FINANCIAL MANAGEMENT ASSIGNMENT -

Learning Outcomes -

1) Research, apply and evaluate a variety of financial assessment techniques for application to a case study.

2) Research, evaluate and critically discuss various issues and theoretical frameworks used in the management and control of financial resources.

TASK DESCRIPTION -

Section A - You work as a financial analyst for World Wealth Management. Your role is to provide investment advice to high-net-worth individuals. Tim Farrow who is risk-averse has been a client of your firm for many years and has approached your manager for investment advice. Tim has a large portfolio of shares and is interested in broadening his portfolio by investing in the UK travel & leisure sector. He has identified two companies that he is interested in investing in - William Hill Plc and Paddy Power Betfair Plc. His file has been passed to you by your manager, and he has asked you to prepare a report for him. You have carried out some preliminary work and obtained access to the latest financial statements and share prices and dividends of the organisations for the last three accounting periods.

Required:

a) Carry out a financial analysis of both companies.

This analysis should include

I. Ratios you have computed, an evaluation of the financial performance and current financial position of both companies. This should include investor ratios.

II. All computations should be included in an appendix.

b) Based on your assumption of Tim 's attitude to risk which should be clearly stated and supported by the results in (a), advise Tim on how he should proceed with his investment decision.

Word count: Max 3,500.

Section B - Patel Mintro owns a manufacturing company in London. He is considering two projects that he hopes will generate additional profit. Project A requires an initial investment of £160,000 and Project B £220,000.

The projects will last for 6 years. At the end of 6 years, Project A will have a residual value of £20,000, and Project B will have £10,000 residual value.

The company's current cost of capital is 7%. Projected annual income (cash flow for NPV) for each project is detailed below:

Required -

a) Determine the Payback and the Net Present Value (NPV) of the two proposals. Use a discount rate of 7% for the NPV calculation.

b) Determine the Accounting Rate of Return (ARR) for each project.

c) Evaluate the results of part (a) and (b) above. Recommend with reasons the project that should be adopted.

d) Critically discuss the advantages and shortcomings of the Payback and NPV techniques as ways of evaluating capital projects.

e) Discuss the non-financial factors that need to be considered in investment appraisal process.

Word Count: Maximum 2,500.