代写 MAF 203 Business Finance Group Assignment
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代写 MAF 203 Business Finance Group Assignment
MAF 203 – Business Finance Group Assignment Case Study
T1/2016 Capital Budgeting – AusSteel Ltd
Page 1
Generic instructions for Group Assignment (Assessment 3)
Due: Friday 13th May, 2016 (5:00 pm), via CloudDeakin
Weight: 30% of the overall assessment
Groups Students to form groups of three (3) minimum or four (4) maximum.
Once the group is registered on CloudDeakin, the member(s) of
group will not be allowed to switch to another group.
NO exemption is granted.
Rubric A copy of the Marking Rubric is available on CloudDeakin.
Introduction
This assignment consists of two parts:
Part A (85 marks)
Part A is to be submitted in the form of a report of not more than 3,000 words. The report
is required to respond to Eight (8) questions addressing the capital budgeting aspects of the
AusSteel case study.
Part B (15 marks)
Part B is not part of the formal report. It consists of a single Capital Rationing question.
Assignment Details
1. The assignment has a weighting of 30% of your overall mark for the unit. Your group
mark will be converted to a score out of 30. All members of the group will receive the
same mark.
2. All students should have been enrolled in a group (of 3-‐4 students) to submit the
assignment on CloudDeakin. You can from a group with any student from any seminar
group. The only requirement is that all members should be currently enrolled in
Trimester 1, 2016 offering of MAF 203.
3. All assignments are to be submitted online in an area provided in CloudDeakin. They
are counted as “on time” if submitted by 5pm AEST or AEDST on the due date.
MAF 203 – Business Finance Group Assignment Case Study
T1/2016 Capital Budgeting – AusSteel Ltd
Page 2
• A penalty of 20% of the total mark will apply to assignments submitted 1-‐day
late.
• No submission is permitted more than 24 hours after the deadline.
4. It is up to the group to manage the group dynamics and get equal contribution from
all members. It is a good idea to appoint a leader to direct and coordinate the
activities of the group, including allocating tasks (questions) among the group
members.
All group members are expected to discuss the assignment as a whole and contribute
to preparing answers to all questions. Before the final submission of the assignment
all group members are expected to review and edit all questions, as appropriate.
On the last page of your report, you need to have a Statement of Contribution which
indicates the work done (in percentage) by each student.
5. Only one member of the group should submit the assignment on CloudDeakin on
behalf of all the group members. Only one file (Word document or PDF) should be
uploaded for your group on the MAF203 CloudDeakin site. List the names and ID
numbers of all group members on the first page of your Word document.
6. When submitting online, you must check that you have submitted work correctly by
following the instructions provided in CloudDeakin. This involves completion of the
plagiarism statement by the student designated to submit the electronic copy on
behalf of the group. Only one copy of the assignment per group is to be submitted.
Individual assignments are not permitted and will not be marked.
7. If you are using an Excel spreadsheet for NPV and IRR analysis, you need to copy and
paste the spreadsheets to the body of your Word document (landscape orientation).
Alternatively print out the narrative pages (from Word doc) and the spreadsheets
(from Excel file) and scan them into a single PDF document which can be uploaded.
Please do not upload Excel spread sheets as a separate file.
8. If you make an error and need to correct your assignment before resubmitting then
you can do so, but only before the due date for submission. In the Assignment tool
button, you will find the “Submitted” tab. Under “Actions” within this tab, click on the
“Take Submission Back to Inbox” icon. Click the “Inbox” tab. Click on the assignment
to open it. You then delete the attached file by clicking on the icon next to the file
name. From this point you can attach your new file and resubmit your assignment.
9. The preferred method of referencing is according to the Harvard System. There is no
excuse for incorrect referencing. If you use any source you MUST reference it and
MAF 203 – Business Finance Group Assignment Case Study
T1/2016 Capital Budgeting – AusSteel Ltd
Page 3
have in-‐text citation. That means that within or at the end of the paragraph you will
have a reference. You can check what is required here by using student resources
online at:
http://www.deakin.edu.au/current-‐students/study-‐support/study-‐
skills/handouts/authordate-‐harvard.php
10. Assignments sent as e-‐mail attachments or by mail will not be accepted under any
circumstances.
MAF 203 – Business Finance Group Assignment Case Study
T1/2016 Capital Budgeting – AusSteel Ltd
As the author, the copyright of this case study (assignment) remains with Samson Ekanayake Page 4
PART A AusSteel Case Study 85 marks
Following is a summary of requirements and guidance for Part A:
Question Heading Marks
Words
(indicative)
Comments
1 Free Cash Flows (FCF) 10 200 AusSteel case study
2
Net Present Value (NPV)
and Internal Rate of Return
(IRR)
10 200 AusSteel case study
3 Sensitivity analysis 20 400 AusSteel case study.
4
Weighted Average Cost of
Capital (WACC)
10 400
General capital budgeting,
and AusSteel case study.
5 Impact of inflation 10 400 AusSteel case study
6* Qualitative risk factors 5 200 AusSteel case study*
7*
What would happen if
AusSteel was based in
Argentina
10 200 Argentina default*
8
Executive Summary
(recommendation)
10 1,000 AusSteel case study
TOTAL 85 3,000
* The companion document titled “Steel Has Never Been More Competitive” published by
the Australian Steel Institute should also be used in forming your opinions when
evaluating the qualitative risk factors relevant to the new project (i.e. in answering
question 6).
* The companion document titled “Argentina Default” should be used in forming your
opinions when evaluating question 7.
MAF 203 – Business Finance Group Assignment Case Study
T1/2016 Capital Budgeting – AusSteel Ltd
As the author, the copyright of this case study (assignment) remains with Samson Ekanayake Page 5
1. You need to compare the benefits and costs of continuing to use the existing
machinery and equipment with the proposed new machinery and equipment.
2. For cash flow and NPV comparison you may adopt an incremental analysis (i.e.
differential analysis) or an isolation approach (holistic analysis). However, for this
project an “incremental analysis approach” is more appropriate as you may not have
all the information you require for a “holistic analysis”.
3. Clearly state any assumptions you make. Your assumptions, if any, should be
realistic and should be only about information you need, but is not available in the
assignment documents.
Detailed Requirements
1. Free Cash Flows (FCF)
(10 marks, 200 words -‐ indicative)
Prepare a cash flow statement for the AusSteel project.
2. Net Present Value (NPV) and Internal Rate of Return (IRR)
(10 marks, 200 words – indicative)
Calculate the NPV and IRR for AusSteel’s proposed project.
Compare and contrast the NPV and IRR methods.
3. Sensitivity Analysis
(20 marks, 400 words – indicative)
Perform a sensitivity analysis on NPV of the NEW PROJECT, applying a +/-‐10% variation
factor to the estimates for
• output and sales
代写 MAF 203 Business Finance Group Assignment
• selling price
• variable costs
• fixed overhead costs
• incremental working capital; and
• applicable discount rate.
Identify the most sensitive variable/s, and comment on your analysis.
MAF 203 – Business Finance Group Assignment Case Study
T1/2016 Capital Budgeting – AusSteel Ltd
As the author, the copyright of this case study (assignment) remains with Samson Ekanayake Page 6
4. Weighted Average Cost of Capital (WACC)
(10 marks, 400 words – indicative)
Under what circumstances (conditions) is it appropriate to use the weighted average
cost of capital (WACC) of a company, as the hurdle rate for accepting/rejecting a
project?
Do you think it is appropriate to use WACC as the hurdle rate (cost of capital) for
evaluating this project? Why?
5. Impact of Inflation
(10 marks, 400 words – indicative)
Explain the impact inflation will have on AusSteel’s proposed project.
6. Qualitative risk factors
(5 marks, 200 words – indicative)
Refer to the companion document titled “Steel Has Never Been More Competitive”
published by the Australian Steel Institute.
What other qualitative factors (i.e. factors which are unquantifiable at present) would
you consider relevant in evaluating the riskiness of the project.
7. Suppose AusSteel is based in Argentina. Read the information below and answer the
question.
(10 marks, 200 words – indicative)
The Argentina government recently defaulted on its debt. Would this be relevant
information to solve this problem. Explain why.
8. Report (recommendation)
(10 marks, 1,000 words – indicative)
Drawing on your answers to questions 1 to 6, write your recommendation (with
reasons), in a form of a report, on whether to accept or reject the project.
MAF 203 – Business Finance Group Assignment Case Study
T1/2016 Capital Budgeting – AusSteel Ltd
As the author, the copyright of this case study (assignment) remains with Samson Ekanayake Page 7
Case Study -‐ AusSteel
You are to cast your group as a Business Finance Consultancy. Your client, AusSteel is based
in Eastern Victoria. AusSteel has commissioned your firm to provide a report advising
whether or not the company should invest in a project to replace its current machinery and
equipment being used in fabricating base steel.
Despite the current stagnated prices in the fabricated base steel market (which are at 2007
levels), AusSteel believes that current price levels are still profitable and that the market is
likely to improve in the near future.
The CEO of AusSteel firmly believes that the enterprise should invest in capital assets now to
ensure that they will be around tomorrow. The director of marketing also believes that the
company should invest in latest technology and machinery to maintain market share,
otherwise “we are going to be bypassed”.
On the other hand, the director of finance, who is well aware of the possible financial
repercussions of committing a huge amount of capital in new technology and machinery,
insists that the new machinery, if purchased, should generate positive net cash flows and
increase the value of the company. “Otherwise, the shareholders would not be happy”.
AusSteel’s manufacturing process, at present, is semi-‐automatic and considered
environmentally friendly as it consumes less energy. The machinery and equipment
currently being used on the manufacturing site cost $50,000,000 five years ago and has a
written down value of $25,000,000. The demand for the products has been fairly stable and
output has been maintained at 400,000 tons per annum in recent years. It is expected that
the output and sales will increase to 475,000 tons if the proposed new machinery and
equipment are purchased and installed.
The accountant of the company has prepared the following data, based on the current level
of output, and existing machinery and equipment:
Selling Price per ton $1,250
Variable expenses – per ton manufactured and sold $ 1,000
Fixed overhead expenses
excluding depreciation of machinery and equipment $18,000,000
Depreciation of machinery and equipment $5,000,000
MAF 203 – Business Finance Group Assignment Case Study
T1/2016 Capital Budgeting – AusSteel Ltd
As the author, the copyright of this case study (assignment) remains with Samson Ekanayake Page 8
Profit per ton $192.50
The fixed overhead expenses are cash expenses and the total fixed overhead expenses are
expected to remain the same irrespective of any change in the level of production and sales.
The existing equipment is expected to last for a further five years, and will have no resale
(scrap/salvage) value at that point in time.
The new machinery and equipment will cost $100,000,000 and will have an expected life of
5 years. At the end of which it would be sold for an estimated scrap value of $10,000,000.
However, the finance manager who is a graduate of Deakin University, knows that he should
depreciate the machinery in such a way that that the time value of the tax benefits relating
to depreciation maximised, while honouring the taxation rules.
If the new machinery and equipment are purchased now, the old machinery and equipment
could be sold for $11,000,000 immediately.
AusSteel has already spent $500,000 for the feasibility study of the new project.
If the proposed project goes ahead, AusSteel will have to use their existing excess
warehouse facilities to store the additional inventories. These excess existing warehouse
facilities have been currently rented to another company at an annual rent of $1,200,000.
The accountant has also prepared the following data to help assess the proposed change.
Selling Price per ton $1,250
Variable expenses – per ton manufactured and sold $ 900
Fixed overhead expenses
excluding depreciation of machinery and equipment $18,000,000
Depreciation of machinery and equipment $20,000,000
Profit per ton $270
If the new machinery and equipment are installed, the raw material (steel) inventory will
have to be increased by $10,000,000.
The appropriate, after tax, cost of capital (discount rate) for the project is considered to be
11%. This is same as the company’s after tax weighted average cost of capital. Assume that
MAF 203 – Business Finance Group Assignment Case Study
T1/2016 Capital Budgeting – AusSteel Ltd
As the author, the copyright of this case study (assignment) remains with Samson Ekanayake Page 9
the company is subject to 30% corporate tax and that the tax is paid at end of the same year
(i.e. not the following year).
Also assume, that all entire production will be sold within the year and there will be no
finished goods inventory.
The company’s bank is willing to lend the funds required for new machinery and equipment
at a 9% annual interest rate.
MAF 203 – Business Finance Group Assignment Case Study
T1/2016 Capital Budgeting – AusSteel Ltd
Page 10
PART B Capital Rationing (15 marks)
Mayco has a $2,000 capital budget and has the opportunity to invest in five projects. The
initial investment and NPV of the projects are described below.
Project Investment Outlay($) NPV ($)
Project A -‐800 300
Project B -‐500 180
Project C -‐400 100
Project D -‐350 85
Project E -‐300 -‐50
Required
Determine in which projects Mayco should invest. (10 marks)
Explain your rationale. (5 marks)
代写 MAF 203 Business Finance Group Assignment
