MBA – ADVANCED CORPORATE FINANCE
ASSIGNMENT BRIEF
This coursework assignment consists of one piece of work divided into two parts. You should ensure that you answer all the sections.
Beverages & Spirits Ltd (B&S Ltd) has been manufacturing beverages. In recent years B&S Ltd has noted that its costs have risen substantially and it is considering closing one or more of its production plants.
Projected annual future costs and revenues for each plant are as shown in Table 1. The projected costs and revenues are per unit. In all, B&S Ltd expects to sell 100,000 units of each beverage each year.
Table 1
Costs are in USD$
Each factory lasts, in total, for five years and then becomes obsolete. The initial cost of each factory and the associated research and development costs for each beverage were as
B&S Ltd must also pay a service charge on the factory, which is payable immediately if production at the factory continues. These are shown in Table 3. The service fee is not payable if production ends at the factory immediately; instead each factory could be sold for the amounts detailed in Table 3. These amounts will be realised only if production ends immediately.
Table 3
Note:
Depreciation is charged on a straight line basis over the life of the project.
Research and development expenditure is treated in the same way. Ignore taxation. The
estimated cost of capital for B&S Ltd is 13%. B&S Ltd has $180,000,000 invested in index
linked gilts which provide an annual return of 4%. B&S Ltd usually applies NPV and IRR
investment appraisal methods. It does not currently use payback.
Required:
Overall assignment (Total 100 marks)
(Maximum 4000 words)
Assignment Specifics:
THIS IS AN INDIVIDUAL PIECE OF WORK.
This assignme nt count s 100% t owards your final grade .
Yourreport should be grounded in relevant theory – use the core and recommended reading.
Reference all sources appropriately, using the Harvard Referencing System.
The word count of your re port is 4000 words-(/+10%).
The Assignment should be accomplished by 26/08/2016.
Late submissions will not be accepted.
Use Tim e s Rom an pt 12, wit h 1½ or double spacing.
Page s MUST be num be re d.
He adings and sub-headings should be clear and visible.
The t e xt should flow smoot hly, wit h e ach se citon leading naturally and logically to the next.
ASSIGNMENT BRIEF
This coursework assignment consists of one piece of work divided into two parts. You should ensure that you answer all the sections.
Beverages & Spirits Ltd (B&S Ltd) has been manufacturing beverages. In recent years B&S Ltd has noted that its costs have risen substantially and it is considering closing one or more of its production plants.
Projected annual future costs and revenues for each plant are as shown in Table 1. The projected costs and revenues are per unit. In all, B&S Ltd expects to sell 100,000 units of each beverage each year.
Table 1
Costs are in USD$
| Factory | Revenues | Materials | Labour Costs | Overheads |
| Orange | 60 | 10 | 5 | 25 |
| Apple | 180 | 130 | 25 | 45 |
| Peach | 100 | 20 | 60 | 20 |
| Pear | 350 | 85 | 225 | 150 |
Each factory lasts, in total, for five years and then becomes obsolete. The initial cost of each factory and the associated research and development costs for each beverage were as
| shown in Table 2 Factory | Table 2. These were paid Initial Cost($) | two years ago when production commenced. Research and Development |
| Orange | 10,000,000 | Costs ($)2,000,000 |
| Apple | 15,000,000 | 5,000,000 |
| Peach | 20,000,000 | 1,000,000 |
| Pear | 30,000,000 | 2,000,000 |
B&S Ltd must also pay a service charge on the factory, which is payable immediately if production at the factory continues. These are shown in Table 3. The service fee is not payable if production ends at the factory immediately; instead each factory could be sold for the amounts detailed in Table 3. These amounts will be realised only if production ends immediately.
Table 3
| Factory | Service Charge ($) | Resale Value ($) |
| Orange | 10,000,000 | 4,000,000 |
| Apple | 2,000,000 | 8,000,000 |
| Peach | 3,000,000 | 3,000,000 |
| Pear | 6,000,000 | 7,000,000 |
Note:
Depreciation is charged on a straight line basis over the life of the project.
Research and development expenditure is treated in the same way. Ignore taxation. The
estimated cost of capital for B&S Ltd is 13%. B&S Ltd has $180,000,000 invested in index
linked gilts which provide an annual return of 4%. B&S Ltd usually applies NPV and IRR
investment appraisal methods. It does not currently use payback.
|
Required:
Overall assignment (Total 100 marks)
(Maximum 4000 words)
Assignment Specifics:
THIS IS AN INDIVIDUAL PIECE OF WORK.
This assignme nt count s 100% t owards your final grade .
Yourreport should be grounded in relevant theory – use the core and recommended reading.
Reference all sources appropriately, using the Harvard Referencing System.
The word count of your re port is 4000 words-(/+10%).
The Assignment should be accomplished by 26/08/2016.
Late submissions will not be accepted.
Use Tim e s Rom an pt 12, wit h 1½ or double spacing.
Page s MUST be num be re d.
He adings and sub-headings should be clear and visible.
The t e xt should flow smoot hly, wit h e ach se citon leading naturally and logically to the next.
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