User Account

All Pages

Financial analysis, Financial Management

Assignment Help:
Task

I am sure you are aware that the corporate annual meeting is coming up soon. As part of the Treasurer''s presentation, I have been asked to propose a Special Capital Requirements Report for the following cash needs:

• Project Alpha -- capital required: $1,250,000, March 1, 2013
• Project Beta - capital required: $240,000 per month, Oct. 2012 through and including the end of 2014
• Pension funding through 2014 (our underwriters advise that an annual funding of $4,500,000, due at the end of December, will be needed for 2012, with increases thereafter of 7% per annum)
• Purchase of a Tesla Roadster for the Chairman of the Board (for his birthday in September at $101,500)
• Management retention bonuses for 2012 and 2013, payable, as usual, in March of the following year, not to exceed $10 million per year.

These are all special projects, requiring funding from sources other than operating revenues. I will handle scheduling the appropriate deposits into the Special Capital account at Penultimate National Bank and, except as specified below, you are not to concern yourselves with where funding may be obtained, only with how much will be needed.
Also, sinking fund requirements for the Series of 2025 Subordinated Debentures will be funded from the Special Capital account in single payments at the end of 2013 and 2014, only (that is, no more than two years of sinking fund payments need be funded - disregard any future payments). The indenture requires redemption of 2% of the $600 million issue per year. Retirement of the balance of the bonds will be funded elsewhere.

At the last meeting, the Board accepted the offer of Western Widgets for purchase of our widget winding facility in West Winona which will produce net proceeds in the amount of $16,500,000. This sale will be completed this month, and on the first of next month I will be depositing those funds in the Penultimate National Bank Special Capital account at 4.5% to provide at least a start on funding these projects. (This same 4.5% rate should be used for all discounting computations without regard to the company''s cost of capital).

In addition, it is possible, but not certain, that the Wilmer Widget Wrapping plant may also be sold for as much as $20 million (net) in June 2013. Since this is not certain, it should be treated as an alternative partial solution to the cash needs problem.
To assist me in putting together my report, please prepare the following for distribution to the Board Members, and attach them to your explanatory memo:

1. A cash requirements budget for the above expenditures.

2. A handout for the Board Members showing the present value of the total expenditures by item, how you calculated your results and why you did it the way you did. Some of the Members have no substantial financial training.
HINT: liberal use of appendices is recommended!!

3. Your estimate of the monthly deposits required to meet the above expenses, assuming the sale of the West Winona facility, with an explanation for the Board as to how you came up with that figure.

As usual, I am sure it is unnecessary to point out again that most of the members of the Board of Directors have no particular training in accounting and are interested only in a clear explanation of the amounts and application of the funds discussed in this memo. Accordingly, I do not expect you to use GAAP - I expect you to use common sense! Give me documents I can present to the members and that they can understand. In other words I do not expect you to use any standard financial statement forms. In addition, please disregard all tax issues.

I will be accompanying the Chairman on an important fact-finding mission to Tahiti next week, and, accordingly, will not be available to clarify any of the above details. If there are facts you feel need to be further developed, you will have to make appropriate assumptions (and specify any such assumptions made in your work product).
Don''t forget that salary reviews are scheduled for the week following the Meeting.

Related Discussions:- Financial analysis

Asset Securitization Structures (Excel help), #questAs an assistant vice pr...

#questAs an assistant vice president at a regional bank, your boss has tasked you to acquire $100 million of residential mortgages to be securitized in a pass-through MBS. There mu

M.r, capital structure

capital structure

Planning and controlling the various business activities , Explain and crit...

Explain and critically evaluate : a)  The relevance of committed fixed costs in deciding the optimal mix of products to maximum a company's profit and the importance of relevant

Illustrate the method of appraising capital investments, Q. Illustrate the ...

Q. Illustrate the method of appraising capital investments? One of the potency of internal rate of return (IRR) as a method of appraising capital investments is that it is a di

Company default rate on account receivable when its too low, Can a company ...

Can a company have a default rate on its accounts receivable that is too low?  Explain. A company might have a default rate on AR that would be considered too low if by liberal

Valuation, Valuation The process of finding out the current value of an...

Valuation The process of finding out the current value of an asset or company is known as valuation. There are various techniques that can be utilized to find value, few are su

#titApplicability of an operating cycle, Discuss the applicability of an op...

Discuss the applicability of an operating cycle in cabbage growing business in Uganda.

Calculate the maximum amount, Determine the amounts to be recognised in pro...

Determine the amounts to be recognised in profit or loss and in other comprehensive income in respect of the property for the year ended 31 December 2010.   Evaluate the compliance

How is present value affected by change in the discount rate, How is presen...

How is present value affected by a change in the discount rate? Present value is inversely associated to the discount rate.  In other words current value moves in the opposite

Regulatory requirements for debentures, The following guideline...

The following guidelines are applicable for the issue of Fully Convertible Debentures (FCDs), Partly Convertible Debentures (PCDs) and Non-conve

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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