end of six months

Assuming monthly compounding, what should the forward interest rate of a three-month T-bill be if it is to be delivered at the end of three months? What if it is to be deliv

Risk-free rate have to be for the two stocks

Stock Y has a beta of .98 and an expected return of 10.30 percent. Stock Z has a beta of .80 and an expected return of 9 percent. What would the risk-free rate have to be for

Semiannual coupon bond matures

An 7% semiannual coupon bond matures in 4 years. The bond has a face value of $1,000 and a current yield of 7.4185%. What is the bond's price? What is the bond's YTM?

What is estimated required rate of return on woidtke stock

Woidtke Manufacturing’s stock currently sells for $22 a share. The stock just paid a dividend of $1.20 a share (i.e., D0 = $1.20), and the dividend is expected to grow forever

Calculate expected rate of return and standard deviation

Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? Calculate the expected rate of return and standard deviation for each i

Calculate the mean adjusted abnormal return

Which of the following are inconsistent with the semi-strong form of the efficient market hypothesis?  Suppose a security's mean return is 1.50%. On a particular day, the retu

Amount to use as annual sales figure when evaluating project

Winnebagel Corp. currently sells 26,400 motor homes per year at $39,600 each, and 10,560 luxury motor coaches per year at $74,800 each. The company wants to introduce a new po

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd