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1. Analyse the company's capital structure and critically assess different types of financing options available to the company. Calculate the cost of these different types of financial sources. Recommend currently which financing option is more justifiable for the company and explain how this can improve the overall business performance.
2. Critically analyse the company's performance in managing effectively its financial resources. Consider working capital management, accounts receivable management and financial control systems.
3. You are working for JD Printing Ltd., as a Finance Assistant and your manager asked you to perform an investment appraisal analysis on a new capital investment. The company is considering renewing one of their printing machines and they have found three possible options. You are required to evaluate these different options in your report and recommend one of them for purchasing. The company's cost of capital is 15% and the company usually accepts projects with payback period shorter than 5 years period. (2.1, 2.2, 2.3, 2.4)
Perform an investment appraisal analysis using some appraisal techniques (Payback period, Net Present Value, Internal Rate of Return etc.) Write a report on your evaluation and justify your recommendations.
Table 1: The projections with regards to the printing equipments
Machine A
Machine B
Machine C
Price (£)
1,000,000
550,000
400,000
Expected economic life
6 Years
Year 1 revenue (£)
150,000
85,000
70,000
Year 2 revenue (£)
230,000
120,000
125,000
Year 3 revenue (£)
190,000
Year 4 revenue (£)
300,000
195,000
165,000
Year 5 revenue (£)
250,000
200,000
Year 6 revenue (£)
140,000
180,000
80,000
Scrap value (£)
40,000
Nil
Table 2: Present Value Factors
Year/Rate
14%
15%
16%
17%
18%
19%
1
0.8772
0.8696
0.8621
0.8547
0.8475
0.8403
2
0.7695
0.7561
0.7432
0.7305
0.7182
0.7062
3
0.675
0.6575
0.6407
0.6244
0.6086
0.5934
4
0.5921
0.5718
0.5523
0.5337
0.5158
0.4987
5
0.5194
0.4972
0.4761
0.4561
0.4371
0.419
6
0.4556
0.4323
0.4104
0.3898
0.3704
0.3521
7
0.3996
0.3759
0.3538
0.3332
0.3139
0.2959
8
0.3506
0.3269
0.305
0.2848
0.266
0.2487
9
0.3075
0.2843
0.263
0.2434
0.2255
0.209
10
0.2697
0.2472
0.2267
0.208
0.1911
0.1756
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