Determine the payback and the net present value

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Reference no: EM132221969 , Length: word count:6000

FINANCIAL MANAGEMENT ASSIGNMENT -

Learning Outcomes -

1) Research, apply and evaluate a variety of financial assessment techniques for application to a case study.

2) Research, evaluate and critically discuss various issues and theoretical frameworks used in the management and control of financial resources.

TASK DESCRIPTION -

Section A - You work as a financial analyst for World Wealth Management. Your role is to provide investment advice to high-net-worth individuals. Tim Farrow who is risk-averse has been a client of your firm for many years and has approached your manager for investment advice. Tim has a large portfolio of shares and is interested in broadening his portfolio by investing in the UK travel & leisure sector. He has identified two companies that he is interested in investing in - William Hill Plc and Paddy Power Betfair Plc. His file has been passed to you by your manager, and he has asked you to prepare a report for him. You have carried out some preliminary work and obtained access to the latest financial statements and share prices and dividends of the organisations for the last three accounting periods.

Required:

a) Carry out a financial analysis of both companies.

This analysis should include

I. Ratios you have computed, an evaluation of the financial performance and current financial position of both companies. This should include investor ratios.

II. All computations should be included in an appendix.

b) Based on your assumption of Tim 's attitude to risk which should be clearly stated and supported by the results in (a), advise Tim on how he should proceed with his investment decision.

Word count: Max 3,500.

Section B - Patel Mintro owns a manufacturing company in London. He is considering two projects that he hopes will generate additional profit. Project A requires an initial investment of £160,000 and Project B £220,000.

The projects will last for 6 years. At the end of 6 years, Project A will have a residual value of £20,000, and Project B will have £10,000 residual value.

The company's current cost of capital is 7%. Projected annual income (cash flow for NPV) for each project is detailed below:

	Project A	Project B
Income (Cash Flow)	£45,000	£60,000

Required -

a) Determine the Payback and the Net Present Value (NPV) of the two proposals. Use a discount rate of 7% for the NPV calculation.

b) Determine the Accounting Rate of Return (ARR) for each project.

c) Evaluate the results of part (a) and (b) above. Recommend with reasons the project that should be adopted.

d) Critically discuss the advantages and shortcomings of the Payback and NPV techniques as ways of evaluating capital projects.

e) Discuss the non-financial factors that need to be considered in investment appraisal process.

Word Count: Maximum 2,500.

Reference no: EM132221969

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Reviews

len2221969

1/23/2019 10:07:29 PM

WORD COUNT: 5000 - 6000 WORDS. Make sure that Your Name , Your Student Number, Your Module Title, Assignment Title and Your Module Lecturer’s Name are clearly shown on the front page of your assignment. All assignments must be submitted electronically to Moodle. Research informed Literature Extent of research and/or own reading, selection of credible sources, application of appropriate referencing conventions - Outstanding knowledge of research-informed literature embedded in the work. Outstanding selection of relevant and credible sources. High-level referencing skills consistently and professionally applied.

len2221969

1/23/2019 10:07:24 PM

Knowledge and Understanding of Subject Extent of systematic knowledge, understanding and critical awareness of concepts and underlying principles associated with the discipline. Exceptional mastery of a complex and specialised area of knowledge and skills, with an exceptional critical awareness of current problems and/or new insights at the forefront of the field. A critical awareness of the ambiguities and limitations of knowledge.

len2221969

1/23/2019 10:07:15 PM

Analysis, evaluation and synthesis; logic, argument and judgement; analytical reflection; organisation of ideas and evidence - Exceptional critical evaluation of methodologies, current research and ideas and, where appropriate, proposes new hypotheses/ ideas. Evaluates and synthesises complex issues at a high level of mastery. Makes outstanding judgements and proposes highly convincing arguments in the absence of complete data. Highly persuasive conclusions. Work is of journal publishable quality.

len2221969

1/23/2019 10:07:06 PM

Practical Application and Deployment Effective deployment of appropriate methods, materials, tools and techniques; extent of skill demonstrated in the application of concepts to a variety of processes and/or contexts; formulation of innovative, original and creative solutions to solve problems. Outstanding levels of application and deployment skills. Assimilation and development of cutting edge processes and techniques.

len2221969

1/23/2019 10:07:00 PM

Skills for Professional Practice Demonstrates attributes expected in professional - Can communicate with an exceptionally high level of professionalism. Practice including: individual initiative and collaborative working; deployment of appropriate media to communicate (including written and oral); clarity and effectiveness in presentation and organisation. Can work exceptionally well and professionally autonomously and within a team, showing advanced leadership skills. Work is exceptionally coherent, very fluent and is presented professionally.

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