Identify the projects that fit msh''s criteria for acceptance

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Reference no: EM131018174

This assignment has a total of 50 marks and contributes 15% to your final grade. State any assumptions that you have made and show all your work as partial marks may be awarded.

Question 1

 Budgeting is the process by which management allocates corporate resources. Management is entrusted with making the allocations that will best help the organization meet its goals. Organizations usually prepare a number of different budgets with input from participants at all levels, cumulating in a comprehensive or master budget.

Consider the following potential situations that could occur:

  • goals are set too tightly
  • goals are set too loosely
  • goals are conflicting


For each situation

a)  give an example of such a situation,

b)  explain the implications of the situation, and

c)  provide possible ways to resolve the situation.

Question 2

Your aunt recently passed away from a heart attack and several of your family members have heart conditions. You and your cousin, Louise, have   decided to start a charity to support heart research. You and Louise have visions of presenting a giant cheque for thousands of dollars to cardiac researchers at the Heart Centre every year. You have been brainstorming about ways to raise money including having fun runs and a silent auction.  Neither you nor Louise have ever been involved with a charity, although you are both very passionate about the cause and have donated to charities in the past. You are pretty organized, so how hard could it be?

You and Louise start by asking family members for donations. They are happy to donate and you are happy to accept their donations. Louise says that one of your cousins wants tax receipt and she said that she will get back to him.  You go to the stationery store and buy a book of blank receipts. One of your friends, Darcy, is an accountant and you ask him how to prepare a tax receipt for your cousin. Darcy asks to see the paperwork showing that you have a registered charity.  "What does that mean?" you ask. Darcy explains and you start to realize that there may be more to this than you and Louise thought. Darcy asks you to do the following:

a)  Prepare a SWOT analysis. How do you plan to address the weaknesses and threats?State any valid assumptions that you deem necessary.

b)  What are your financing and distribution plans: for example, where will the money come from? do you have to borrow to get started? are you planning on distributing all the funds collected or a portion of them?Provide the rationale for your answers.

c)   Describe your accounting needs. Can you do this yourself, or will you have to hire someone? If you hire someone, where will you get the money to pay them?

Question 3

Grandma Sunny's Lunches (GSL) is a not-for-profit organization that supplies hot lunches to inner city schools.

a)   At the beginning of 2015, GSL received a $10,000 grant from the provincial government. 

i)    If GSL invests the funds in a term deposit that yields 3% annually, how much will GSL have in 10 years?

ii)   If GSL invests the funds in a bond that yields 6% annually, how much will GSL have in 10 years?

iii)  The yield rate in (ii) is double the yield rate of (i). Why is the dollar value of the total interest under (ii) not exactly double the amount under (i)?

b)   GSL has a mortgage on its kitchen facilities.  GSL plans to pay off the mortgage in 5 years. The unpaid mortgage principal in 5 years will be $75,940.

i)    What amount does GSL have to invest now to have enough funds to pay off their mortgage in 5 years, assuming that GSL can invest the funds at an annual yield of 4%?

ii)    Assume that GSL does not have sufficient funds to make a lump sum investment not to pay off the mortgage in 5 years. However, it is able to make annual investments. Assuming that GSL can receive an annual yield of 4%, how much should GSL invest at the end of each year to have sufficient funds to pay off the mortgage at the end of 5 years?

c)   GSL plans to invest $25,000 from its annual winter fundraiser at the end of each year for the next 10 years. Assuming that GSL can invest the funds to produce an annual yield of 5%, how much will GSL have at the end of 10 years?

Question 4

Mei's Safe House (MSH) is a women's shelter for immigrant women and children seeking refuge from abusive relationships. It is currently considering a number of long-term fundraising projects. Each project requires an initial investment. They have over $1,500,000 in contributions that they can use to invest in fundraising projects. They want to spend their money wisely. 

In choosing projects, MSH has certain minimum criteria that must be met:

  • For projects that require initial investments under $100,000, a minimum payback of 4 years is required.
  • For projects that require initial investments $100,000 or over, a minimum payback of 5 years is required.
  • A minimum return of 7% is required on all projects.

Information about the projects is summarized below:

 

Initial Investment

Year

Expected Profit (Loss)

Expected Net Cash Flow

 

 

 

 

 

Project A

 

$ 140,000

 

1

 

$ 52,000

 

$ 80,000

 

 

2

32,000

60,000

 

 

3

12,000

40,000

 

 

4

7,000

35,000

 

 

5

2,000

30,000

 

 

6

1,000

25,000

 

 

 

 

 

Project B

 

$ 90,000

 

1

 

$ 12,000

 

$ 30,000

 

 

2

12,000

30,000

 

 

3

12,000

30,000

 

 

4

11,000

29,000

 

 

5

11,000

29,000

 

 

6

10,000

28,000

 

 

 

 

 

Project

C

 

$ 80,000

 

1

 

$ 9,000

 

$ 25,000

 

 

2

9,000

25,000

 

 

3

(1,000)

15,000

 

 

4

(1,000)

15,000

 

 

5

(1,000)

15,000

 

 

6

(1,000)

15,000

 

 

 

 

 

Project D

 

$ 600,000

 

1

 

$ 130,000

 

$ 250,000

 

 

2

30,000

150,000

 

 

3

(20,000)

100,000

 

 

4

(20,000)

100,000

 

 

5

(15,000)

105,000

 

 

6

(10,000)

105,000

 

 

 

 

 

Project E

 

$800,000

 

1

 

$ 240,000

 

$ 400,000

 

 

2

40,000

200,000

 

 

3

40,000

200,000

 

 

4

40,000

200,000

 

 

5

(10,000)

150,000

 

 

6

(10,000)

140,000

 

 

 

 

 

Project F

 

$ 250,000

 

1

 

$ 10,000

 

$ 75,000

 

 

2

10,000

75,000

 

 

3

10,000

75,000

 

 

4

10,000

75,000

 

 

5

10,000

75,000

 

 

6

10,000

75,000

Required:

a)    Calculate the payback periods and NPV for each project. Remember to show all your calculations.

b)    Identify the projects that fit MSH's criteria for acceptance and rank them from most to least attractive.

c)    Identify other things that should be considered, besides your calculations, before determining which project(s) to undertake.

Reference no: EM131018174

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