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
|
6 Years
|
6 Years
|
|
Year 1 revenue (£)
|
150,000
|
85,000
|
70,000
|
|
Year 2 revenue (£)
|
230,000
|
120,000
|
125,000
|
|
Year 3 revenue (£)
|
400,000
|
190,000
|
150,000
|
|
Year 4 revenue (£)
|
300,000
|
195,000
|
165,000
|
|
Year 5 revenue (£)
|
250,000
|
200,000
|
120,000
|
|
Year 6 revenue (£)
|
140,000
|
180,000
|
80,000
|
|
Scrap value (£)
|
150,000
|
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
|