TFIN501 Corporate Finance 代写

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  • TOP Education Institute TFIN501 Corporate Finance Summer Term, 2015-2016
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    Due Date: 11 January 2016, 5 p.m. (Sydney time)
    Total Mark: 20 points
    General Rules and Requirements:
    The report should be prepared in a group (each group should have a minimum of three or a
    maximum of four students). Reports must be confined to 2,500 words. Your report must
    include a title page, a table of contents (based on your report headings), an introduction, and a
    body of the report, a conclusion and a list of references actually cited. Font type - Times New
    Roman (size 12), paragraph spacing - 1.5. Assignments should be submitted via Turnitin on
    Case Study #1 (12 points)
    Emu Electronics is an electronics manufacturer located in Box Hill, Victoria. The company's
    managing director is Shelly Chan, who inherited the company from her father. The company
    originally repaired radios and other household appliances when it was founded more than
    fifty years ago. Over the years, the company has expanded, and it is now a reputable
    manufacturer of various specialty electronic items. Robert McCanless, a recent MBA
    graduate, has been hired by the company in the finance department.
    One of the major revenue-producing items manufactured by Emu Electronics is a personal
    digital assistant (PDA). Emu Electronics currently has one PDA model on the market and
    sales have been excellent. The PDA is a unique item in that it comes in a variety of colours
    and is pre-programmed to play Jimmy Barnes's music. However, as with any electronic item,
    technology changes rapidly, and the current PDA has limited features in comparison with
    newer models. Emu Electronics has spent $750 000 developing a prototype for a new PDA
    that has all the features of the existing one, but adds new features, such as mobile phone
    capability. The company has spent a further $200 000 for a marketing study to determine the
    expected sales figures for the new PDA. Emu Electronics' production manager has produced
    estimates of the costs associated with manufacture of the new PDA. Variable costs are
    estimated at $97 per unit and fixed costs for the operation are expected to run at $3.4 million
    per year. The estimated sales volume is 68 000 units in Year 1; 79 000 units in Year 2; 105
    000 units in Year 3; 83 000 units in Year 4; and 64 000 units in the final year. The unit price
    of the new PDA will be $275. The necessary manufacturing equipment can be purchased for
    $20.5 million and will be depreciated for tax purposes over a seven-year life (straight-line to
    zero). It is believed the value of the manufacturing equipment in five years' time will be $3.5
    Net working capital for the PDAs will be 20% of sales and will have to be purchased at the
    beginning of the year for production to start. The cost of the raw materials is reflected in the
    variable unit cost of $97. Changes in NWC will first occur at the beginning of Year 1 based
    on the first year's sales. Emu Electronics has a 30% corporate tax rate and a 12% required
    TOP Education Institute TFIN501 Corporate Finance Summer Term, 2015-2016
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    Shelly has asked Robert to prepare a report that answers the following questions:
    1. What is the payback period of the project?
    2. What is the profitability index of the project?
    3. What is the IRR of the project?
    4. What is the NPV of the project?
    5. How sensitive is the NPV to changes in the price of the new PDA?
    6. How sensitive is the NPV to changes in the quantity sold?
    Case study #2 (8 points)
    International Value Bank (IVB) Ltd has 10 million fully paid ordinary shares on issue and its
    shares are listed on the Australian Securities Exchange (ASX). About 60 per cent of the
    shares are held by Australian financial institutions and the closing price per shares on 15
    October 2014 was $4. The company has a fully drawn $500 million bank loan facility, which
    is due to be rolled over or repaid on 30 November 2014. IVB Ltd is close to breaching an
    important covenant and its directors have resolved to raise equity to repay the loan on or
    before the due date. The company’s last share issue occurred in 2011.
    a) Assuming an issue price of $3.80 per share, what is the maximum amount IVB can
    raise by making a share placement without the shareholder approval?
    b) Advise the directors on the feasibility of raising the required funds by a traditional
    renounceable or non-renounceable rights issue.
    c) After receiving your advice, the directors are considering a combination of an
    institutional placement followed immediately by an accelerated entitlement offer.
    Does the maximum amount that can be raised by the placement remain the same as in
    part a? Why, or why not? Review your answer to part b. How will your advice
    change, given an accelerated offer structure is to be used?
    d) Assume the company proceeds with an accelerated entitlement offer. From the
    viewpoint of IVB’s shareholders, what is the main effect of making the offer
    renounceable rather than non-renounceable? Will a renounceable offer necessarily
    ensure that all shareholders are treated equally? Why or why not?