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Module Assignment Information
The aim of this assignment is to test your knowledge and understanding of key accounting and corporate finance concepts, theories and tools that can be used to critically analyse organisations.
Section A (70% of the total marks for this section)
You are required to select a company quoted on the FTSE [the name of selected company will be provided latter].
Imagine that you are acting as a financial advisor to a potential investor in that company. You are to produce a report of a maximum 2,500 words which covers the following issues for the last three years:
1) Profits, earnings and dividends (including a comprehensive ratio analysis) (15%)
2) Financial stability and liquidity (including a comprehensive ratio analysis (15%)
3) An analysis of the; customers, markets, products, growth and risks facing the company. A range of techniques may be used to facilitate this analysis including PESTLE and SWOT (20%)
4) A critical reflection on the company portrayed by journalists and other financial reports (10%)
5) Identify the asset value per share and the current market share price and assess whether or not your selected company represents an investment opportunity (10%)
It is essential that all sources of information are correctly referenced using the Harvard system.
Maximum words for this section: 2,500 words
Section B (30% of the total marks for this section)
Riverside Motorcycle Components Ltd. has carried out some research that shows that the business could provide a standard service that it has recently developed.
Provision of the service would require investment in a machine that would cost £100,000 payable immediately. Sales of the service would take place throughout the next five years. At the end of that time, it is estimated that the machine could be sold for £20,000.
Sales of the service would be expected to occur as follows:
Number of units
Next year (year 1) 5,000
Second year 10,000
Third year 15,000
Fourth year 15,000
Fifth year 5,000
It is estimated that the new service can be sold for £12 a unit, and that the relevant variable costs will total £8 per unit.
The company’s cost of capital is 12%.
1) Calculate the annual cash flows for each of the five years. (10%)
2) Calculate the ARR, Payback, NPV and IRR (20%)