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FIN200 Assignment, T2 2014

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Question;FIN200;Assignment, T2 2014;1. List;and briefly describe the three general areas of responsibility for a chief;financial officer (CFO) of a selected non-financial company which is listed on;Australian Stock Exchange (ASX). How those responsibilities can affect ultimate;objective of the company. The name of company you chose should start with the;first letter of your name, surname or middle name. (Maximum of 1000 words);2. Chill Mount Creamery;manufactures a variety of Ice creams. The company is considering introducing a;new product (Yugo cream). The company?s manager has been provided with the;following information by their business analyst.;? The project has an;anticipated economic life of 5 years.;?The Company plans to;spend $1,300,000 on advertising campaign to boost sales.;?The Company?s interest;expense each year will be $500,000.;? The Company is;required to purchase a new machine to produce the new product. The machine?s;initial cost is $5,500,000. The machine will be depreciated on a straight ?;line basis over 5 years. The Company anticipates that the machine will last for;10 years, the salvage value after 5 years is $500,000.;? Six months ago the;Company also paid $300,000 to a firm to do research regarding new product.;? If the Company goes;ahead with the new product, it will have an effect on the Company?s net;operating capital. The forecasted net working capital will be $200,000 (at time;zero);? The new product is;expected to generate sales revenue of $1,500,000, 2,500,000, 3,500,000;4500,000 and 5,500,000 in year 1, 2, 3, 4 and 5 respectively. Each year the;operating cost (not including depreciation) expected to equal 30 percent of;sales revenue.;? In addition the;Company expects with introduction of new product, sale of other ice cream;increase by $500,000 after taxes each year.;? The Company?s overall;WACC is 7.5 percent. However, the proposed project is riskier than the average;project, the new project?s WACC is estimated to be 10 percent.;? The Company?s tax rate;is 30 percent.;? What is the net;present value, internal rate of return, payback period, discounted payback;period, and profitability index of the proposed project. Based on your analysis;should the project be accepted? Discuss.

 

Paper#48878 | Written in 18-Jul-2015

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