Recent Question/Assignment
Unit: AFCM 202, Financial Management
Program: Bachelor of Business
Trimester: 2, 2014
Assignment Instructions
Objective
This assignment is designed to develop your understanding of present value technique.
Case
John Malcom, manager of the Dairy Products Division of FitzGerald Famous Foods Limited, was pleased with his division’s performance over the past three years. Each year, divisional profits had increased and he had earned a large bonus. Bonuses are based on the division’s reported income. John also received considerable attention from senior management. A vice president told him that, if his performance over the next three years matched the first three, he would be promoted to higher management. Determined to meet these expectations, John made sure he personally reviewed every capital budget request. He wanted to be certain that any funds invested would provide good, solid returns. The division’s cost of capital is 12%. At the moment, he is reviewing two independent requests. Proposal A involves automating a manufacturing operation that is currently labour-intensive. Proposal B centers on developing and marketing a new ice cream product. Proposal A requires an initial outlay of $275,000 and proposal B requires $325,000. Both projects could be funded given the status of the division’s capital budget.
Both have an expected life of six years and have the following projected after-tax cash flows:
Year Proposal A Proposal B
$ $
1 150,000 --37,500
2 125,000 --25,000
3 75,000 --12,500
4 37,500 212,500
5 25,000 275,000
6 12,500 337,500
After careful consideration of each proposal, John approved funding of Proposal A and rejected Proposal B.
Required:
The Directors of FitzGerald Famous Foods are not confident that John made the right decision. The Directors have asked for your advice which should take into account the following points:
a) List and briefly explain the methods that the company could use to evaluate a potential investment. How are these methods related to each other, if at all? Which method is the most effective? Why?
b) Calculate the NPV for each proposal. Explain each answer.
c) Calculate the IRR for each proposal. Explain each answer.
d) Calculate the payback period for each proposal. Explain each answer.
e) Based on your analysis, do you agree with John’s choice of Proposal A? Why or why not? Justify your advice to the
Board.
+++++++
General instructions
This assignment may be completed and submitted on either an individual or small group basis. A ‘small group’ can consist of two or three students. Groups are responsible for selecting and managing their own members.
Whether completing the assignment on an individual or group basis, you are free to discuss material and the assignment questions with your fellow students. However, the final assignment, when submitted, is expected to be unique, with regard to both form and content.
Assessment value
This assignment is worth 15% towards your semester aggregate. Attempt all five (5) questions. Each question carries 10 marks for a total of 50 marks, convertible to 15%.
Due date
Your assignment must be submitted by 4.00pm, Thursday, 17 September AEST (Week 8). Students are encouraged to submit assignments comfortably before the close-off time.
Length
1500 words (+/-10%), excluding reference list, diagrams, headers, footers.
Submission
Should you need an extension, please ensure that you have made application comfortably before the due date.
Other important points:
• Treat each of the questions discreetly. Therefore, answer each of the specific questions as they stand.
• You are required to demonstrate scholarly discussion, critical and analytical skills and to express your position effectively on any issues uncovered.
• You are encouraged to use the resources of the library.
• Please observe normal academic conventions with regard to layout, formatting, in-text referencing and sourcing. A conservative style of presentation is preferred, using Times New Roman, Font Size 12, or similar. Please avoid using over-sized fonts, excessive artwork and other eccentricities.
• A reference list should be presented at the end of the assignment.
• Do not submit your assignment in plastic sleeves or a binder. The pages of the assignment should be simply stapled in the top left hand corner.
• Late submission, unless authorized, will be penalised.
See your lecturer if you have any specific queries.
Dr Mark St Leon
Lecturer
Kent Institute of Business & Technology, Sydney
18 August 2014
Program: Bachelor of Business
Trimester: 2, 2014
Assignment Instructions
Objective
This assignment is designed to develop your understanding of present value technique.
Case
John Malcom, manager of the Dairy Products Division of FitzGerald Famous Foods Limited, was pleased with his division’s performance over the past three years. Each year, divisional profits had increased and he had earned a large bonus. Bonuses are based on the division’s reported income. John also received considerable attention from senior management. A vice president told him that, if his performance over the next three years matched the first three, he would be promoted to higher management. Determined to meet these expectations, John made sure he personally reviewed every capital budget request. He wanted to be certain that any funds invested would provide good, solid returns. The division’s cost of capital is 12%. At the moment, he is reviewing two independent requests. Proposal A involves automating a manufacturing operation that is currently labour-intensive. Proposal B centers on developing and marketing a new ice cream product. Proposal A requires an initial outlay of $275,000 and proposal B requires $325,000. Both projects could be funded given the status of the division’s capital budget.
Both have an expected life of six years and have the following projected after-tax cash flows:
Year Proposal A Proposal B
$ $
1 150,000 --37,500
2 125,000 --25,000
3 75,000 --12,500
4 37,500 212,500
5 25,000 275,000
6 12,500 337,500
After careful consideration of each proposal, John approved funding of Proposal A and rejected Proposal B.
Required:
The Directors of FitzGerald Famous Foods are not confident that John made the right decision. The Directors have asked for your advice which should take into account the following points:
a) List and briefly explain the methods that the company could use to evaluate a potential investment. How are these methods related to each other, if at all? Which method is the most effective? Why?
b) Calculate the NPV for each proposal. Explain each answer.
c) Calculate the IRR for each proposal. Explain each answer.
d) Calculate the payback period for each proposal. Explain each answer.
e) Based on your analysis, do you agree with John’s choice of Proposal A? Why or why not? Justify your advice to the
Board.
+++++++
General instructions
This assignment may be completed and submitted on either an individual or small group basis. A ‘small group’ can consist of two or three students. Groups are responsible for selecting and managing their own members.
Whether completing the assignment on an individual or group basis, you are free to discuss material and the assignment questions with your fellow students. However, the final assignment, when submitted, is expected to be unique, with regard to both form and content.
Assessment value
This assignment is worth 15% towards your semester aggregate. Attempt all five (5) questions. Each question carries 10 marks for a total of 50 marks, convertible to 15%.
Due date
Your assignment must be submitted by 4.00pm, Thursday, 17 September AEST (Week 8). Students are encouraged to submit assignments comfortably before the close-off time.
Length
1500 words (+/-10%), excluding reference list, diagrams, headers, footers.
Submission
Should you need an extension, please ensure that you have made application comfortably before the due date.
Other important points:
• Treat each of the questions discreetly. Therefore, answer each of the specific questions as they stand.
• You are required to demonstrate scholarly discussion, critical and analytical skills and to express your position effectively on any issues uncovered.
• You are encouraged to use the resources of the library.
• Please observe normal academic conventions with regard to layout, formatting, in-text referencing and sourcing. A conservative style of presentation is preferred, using Times New Roman, Font Size 12, or similar. Please avoid using over-sized fonts, excessive artwork and other eccentricities.
• A reference list should be presented at the end of the assignment.
• Do not submit your assignment in plastic sleeves or a binder. The pages of the assignment should be simply stapled in the top left hand corner.
• Late submission, unless authorized, will be penalised.
See your lecturer if you have any specific queries.
Dr Mark St Leon
Lecturer
Kent Institute of Business & Technology, Sydney
18 August 2014
Looking for answers ?
Recent Questions
Assessment Criteria for Written Report (20%)• Submission of a minimum 1500 to maximum 1800-words written report due from week 9. You will submit your written report one week after you have undertaken the...Assessment 2: (20%) Case Study Presentation Due Date weeks 10This assessment builds on your theoretical knowledge and tests your ability to apply this knowledge to practice.you are required to formulate...Assessment 2Assessment 2Report: 30%Word count: 1400 – 1600 wordsDue date: Sunday of Week 8DescriptionYou are playing the role of a community service worker supporting a young adult son who is 18 years...1500-1800 wordsInstructions From TutorPlease download the eTask3 spreadsheet from Canvas and save the eTask spread as an Excel file. The main content of the force method is taught in Lectures 6,7&8.eTask3.1 is a...ASSIGNMENT INSTRUCTIONSAssessment Practical assessmentAssessment code: 011Academic Year: 2023/2024Trimester: 2Module Title: Critical Perspectives on Cross-Border BusinessModule Code: MOD009194Level: 6Module...Information Systems Analysis & DesignAssignmentDue date: Week 5 Friday (5 Apr 2024) 11:59 pm AESTWeighting: 30%Length: 1,200 to 1,500 words (penalty will apply if the length is outside this limit)Assessment...Show All Questions