The objective of this assignment is to encourage the students to

FINANCIAL MANAGEMENT INDIVIDUAL ASSIGNMENT
The objective of this assignment is to encourage the students to use excel spreadsheets
to aid in problem solving. Students are asked to solve a capital budgeting problem using
an excel spreadsheet. Please read the document carefully for all details regarding
structure/ submission.
Assignment question:
KKP Ltd is one of the key players in the instrumentation and automation business. The directors
of KKP Ltd are interested launching a new type of proximity sensor for food industry. The
company has recently completed a $75000 marketing study.
Start-up costs include $500,000 to build new machinery. Increased working capital in the form of
mostly inventory and WIP will have to be increased at the time of investment to the extent of
$25000 that will be recouped at the end of the life of the project.
The $500,000 machine will be depreciated at 10% straight line (prime cost) each year. At the end
of the 5th year, machine is expected to be sold for an estimated $220,000.
The directors believe that they can sell 5000 units per year. The selling price will be $50 per unit.
Variable costs per unit will be $20 per sensor. Other fixed costs are $100,000 per year starting
from year 1. The new venture will reduce production costs by $80000 per year. However, the
sales of gas analysers will be negatively affected, causing the sales to decrease by $17000 each
year.
Interest rate is 8% and tax rate is 30%.
Required:
Using Excel Spreadsheet, prepare a full analysis to be presented to the CFO of KKP Ltd
in evaluating whether either project should be started or not. Your analysis should include the
following:
• Table of cash flows
• Use of excel formulae where appropriate (refer eLearning video of Week-6)
• A written report (1500 words, +/- 10%) outlining your recommendation as to whether
KKP Ltd should proceed with either project.
Justify your recommendations using Quantitative (NPV, IRR, pay back, discounted payback, PVI)
and Qualitative issues (non-numerical issues… you can google to get an idea) and your analysis
relating to the project.
Marks will be awarded for:
• Set out of spreadsheet
i.Ease of reading spreadsheet
ii.Use of excel formulae in organised spreadsheet
iii.Overall presentation of answer including the written report.
* Carefully read the Report Format and Marking Rubric for required components and
presentation of formal report.
Total Marks for the assignment by
1) Organised Excel Spreadsheet
2) Concise Formal Business Report (1500 +/- 10% words)
Lecturer will assess whether the students have met the objective of the assignment
which is to encourage students to use excel spreadsheets to aid in problem solving and
write a concise business report. Students are asked to solve a capital budgeting problem
using an excel spreadsheet and present their analysis in a summary business report.
A copy of their formal REPORT including an assignment COVER SHEET and a copy of
their Excel Spreadsheet including
(a) a spreadsheet with values and
(b) a spreadsheet with excel formulas.
SUGGESTED FORMAT FOR ASSIGNMENT REPORT
Components of a FORMAL report are expected in the assignment structure. Following table
shows one example of major sections: (other sections may be added, if needed)
Structure Example :
COVER PAGE [ Must be correctly filled in; otherwise, you will forfeit marks]
Executive Summary
Table of Contents
Body
1. Introduction
2. Findings
2.a Quantitative (with explanation of results)
2.b Qualitative
3. Recommendations and Justifications
4. Further Recommendations
5. Conclusion
References
Appendix
Workings
Exact Copy of Excel Spreadsheet displaying values (not edited in Word doc)*
Exact Copy of Excel Spreadsheet displaying Excel formulas (not edited in Word doc)*