CORPFIN 7101 managerial finance assignment answers
{` University of Adelaide Business School MANAGERIAL FINANCE `}
Assignment CASE 1
Sam Harrison has been working as a petroleum engineer for the last 10 years largely on offshore oil rigs in Western Australia. The fall in the price of oil and gas since the beginning of the COVID 19 pandemic has caused his company to reduce production and to cut the workforce on its rigs. Redundancy packages were offered to employees and Sam decided it was time to move back to Adelaide and to retrain in order to take up employment opportunities in the expanding carbon storage projects being undertaken in the Cooper Basin in South Australia. Taking into account his personal savings plus redundancy payment, Sam has managed to save $400,000 which currently is earning 1.2% annual interest in a term account with his bank. Sam plans to withdraw $300,000 from the account and invest it in shares.
In discussions with a financial advisor recommended by his bank, he understands that he should consider the advantages of investing in a portfolio and the concept of systematic risk. After considering a range of possible companies recommended by the financial advisor, Sam has decided that he would like to invest his money in two companies, namely York Mining Ltd and Torrens Solar Energy Ltd. The financial advisor recommends that Sam invest half his available funds in each company. However, Sam is not so sure this is the right approach to take. He recalls reading about betas and systematic risk, and after a search of various internet sites has found that shares in York Mining have a beta of 1.40, and shares in Torrens Solar Energy 0.8. In addition, he also noted that the general consensus amongst financial analysts is that the current expected return on the ASX 200 Index is 7.2% and the risk-free rate is 1.8%.
- Explain to Sam the significance of beta and the difference in beta between the shares in these two companies?
- What is the expected return on each of these shares?
- Suppose Sam is aiming to achieve a return of 8.5% on his funds invested in a portfolio consisting of these two shares. How much of his funds should be invested in each of these shares to achieve this return?
- What is the beta of the resultant portfolio?
- Would you support Sam’s investment strategy?
Assignment CASE 2
Nationwide Foods Ltd has been operating for seven years in Adelaide and has quickly established a strong reputation across the eastern states as a reliable supplier of high quality organic fruit, vegetables, meat and diary products to high-end clients such as hotels, restaurants, airlines and special event catering services. The foundation of the business is contracts with reputable producers across various regions in South Australia who are dedicated to producing organic food, the adoption of modern production and food handling technology, and very receptive to meeting the company’s specialist needs as its range of clients grows.
The business has grown rapidly since it commenced operations, supported by a successful IPO five years ago, and an issue of unsecured notes two year’s later.
The COVID 19 shutdown of states has had a profound impact on the business, especially sales to a number of key suppliers to hotels, restaurants, airlines and upmarket retail outlets. This has caused the company to consider export opportunities to make up for a very significant fall in produce sales to clients in Australia, something that it was planning to investigate in 2022, but now it has the time to explore this potential development.
It has recently been approached by representatives of Middle East airlines to consider opportunities for the export of the company’s fresh produce to the Middle East. The company subsequently decided to send two of its senior executives to the region to explore opportunities in July 2020, despite the need to quarantine on their return. Both have returned with encouraging reports. A trial shipment of produce to a distributor in Dubai in September was well received with the promise of follow up orders provided the company is able to maintain a steady flow of a wide range of fresh produce.
The company is aware that meeting the volume and quality requirements of clients in the Middle East will be a critical part of the development of a business model for exporting fresh produce to this region. It is also aware that its current processing and storage facilities are inadequate to support further growth of its business. It will need to build a new plant to facilitate the development of an export business. The company had purchased land close to Adelaide Airport some three years ago for $4.0 million in anticipation of expanding its business, and to be able to easily link its exports of perishable goods to the regular flight schedules of Qatar and Emirates airlines once they resume regular flights to the Middle East. This land would be the site of a new plant to facilitate an export business. The company recently received an offer of $4.5 million for the land. It is anticipated that the land will increase in value at the rate of 5% per annum for the foreseeable future.
In September you were asked by the CEO of the company to lead an evaluation team of key people from various parts of the company to develop the business plan for the proposed new export project. The CEO plans to take your recommendation to the December 2020 meeting of the company’s Board of Directors.
Your team has been working on the project for two months and has estimated that a new plant will cost $12.5 million to construct including specialist equipment purchased from a supplier in Italy for processing, packaging, and storage of produce to meet high standards required by potential clients in the Middle East, all of which can be depreciated on a straight-line basis over eight years for tax. In addition, at the end of the project’s life, estimated to be five-years, the plant and equipment could be scrapped for $3.2 million. There will also be a need to invest $500,000 in initial net working capital.
The project team has had discussions with the local council concerning the potential use of the land, and has been assured that building approvals would be quickly granted. Consequently, it is expected that construction of the plant could commence in February 2021 and be completed by the end of that year.
Based on research undertaken by the company’s marketing team and ZOOM meetings with potential clients in the Middle East, it is estimated that the company can sell $13 million of produce annually to clients in the region, the total capacity of the new plant, although this volume of export business will also require some air freighting through Melbourne Airport given the limits on available space on regular flights from Adelaide to the Middle East. Variable costs are estimated to be 50 per cent of sales, and fixed costs at $1 million a year.
The company’s CFO has informed the project team that the company will have to raise new capital to fund the investment in the project. The company’s current capital structure consists of the following:
Debt: 190,000 7.6% coupon unsecured notes with five years to maturity. These notes are currently priced at 98% of face value of $100, with half yearly coupon payments.
Equity: 5,000,000 ordinary shares outstanding currently selling for $3.72 per share. The company’s ordinary shares currently have a beta of 1.1, the market risk premium is 7%, and the risk-free rate is 3.5%.
The CFO has indicated that the company would use its investment bank to raise the capital required for the project, should it be approved, consistent with its current capital structure. Moreover, the company would not be able to allocate any retained earnings to the project as these funds are already committed to other projects. Subsequent discussions with the bank indicated that the costs and fees associated with raising new capital would be 7% on an issue of ordinary shares, and 4% on new debt issues.
The CFO considers that this export-based project is somewhat more risky than the typical domestic focused project undertaken by the company in the past. She has instructed you to use a risk adjustment factor of +5% in evaluating this project.
Based on all the information collected, you now need to develop a recommendation for the CEO, and draft a report for the Board of Directors to consider at its December meeting.
The company tax rate is 30%.
- Calculate the net present value and internal rate of return for the project. Would you recommend the project to the CEO?
- Briefly indicate any further analysis, if any, that you would recommend be undertaken before a final decision is made.
Assignment CASE 3
Surgical Robotics Ltd is a small Adelaide-based manufacturer of robotic surgical equipment incorporating research and development work undertaken by a research team at the University of Adelaide. The company has grown rapidly with wide adoption of its equipment in public hospitals and specialist clinics in Australia. This growth has been funded by retained earnings and two share issues, enabling the company to retain an all-equity capital structure since it was listed on the ASX.
At its last meeting the company’s directors discussed a proposal from the CFO to change the company’s capital structure to one with debt representing 30% of the value of the company. The directors, however, were not convinced that this would be in the best interests of long-term shareholders who had invested in the company partly on the basis of its business strategy and conservative financing policy.
The company currently has 1,000,000 shares outstanding, and the current market price is $5.00. EBIT is expected to be $4,000,000 and is forecast to remain stable indefinitely, given that future sales will largely be based on the purchase of replacement equipment. The interest rate on new debt is 7%. The company has just changed its dividend policy to one involving a payout rate of 100% that it plans to maintain indefinitely now its rapid growth phase is over.
Jessica Henderson is a shareholder and director of the company with a holding of 100,000 shares. She is unhappy with the decision of her fellow directors. She believes that the use of debt by the company would create value for its shareholders since debt is usually cheaper than equity capital. New debt capital raised by the company could be used to buy back its shares, and provide a cash return to shareholders who have supported the past growth of the company and elect to take up the buyback offer.
In order to boost her arguments in support of a change in capital structure, Jessica has sought your advice. She wants you to consider how she would benefit from the change in capital structure as an example to share with her fellow directors. You recall the Modigliani and Miller analysis from your time at university, and will use this as a guide to the advice you would provide to Jessica.
- As a first step, consider the impact of a change in the debt ratio of the company from 0 to 30% on Jessica’s annual income from her shares assuming the company is not subject to company tax. Assume that Jessica could invest any proceeds from re-purchase of her shares in an investment earning 7% per annum. What aspects of this analysis, if any, would you highlight in your report to Jessica?
- Now consider this change in capital structure in the context of the company being subject to company tax at the rate of 30%. What impact is this likely to have on Jessica’s income and the value of the company.?
- What other issues should you bring to Jessica’s attention in your report?
Diploma Universities Assignments
Laureate International Universities Assignment
Holmes Institute Assignment
Tafe NSW
Yes College Australia
ACC508 Informatics and Financial Applications Task 2 T2, 2019
ACC512 Accounting
ACC520 Legal Regulation of Business Structures Semester 2, 2019
ACCT20074 Contemporary Accounting Theory Term 2 Assessment 3
AERO2463 Computational Engineering Analysis : Assignment 4
B01DBFN212 Database Fundamentals Assessment 1
BE01106 - Business Statistics Assignment
BFA301 Advanced Financial Accounting
BFA504 Accounting Systems Assessment 3
BSB61015 Advanced Diploma of Leadership and Management
BSBADV602 Develop an Advertising Campaign
BSBCOM603 Plan and establish compliance management systems case study
BSBCOM603 Plan and establish compliance management systems Assessment Task 1
BSBCOM603 Plan and establish compliance management systems Assessment Task 2
BSBCOM603 Plan and establish compliance management systems Assessment Task 3
BSBFIM501 Manage Budgets And Financial Plans Assessment Task 1
BSBHRM602 Manage Human Resources Strategic Planning
BSBINM601 Manage Knowledge and Information
BSBWOR501 Assessment Task 3 Plan Personal Development Plan Project
BSBMGT517 Manage Operational Plan
BSBWHS521 Ensure a Safe Workplace For a Work Area
BSBWRK510 Manage employee relations
BUSS1030 Accounting, Business and Society
CAB202 Microprocessors and Digital Systems Assignment Help
CHC40213 Certificate IV in Education Support
CHCAGE001 Facilitate the empowerment of older people
CHCAGE005 Provide support to people living with dementia
CHCCCS023 Support independence and wellbeing
CHCCCS025 Support relationships with carers and families
CHCCOM005 Communicate and CHCLEG001 Work Legally Ethically
CHCDIS002 Follow established person-centred behaviour supports
CHCECE019 Early Childhood Education and Care
CHCHCS001 Provide home and community support services
COMP10002 Foundations of Algorithms
COMP90038 Algorithms and Complexity
COSC2633/2637 Big Data Processing
COSC473 Introduction to Computer Systems
CPCCBC5011A Manage Environmental Management Practices And Processes In Building And Construction
CPCCBC5018A Apply structural Principles Medium rise Construction
CSE3OSA Assignment 2019
ELEC242 2019 Session 2
ENN543 Data Analytics and Optimisation
ENN543 Data Analytics and Optimisation Semester 2, 2019
FINM202 Financial Management Assessment 3 Group Report
Forensic Investigation Case Assignment ECU University
HA2042 Accounting Information Systems T2 2019
HC1010 Holmes Institute Accounting For Business
HC2112 Service Marketing and Relationship Marketing Individual Assignment T2 2019
HC2121 Comparative Business Ethics & Social Responsibility T2 2019
HI5002 Holmes Institute Finance for Business
HI5003 Economics for Business Trimester 2 2019
HI5004 Marketing Management T1 2020 Individual Report
HI5004 Marketing Management T1 2020 Group Report
HI5004 Holmes Institute Marketing Management
HI5014 International Business across Borders Assignment 1
HI5014 International Business across Borders
HI5017 Managerial Accounting T2 2019
HI5017 Managerial Accounting T1 2019
HI5019 Tutorial Questions 1
HI5019 Strategic Information Systems for Business and Enterprise T1 2020
HI5019 Holmes Institute Strategic Information Systems T2
HI5019 T2 2019
HI5019 T1 2019
HI5020 Corporate Accounting T3 2019
HI5020 Corporate Accounting T2 2019
HI6005: Management and Organisations in a Global Environment
HI6006 Tutorial questions
HI6006 Competitive Strategy Individual T1 2020
HI6006 Holmes Institute Competitive Strategy
HI6006 Competitive Strategy T3 2019
HI6007 Statistics for business decisions
HI6007 Assessment 2 T1 2020
HI6007 T1 2019
HI6008 T2 2019
HI6008 Holmes Institute Research Project
HI6025 Accounting Theory and Current Issues
HI6026 Audit, Assurance and Compliance Assignment Help
HI6026 Audit, Assurance and Compliance
HI6027 business and corporate law tutorial Assignment T1 2021
HI6027 Business and Corporate Law T3 2019
HI6027 Business and Corporate Law T2 2019
HI6028 Taxation Theory, Practice and Law T2 2021
Hi6028 taxation theory, practice and law Final Assessment t1 2021
HI6028 Taxation Theory, Practice and Law T2 2019
HI6028 Taxation Theory T1 2019
HI6028 Taxation Law Holmes
HLTAAP001 Recognise healthy body systems
HLTWHS002 Follow safe practices for direct client care
HOTL5003 Hotel Property and Operations
HPS771 - Research Methods in Psychology A
HS2021 Database Design
ICTICT307 Customise packaged software applications for clients
IFN619 Data Analytics for Strategic Decision Makers
INF80028 Business Process Management Swinburne University
ISY2005 Case Assignment Assessment 2
ISYS326: Information Systems Security Assignment 2, Semester 2, 2019
ITAP3010 Developing Data Access Solutions Project
ITECH1103- Big Data and Analytics – Lab 3 – Working with Data Items
ITECH1103- Big Data and Analytics Assignment Semester 1, 2020
ITECH 5500 Professional Research and Communication
Kent Institute Australia Assignment
MA5830 Data Visualisation Assignment 2
MGMT7020 Project Management Plan
Mgt 301 Assessment 3
MGT215 Project Management Individual Assignment
MIS102 Data and Networking Assignment Help
MITS4002 Object Oriented Software Development
MITS5002 Software Engineering Methodology
MKT01760 Tourism Planning Environments Assessment 4
MKT01760 Tourism Planning Environments
MKT01906 International Tourism Systems
MKT5000 Marketing Management S2 2019
MNG03236 Report Writing SCU
MRE5003 Industrial Techniques In Maintenance Management Assignment 4
MRE5003 Industrial Techniques In Maintenance Management Assignment 3
MRE5003 Industrial Techniques In Maintenance Management
Network Security and Mitigation Strategies Answers
NIT2213 Software Engineering Assignment
NSB231 Integrated Nursing Practice Assessment Task 1
Science Literacy Assessment 4
SIT323 Practical Software Development T 2, 2019
SIT718 Using aggregation functions for data analysis
SITXCOM002 Show Social and Cultural Sensitivity
TLIL5055 Manage a supply chain
TLIR5014 Manage Suppliers
USQ ACC5502 Accounting and Financial Management
UTS: 48370 Road and Transport Engineering Assessment 2
CHCAGE001 Facilitate the empowerment of older people
CHCAGE005 Provide support to people living with dementia
CHCCCS011 Meet personal support needs
CHCCCS015 Provide Individualised Support
CHCCCS023 Support independence and wellbeing
CHCCCS025 Support relationships with carers and families
CHCCOM005 Communicate and work in health or community services
CHCDIS001 Contribute to ongoing skills development
CHCDIS002 Follow established person-centred behaviour supports
CHCDIS003 Support community participation and social inclusion
CHCDIS005 Develop and provide person-centred service responses
CHCDIS007 Facilitate the empowerment of people with disability
CHCDIS008 Facilitate community participation and social inclusion
CHCDIS009 Facilitate ongoing skills development
CHCDIS010 Provide person-centred services
CHCDIV001 Work with diverse people
CHCHCS001 Provide home and community support services
CHCLEG001 Work legally and ethically
CHCLEG003 Manage legal and ethical compliance
HLTAAP001 Recognise healthy body systems
HLTAID003 Provide First Aid
HLTHPS007 Administer and monitor medications
HLTWHS002 Follow safe work practices for direct client care
Assignment 2 Introduction to Digital Forensics
MGT603 Systems Thinking Assessment 1
MGT603 Systems Thinking Assessment 2
Hi5017 Managerial Accounting T1 2021
HI6028 Taxation Theory, Practice and Law T1 2021
OODP101 Assessment Task 3 T1 2021
ITNE2003R Network Configuration and Management Project
Australia Universities
ACT
Australian Catholic University
Australian National University
Bond University
Central Queensland University
Charles Darwin University
Charles Sturt University
Curtin University of Technology
Deakin University
Edith Cowan University
Flinders University
Griffith University
Holmes Institute
James Cook University
La Trobe University
Macquarie University
Monash University
Murdoch University
Queensland University of Technology
RMIT University
Southern Cross University
Swinburne University of Technology
University of Adelaide
University of Ballarat
University of Canberra
University of Melbourne
University of Newcastle
University of New England
University of New South Wales
University of Notre Dame Australia
University of Queensland
University of South Australia
University of Southern Queensland
University of Sydney
University of Tasmania
University of Technology Sydney
University of the Sunshine Coast
University of Western Australia
University of Wollongong
Victoria University
Western Sydney University
Year 11 - 12 Certification Assignment
Australian Capital Territory Year 12 Certificate
HSC - Higher School Certificate
NTCE - Northern Territory Certificate of Education
QCE - Queensland Certificate of Education
SACE - South Australian Certificate of Education
TCE - Tasmanian Certificate of Education
VCE - Victorian Certificate of Education
WACE - Western Australia Certificate of Education
Assignment Service Australia | CDR Writing Help | TAFE Assignment Help | Perth Assignment Help | Melbourne Assignment Help | Darwin Assignment Help | Adelaide Assignment Help | Assignment Help Victoria | Sydney Assignment Help | Canberra Assignment Help | Brisbane Assignment Help | CDR for Australian immigration | Course For Australian History