2 FIN80005: Corporate Financial Management Assignment 2: Excel report – Capital budgeting Word limit: 1000–1500 words (+/- 10%) Scenario Branson Ltd. is a public listed tour company that is based in...

Looking at having the attached assignment done 1000-1500 words.


2 FIN80005: Corporate Financial Management Assignment 2: Excel report – Capital budgeting Word limit: 1000–1500 words (+/- 10%) Scenario Branson Ltd. is a public listed tour company that is based in Melbourne. One of its main operating businesses is to provide tourists with hot-air balloon flights over the city. As their current balloons are due to be retired, they must decide whether to replace them with a large or small model. New balloons have an expected life of 8 years, after which salvage values are $70,000 for the large balloons and $45,000 for the small balloons. Market research has estimated that there is a 60% probability that demand will be high throughout the useful life of the balloons, and a 40% probability that demand will be low throughout the useful life of the balloons. The large model is expected to cost $900,000, with an extra installation and shipping cost of $80,000. The small model is expected to cost $650,000, with an additional installation and shipping cost of $45,000. The company's accounting policy is to depreciate using the reducing balance approach of 20% per annum.1 There is also an initial increase in net working capital of $70,000 for the large model, and $40,000 for the small model. The net working capital is recoverable at the end of their useful life. In the event of high demand, the company expects a yearly operating revenue of $800,000 for the large model, and a yearly operating revenue of $330,000 for the small model. If the demand is low, yearly operating revenue is forecasted to be $700,000 for the large model and $280,000 for the small model. Annual variable and fixed costs associated with operating these balloons are expected to be $400,000 for the large model and $150,000 for the small model. In addition, if the large model is preferred over the small model, the company needs to rent an additional warehouse to store the large balloons. A new warehouse’s rental cost is expected to be $150,000 per year. At the end of year four, there is also an option to cease operation and thus sell the large balloons for $500,000 and the small balloons for $400,000 if the business is not profitable. The company requires you to calculate an appropriate discount rate using the company’s weighted average cost of capital. The company’s capital structure has remained fairly stable, with a debt-to-equity ratio of 1.2. The company has no plan to adjust its capital structure in the future. Given that the company is listed on the stock exchange, you are able to obtain the historical returns over the last 20 years for the company, the market portfolio and the risk-free asset as tabulated in Table 1. The company debentures have a face value of $1000 and a coupon rate of 10%. They mature in 10 years' time. Similar debentures are currently yielding 12%. The company tax rate is 30%. 1 As discussed in Week 5, ignore residual value in the calculation of yearly depreciation. Table 1 Year Branson Market Risk-free 1999 23.13% 13.81% 6.01% 2000 19.55% 12.77% 6.31% 2001 10.08% 7.65% 5.62% 2002 -19.35% -10.64% 5.84% 2003 25.01% 14.61% 5.37% 2004 29.21% 29.48% 5.59% 2005 28.41% 23.83% 5.34% 2006 22.29% 20.93% 5.59% 2007 -5.68% 1.73% 5.99% 2008 -68.09% -33.58% 5.82% 2009 48.21% 33.84% 5.04% 2010 12.39% 8.03% 5.37% 2011 -6.54% -6.43% 4.88% 2012 15.28% 18.56% 3.38% 2013 -1.12% 10.38% 3.70% 2014 17.98% 11.67% 3.66% 2015 -15.44% -6.43% 2.71% 2016 26.23% 16.29% 2.34% 2017 0.20% 5.70% 2.72% 2018 10.53% -3.40% 2.54% Table 1 (2019) courtesy of Dr Mardy Chiah You are to prepare a report to present to the CEO, showing the various cash flows based on the different scenarios. Your submission should include the following: · The use of Excel to evaluate whether the company should proceed with the purchase of large or small balloons, taking into consideration the different scenarios presented earlier. · A written report stating any assumptions made and outlining your recommendation as to whether the company proceed with the purchase of large or small balloons. Excel tables must be included in the main body and/or appendix of the report. · All workings in the appendix of the report. Supporting resources The following resources will assist you with completing this assignment: · Show and hide formulas in Excel (Links to an external site.) (IQ Accounting Solutions 2014). · Chapter 3 Report writing (Links to an external site.) (Summers & Smith 2014). · Sample of a business-style report (PDF 375 KB) (Links to an external site.). · Swinburne Harvard style guide (Links to an external site.). Submission details overview For this assignment, you will be required to submit your excel workings as well as your 1000-1500 word report. You can do this by uploading each file to the submission link. This assignment will be submitted through Canvas. When you are ready to submit your assignment, select the 'Submit Assignment' button at the top of this page. You will be taken to the 'File Upload' tab where you can choose your file or submit your URL. Please note: When you submit your assignment through Canvas, you are also submitting the assignment through Turnitin, which is a text-matching service that compares your work with an international database of information sources. You will need to agree to using it. Once you have submitted your assignment, select 'Submission Details' on the right of your screen to view your originality report if you haven't already done so. Please allow a 24-hour turnaround for an originality report to be generated. See the 'Turnitin originality report' area of the Academic practice page in the Study Resources section of the Student Hub for several guides to assist with the submission process. Assignment support Don't forget that in addition to your eLAs who provide discipline-specific content advice, you can access the 24/7 draft writing service from Studiosity. If you need assistance with academic feedback on a draft of your assignment task, see Assignment support: Studiosity. Assignment criteria 1. Knowledge and understanding of spreadsheet application. 2. Consideration of cash flows in various scenarios. 3. Conclusions and recommendations. 4. Structure, referencing and presentation. 5. Writing style and grammar. Your work will be assessed using the following marking guide: Assignment 2 marking guide Criteria No Pass Pass 50-59% Credit 60-69% Distinction 70-79% High Distinction 80-100% Knowledge and understanding of spreadsheet application (20%) No evidence of use of spreadsheet, or poor use of spreadsheet, e.g. no formulas. Limited use of spreadsheet - e.g. limited use of formulas. Satisfactory use of spreadsheet - e.g. reasonable use of formulas. Appropriate use of spreadsheet - e.g. formulas used, but minor errors. Competent use of spreadsheet - e.g. correct formulas. Consideration of cash flows in various scenarios (40%) No evidence of scenario testing or poor scenario testing. Limited scenario testing. Satisfactory scenario testing. Appropriate scenario testing. Superior scenario testing. Conclusions and recommendations (20%) None provided or poor connection between analysis and conclusions. Limited connection between analysis and conclusions. Satisfactory connection between analysis and conclusions. Appropriate connection between analysis and conclusions. Superior connection between analysis and conclusions. Structure, referencing and presentation (10%) No evidence of structure or thought of presentation or referencing; or poor attention to structure, referencing and presentation. Limited attention to structure, referencing and presentation. Satisfactory attention to structure, referencing and presentation. Appropriate attention to structure, referencing and presentation. Superior attention to structure, referencing and presentation. Writing style and grammar (10%) No evidence of checking for style and grammar, or poor attention to style and grammar. Limited use of style and grammar. Satisfactory use of expression, but contains spelling errors. Appropriate use of expression with minimal spelling errors. No easily discernible errors in expression. References IQ Accounting Solutions 2014, Show and Hide Formulas in Excel, 1 April, online video, viewed 17 July 2019, . Summers, J & Smith, B 2014, Communication Skills Handbook, 4th edn, Wiley, ProQuest Ebook Central, .