What are the gross profits, operating profits, net incomes, and net incomes attributable to non-controlling interests for these two companies over the 3-year period 2012-2014? Which company has had better financial results over this period of time?

It needs to be only 6 -8 sentences.

 

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Ann, age 61, and Bob, age 62, have a large number of investments in common stock of publicly traded corporations, some municipal bonds, and a money market cash account worth several million dollars. In addition, they own a ranch in Texas that may be worth $100,000,000. They have a large family consisting of three sons, four daughters, and fifteen grandchildren. What are some alternatives that Ann and Bob could consider in order to reduce their taxable estate, assuming that the estate tax law is not yet abolished or amended by Congress before the two taxpayers die? What are the consequences if Ann and Bob decide to gift investments worth $1,000,000 to each of their children and grandchildren? What are the consequences of leaving a large estate that will be divided among their children and grandchildren?

 

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STUDENT1:

Acquisition process goals as they relate to the changing times, and the recent needs of the Federal Agencies are a continuing effort. Understanding the goals of the Federal Agencies and needs of the government must have guidelines that allow for a broad initiative in terms of meeting the customer’s needs. Every single situation would be nearly impossible to cover in the FAR. It is however accounted for in the FAR, one part the council clearly understood, is that all knowing is impossible. The factual basis is in the FAR under the 1.102 Discussion, subpart (b), “Vision. All participants in the System are responsible for making acquisition decisions that deliver the best value product or service to the customer. Best value must be viewed from a broad perspective and is achieved by balancing the many competing interests in the System. The result is a system which works better and costs less.” (Council, 2016). I believe the Council was smart by stating the broad term of “Value”. It can be defined differently, however, this doesn’t always mean getting the “cheapest” product. In turn, this will allow for creativity and changes to be made due to culture, social climate, and environment. Obviously the cheapest doesn’t always mean the best value.

The Cycle will clearly start with an account of cultural, social climate, and environment when we develop the need. Although I would venture to say that much of it should be addressed in the Pre-Award phase. Reasoning is due to the impact of the customers and stakeholders. The social and cultural climate may affect whom will provide what, and how it is provided may be affected by the environment. For instance the social climate in a war torn country could easily pose a threat to the safety and delivery of the product or service being rendered. Culturally the country’s population may fight over the product or service, and their cultural differences may directly affect the end contract.

Reference:

Council, A. (2016, October 24). General Structure and Subparts. Retrieved from Acquisition.gov: https://www.acquisition.gov/sites/default/files/cu…

STUDENT2:

Federal acquisitions have greatly increased over the last 15 years, causing a lack of qualified personnel to provide proper oversight and quality assurance. This has caused excess money to be spent and false sense of product and service reliability. The federal acquisition process goals are very similar to what most people want, a quality product or service at a reasonable price that is available immediately or shortly after purchase. The problem with this is that “the demand for contract management talent exceeds the supply.” (National Contract Management Association, 2013). I found this very interesting as well as shocked that we are lacking the workforce to meet the demands of the government procurements as well as provide the quality assurance needed to ensure the government is not wasting money. For the past 10 years I have seen this very issue with wars in two countries. New problems required new services and new product which required more contracts in condensed timelines. This can lead to gaps and failures in the process. The second goal to federal acquisition is to ensure that purchased supplies and services are delivered or performed within the given timeline. According to the U.S. Government Accountability Office the $80 billion that is annually invested into information technology often failed, lacked or required additional time and money. This is because of the rapid growth of technology in the world makes it enticing to compete and want the latest technology. The federal government has recognized the need to grow this field and properly train and credential a workforce that can manage the federal government’s acquisitions.

 

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FIN309

Finance

Assignment 1 – Individual Assignment/TMA01

January 2017 Presentation

FIN309 Assignment 1

SIM UNIVERSITY Assignment 1 – Page 2 of 4

Individual Assignment

This assignment is worth 25% of the final mark for FIN309 Finance.

The cut-off date for this assignment is 15 February 2017, 2355hrs.

In this assignment, you are expected to:

 Evaluate investment proposals.

 Apply knowledge to decide appropriate financing plan and dividend policy.

 Demonstrate proficiency in writing.

___________________________________________________________________________

Question 1

You recently went to work for Jurong Parts Limited, a company listed on Catalist, which supplies auto repair parts used in the after-market automobiles like Nissan, Honda and Mitsubishi.

Chief Financial Officer of Jurong Port is concerned with which methods should be used to evaluate projects: payback period, net present value or internal rate of return.

(a) Explain the major drawback of using payback period method (including discounted payback period method) and give an example which can provide false decision when mutually exclusive projects are considered.

(6 marks)

(b) Appraise the main reason why net present value is the most appropriate method to be used in evaluating a project.

(4 marks)

(c) Jurong Port is considering two mutually exclusive projects with the following details:

Project A Project B

Life 3 years 3 years

Investment $5 million $5 million

NPV $836,000 $750,000

IRR 11% 12%

Opportunity cost 8% 8%

Since NPV method and IRR method show different decisions, explain how the difference can be reconciled.

(6 marks)

FIN309 Assignment 1

SIM UNIVERSITY Assignment 1 – Page 3 of 4

Question 2

(a) Capital Asset Pricing Model (CAPM) is often used to calculate the cost of equity. In deciding the risk-free rate of return, you have the following information on Treasuries:

Maturity Yield

1 year 2%

10 years 4%

15 years 5%

The market risk premium is always assumed to be positive. However, in practice, it is often seen that in some years the market return is negative showing premium to be negative and some years the market return is unusually high as market returns are based on the expectation of how the economy will move.

Given this information, explain why CAPM using 10-year Treasury rate as risk-free rate and using a positive risk premium is appropriate in calculating the cost of equity.

(6 marks)

(b) Jurong Port plans to finance a new project through issue of new bonds for $10 million. Since debt is used to finance the project, the accounts manager argues that the interest paid for the bond should become part of the expenses in calculating the project’s free cash flows and these cash flows should be discounted at the after-tax cost of debt.

Prepare a statement refuting the observations of the account manager.

(8 marks)

(c) Net Present Value Method is used as the main criteria to evaluate the projects. Analyse the issues that the management should consider in using net present value and explain how these issues can be resolved.

(10 marks)

Question 3

The current share price of Jurong Parts is $8.00 and last year’s dividend was $0.20. It also issued preferred shares several years ago, which pays a dividend of $0.33 per share and currently trades at $4.50 per share.

Security analysts are projecting that the ordinary dividends will grow at a rate of 5% a year. The firm also issued 10-year 6% coupon (semi-annual) bonds two years ago. The face value is $1,000 and the last traded price was $990.

The market risk premium is 6%, the risk-free rate is 3%, and Jurong Parts beta is 0.8. The firm uses a target capital structure with 45% debt, 5% preferred shares and 50% ordinary shares. The firm’s marginal tax rate is 17%.

FIN309 Assignment 1

SIM UNIVERSITY Assignment 1 – Page 4 of 4

(a) Calculate the cost of equity by applying both the capital asset pricing model (CAPM) and Gordon growth model, also known as the dividend discount model (DDM).

(10 marks)

(b) Calculate the cost of preference share and cost of debt.

(10 marks)

(c) Calculate the weighted average cost of capital (WACC). In doing so, use the average cost of equity derived in part (a).

(8 marks)

Question 4

You have been asked by the president of Jurong Parts to evaluate the proposed acquisition of a Computer Numeric Control (CNC) machine to manufacture a new type of alternator, ALT375. A feasibility study was commissioned three months ago at a cost of $65,000 to evaluate this opportunity.

The equipment’s basic price is $700,000, and it would cost another $50,000 to modify it for special use by your firm.

Based on findings from the feasibility study, Jurong Parts expects to sell 2,000 alternators in the first year. Demand is expected to increase by 400 units each year for the next three years. Thereafter, demand will fall by half. No sales are expected from year six onwards because cars using this part will all be scrapped.

Selling price is $250 per unit and not expected to fluctuate over the project life. The firm anticipates to earn a gross profit margin of 35%. Fixed operating costs in the first year is estimated to be $50,000 in year one and this will increase by inflation rate of 3%. Based on past experience, net working capital required, namely spare parts inventory, will be 10% of sales.

The CNC machine would depreciated equally over 3 years to zero net book value. However, it can be sold for $35,000 at the end of the project life. The firm’s marginal tax rate is 17% and the appropriate discount rate is 12%.

(a) Calculate the free cash flow from Year 0 to 5 relating to the proposed manufacturing of ALT375.

(28 marks)

(b) Calculate the net present value (NPV) of this opportunity and determine whether Jurong Parts should proceed with this project.

(4 marks)

—- END OF ASSIGNMENT —-

 

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