...Finance 475 Euroland Foods Case Spring, 2014 1. What are the various capital-budgeting tools currently used by leading firms? Define each, and discuss the accept/reject criterion for each. Which one is “best,” and why is it best? 2. Evaluate the capital-budgeting criteria of Euroland Foods on page 326. Their “Minimum Acceptable IRR” criterion is wrong. Why? Also, why is their criteria not a complete set of criteria with which to evaluate projects? 3. Evaluate the “Minimum Acceptable IRR” returns that Euroland uses for different types of projects. (See page 326.) When, if ever, should these returns be used as the hurdle rate instead of WACC? 4. Evaluate Euroland’s capital rationing. Do you agree or disagree with this policy? Why? If you disagree, then what policy should Euroland follow? 5. In Exhibit 3, rank order (from first to fifth) the five most profitable of the 11 projects, in accordance with correct, risk adjusted capital-budgeting criteria. State the NPV of each of the five projects. Explain your ranking criteria. (Note: create a table showing ONLY the five most profitable projects and their profitability; do NOT state any other projects.) 6. Did Euroland take risk into account in its capital budgeting? If so, how? Which project is the riskiest, and why? There are several reasons why the riskiest project is riskiest; name three reasons. 7. Which of the 11 possible projects was not evaluated in Exhibit 3? Why do you think it was not evaluated? Calculate...
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...27109-7285 Restaurant Development Group Memo To: Date: Re: Registered Students March 1st 2006 Restaurant Development Group’s Winston-Salem Project From: Mr. Bobbie Filet Introduction Restaurant Development Group (RDG) is considering opening a new restaurant in conjunction with the “Winston-Salem Partnership” group that is attempting develop a center of entertainment in downtown Winston-Salem, NC. As part of the project, the company plans to renovate an existing restaurant space in the downtown area and begin operations in six months. RDG has decided to hire several teams of professionals to handle various facets of the project. One team will work closely with city and county government officials to insure the project has strong support from all relevant government agencies. Another team will be responsible for developing the marketing plan and handling media and public relations to insure the project has a positive reception within the media. Finally, the finance and accounting team has responsibility for examining the financial viability of renovating the restaurant and developing a cash flow budget to determine how much cash will be needed open and operate the restaurant. You are part of this last team and are charged with preparing the necessary analyses. In addition to the “go or no-go” decision, RDG management wants to know whether the restaurant should be open for dinner only or open for lunch and dinner. The purpose of this memo is to ask you to examine the financial...
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...University of South Carolina Moore School of Business FINA 761 (800): Advanced Corporate Finance Fall 2013 Instructor: Eric Powers |Class time: |T/TH 2:50 – 5:35 | |Location: |364 | |Office Hours: |TBD | |Office Hour Location: |BA 462 | |E-mail: |epowers@moore.sc.edu | |Course website: |blackboard.sc.edu | The objective of this course is deepen your understanding of the many issues faced by firms as they identify valuable investment opportunities, raise funds for those investment opportunities, distribute profits to share-holders and debt-holders and deal with the consequences of both good and bad investment financing decisions. We will expand on the concepts that you have learned in FINA 760 or in DMSB 715. Class time will be divided between lectures and case studies. My lectures will briefly review concepts from prior courses. The bulk of my lectures will present advanced material that will be new to you. It is assumed that you understand the concepts from your earlier finance and accounting courses. If not, it is your responsibility to review. In order to reduce your note-taking, my lecture notes will be available...
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...IRCO 421B Finance Spring 2013 IRPS, UC San Diego Krislert Samphantharak Assignment 1 Due April 19, 11.59 pm, by email (“Finance B Turnin” on FirstClass) This assignment serves three main objectives. First, it allows you to review various present value and discounting concepts and how to compute them using relevant functions in Excel. Second, it helps you review some crucial concepts in financial accounting that you studied in the last quarter. Finally, it guides you through the calculation of NPV and other investment criteria we discuss in class. Although the case is from a privately-owned company in the US, it serves as an illustrative example on how we compute NPV, IRR, payback period, and profitability index in practice. This procedure could be applied (with appropriate adjustments) to other investment decision making by other forms of organizations, including households, publicly-traded companies, not-for-profit organizations, or governments, both in the US and elsewhere. Instruction 1. Read “New Heritage Doll Company: Capital Budgeting” case. The case can be purchased from Harvard Business School Press at https://cb.hbsp.harvard.edu/cbmp/access/19276442 You need to register on the site to create a user name if you do not already have one. After you register, you can get to the coursepack at any time by doing the following: 1. Visit hbsp.harvard.edu and log in. 2. Click “My Coursepacks”, and then click “Finance B”. 2...
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...The Super Project Tobey Overview • Case Summary • Problem Statement • ROFE & Capital Budgeting • Incredible Incremental • Analysis Options • Cash Flows • Recommendations Case Summary • General Foods is a large corporation organized by Product Lines. • Super is a proposed new instant desert, based on a “flavored, water-soluble, agglomerated powder.” • General Foods has numerous projects with strict criteria to judge worthiness. • There are basically three types of Capital Investment proposals at General Foods: Safety, Quality, Increased Profit • Increased Profit: Cost Reduction, Capacity, New Product • Max 10 years payback: as low as 20% PBT • … if expected to be permanent product addition • … if facilities highly reconfigurable • Three analysis types: Incremental, Facilities-based and Fully Allocated. Problem Statement • Above all, Super’s worthiness as a capital investment must be evaluated according to General Foods’ accepted criteria. • Memos indicate that General Foods’ finance personnel are questioning the same criteria’s ability to accurately reflect the value of the Super project. • This is not an accounting exercise. In accounting, one tries to track and attribute all sources of costs. Also, one alters transaction timings to match expenses with income. • This is a capital budgeting exercise. We’re interested in cash flows to judge the value of a project, and when those cash flows occur. • Therefore, our team must 1) evaluate the pertinence of each of the...
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...Part B: Short Case Memo TO: Alfonso & Leo, SEL FROM: Me, CGA DATE: March 25, 2015 RE: Recommendations for Accounting Software and IPO Steps As per previous discussions, as SEL continues to grow, we need to look into how it can gain a competitive edge in its market by gaining control of the financial activities of the company. With this growth, it needs to consider how to raise additional capital and how to manage the increase in employees and accounting transactions. Over the last 4 years, SEL has grown its business by 25% in total revenue. There are currently enterprise risks and issues that SEL faces due to the lack of planning, organizing, leading and controlling of its financial activities. As SEL is about to obtain a significant contract over a five-year period, it needs to gain control and put processes to operate effectively and efficiently. There are currently some weaknesses in SEL’s financial accounting and reporting system. The part time accountant with only basic accounting experience doesn’t allow SEL to have proper financial analysis or forecasting and it could cause potential accounting gaps, such as not knowing how to properly account for foreign exchange risk. With the part time accountant doing all the accounting tasks, there is no segregation of duties, proper review or approval processes in place. By not analyzing the finances or preparing forecasts, it is not allowing SEL to see where it stands financially and it doesn’t allow for...
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...organisation | | |Pass 1 | | | | |Describe the main employability, personal and communication skills required when | | |Pass 2 |applying for a specific job role | | | |Describe the main physical and technological resources required in the operation of a | | |Pass 3 |selected organisation | | | |Describe sources of internal and external finance for a selected business | | |Pass 4 | | | | |Interpret the contents of a trading and profit and loss account and balance sheet for a | | |Pass 5 |selected company | | | |Explain how the management of human, physical and technological resources can improve | | |Merit 1 |the performance of a selected organisation |...
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...How to Manage Cash Account and Transactions in NGOs – NGO Financial Management Policy Cash payments need to be documented firmly by NGOs in their financial management policy. Since small sums of cash payments are common on a day-to-day basis, a certain procedure needs to be developed and mentioned in the policy manual. An example is given below: “3. Cash Handling 3.1 Cash Account and Transactions Cash transactions are to be resorted only for petty expenses and when /where banking facilities are not available. As per Income Tax Rules, no claim exceeding $______ should be settled through cash payments. These should invariably be by account payee checks only. As a matter of procedure and control, the attempt should be to minimize the number of cash transactions. 3.2 Daily Cash Balance The denomination of the closing balance of the cash should be entered below this and signed by the Accountant. This register has to be maintained from the beginning of the financial year. A fresh register has to be started at the beginning of every financial year. Maximum and minimum cash limits have been fixed as: maximum $______ and minimum $______. 3.3 Withdrawal of Cash from Bank a) The Cash Withdrawal Form/Money Indent to be filled up and signed by the staff handling cash. b) The cash balance available and the estimated expenses would need to be computed. c) The authorized persons must verify the requirement before signing the check for withdrawal of cash. d) The signature of the person presenting...
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...Using Case Studies in Real Estate and Finance Courses By Su Han Chan Department of Real Estate The Preliminaries Setting expectations Focus is on decision making Requires judgment No “right” answers Setting ground rules The student contract (4Ps) Knowing your participants Selecting cases and readings Using a mix of short (“breather”) and long cases Assigning a term project Case seminar series_Su H Chan A Short Case Phuket Beach Hotel: Valuing Mutually Exclusive Capital Projects* (4 pages) Synopsis Phuket Beach Hotel has an opportunity to lease its underutilized space to a karaoke pub and earn a rental income. Alternatively, the hotel could develop the unused space and create its own pub. The general manager of the hotel must decide which of the two capital projects to recommend to the hotel owners. This case presents sufficient information to build cash flow forecasts for each project and to rank the mutually exclusive projects using various evaluation criteria. *The case is available from HBSP.com Case seminar series_Su H Chan Using the case Undergraduate, graduate, and executive levels Exposes students to a wide range of capital budgeting issues Questions built into the case Student group presentations (2 teams presenting the same case) Class members evaluate team presentations Instructor debriefs case Lessons learned Evaluator__Please write your name on the back__________________ Group ___________________________ Grading Checklist for...
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...|Management Sciences | |Sr. No. |Core Areas |Percentage | |1. |Finance |10% | |2. |Accounting |10% | |3. |Marketing |15% | |4. |Management |15% | |5. |Business Maths |10% | |6. |Business Statistic |10% | |7. |HRM |10% | |8. |Business Communication and Report Writing |10% | |9. |Micro Economics ...
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...thereby contributing significantly to the economic development of the country. The leasing sector has contributed significantly over the years, despite several constraints. With the challenges of time, the overall growth of the leasing business achieved through diversification of products and services and aggressive marketing with special focus on the SME sector, is indicative of the industry’s contribution to our national economy. It is worth mentioning that, within two decades; the leasing companies have emerged as an alternative source of finance and well sought after arm for credit for SMEs. In order to catch up with the demands of time, most leasing companies have diversified their products and services into other areas like small loans, housing loans, start-up working capital and domestic factoring of accounts receivable. Further to reducing dependence on traditional borrowings from banks for meeting their working capital requirements, some of them have already introduced new financial instruments like Bonds, Securitization of Assets, Syndication Services, Merchant Banking, Stock Brokerage Services, etc which have set new trends for others to follow. 1.2 Objective of the Report There had been some objectives set forward in doing this report so that it can be determined what tasks to perform in the organization. These objectives were not influenced by thought or feeling. These objectives are described in the following:...
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...Shanti Business School PGDM Batch 2015-17 Semester II Course Outline 1 Shanti Business School, Ahmedabad PGDM 2015-17: Program Structure Semester-1 Semester-2 Semester-3 Semester-4 Course credit Course credit Course credit Language Skills @ Written Analysis & Communication @ Soft skills II @ Employability Skills @ IT & MIS 2 Soft skills I @ Computing skills 2 Social Media Marketing @ 2 Legal Aspects of Business 2 Business Strategy 3 Management Control Systems 3 Micro Economics 3 Macro Economics 3 Business Environment 3 Business Ethics & Corporate Governance 2 Quantitative Methods-1 3 Business Research Methods 3 Quantitative Methods-2 3 Core Elective-1 3 Core Elective1 3 Core Elective-2 3 Core Elective2 3 Elective-1 3 Elective-1 3 Elective-2 3 Elective-2 3 Grand Project-1 3 Grand Project-2 3 Principles of Management Basic Building Blocks Autumn Break Executive Skills Organisational Behavior Human Resources Management 3 Marketing Management 1 3 Marketing Management -2 3 Understanding Financial Statements 3 Financial Mgt 3 Operation Management Management Domain 3 3 Basics of Business Planning 2 Electives Credits Autumn Break credit SUMMER INTERNSHIP Course ...
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...Finance MBA − Cases in Corporate Finance The Super Project (HBS) Instructor: Pål E. Korsvold BI Norwegian School of Management McGraw-Hill/Irwin abc McGraw−Hill Primis ISBN: 0−390−68861−4 Text: Harvard Business School Negotiation Cases This book was printed on recycled paper. Finance http://www.mhhe.com/primis/online/ Copyright ©2006 by The McGraw−Hill Companies, Inc. All rights reserved. Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without prior written permission of the publisher. This McGraw−Hill Primis text may include materials submitted to McGraw−Hill for publication by the instructor of this course. The instructor is solely responsible for the editorial content of such materials. 111 FINAGEN ISBN: 0−390−68861−4 Finance Contents Harvard Business School Negotiation Cases Super Project 1 1 Case iii Harvard Business School Negotiation Cases The Super Project Case © The McGraw−Hill Companies, 2005 1 9-112-034 REV: MAY 27, 2004 The Super Project In March 1967, Crosby Sanberg, manager-financial analysis at General Foods Corporation, told a casewriter, “What I learned about incremental analysis at the Business School doesn’t always work.” He was convinced that under some circumstances sunk costs were relevant to capital...
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...Table of Contents Introduction 3 Task 1 3 Assessment criteria 1.1 3 Assessment criteria 1.2 4 Assessment criteria 1.3 4 Assessment criteria 1.4 6 Assessment criteria 1.4 7 Section 2 8 Assessment criteria 2.1 8 Assessment criteria 2.2 8 Assessment criteria 2.3 10 Section 3 11 Assessment criteria 3.1 11 Assessment criteria 3.2 13 Assessment criteria 3.4 15 Zero-based budgeting 16 Top-down budgeting 16 Bottom-up budgeting 16 Activity-Based Budgeting 16 Section 4 18 Assessment criteria 4.1 18 Assessment criteria 4.2 21 Conclusion 22 Bibliography 23 Introduction Financial management is the efficient as well as effective management of the funds in a motive of accomplishing the goals and the objectives an organization. It comprises of how to rise capital and how to allocate for instance through budgeting. This does not only cater for the long term budget but also the allocation of funds in the short term. In our discussion we are going to focus on various issues such the various methods used in costing, the budgeting formation and formation process, and the different types of budgeting. The attainment of coordination will also be factored since it is key to the success of a business. Task 1 Assessment criteria 1.1 a. Identify and explain the various ways by which cost can be classified discussion the value of costs classification including any weaknesses in your argument In the world of business there are a range of costing methods are actually used by...
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...Table of contents Introduction 12 Body 13 3.1 Explain the purpose and nature of budgeting process which should normally be taken in the preparation of budgets for Glentruan Furniture Ltd. 13 Budget 13 Purpose and nature of budget 15 Purpose 15 Nature 15 3.2 Select appropriate budgeting methods for new product line and its need. 16 Incremental budget 16 Zero based budget 16 Different between zero based budgeting and incremental budget 16 Fixed budget 17 Flexible budget 17 Different between fixed and flexible budget 17 Functional budget 18 Sales budget 18 Production budget 18 Direct material usage budget 18 Direct material purchase budget 18 Direct labor budget 18 Factory overhead budget 18 Selling and administration budget 18 Cash budget 19 Master budget 19 3.3 Prepare budgets according to the chosen budgeting methods based on the given information in the scenario. 20 Sales budget 20 Production budget 22 Direct material usage budget 23 Direct material purchase budget 26 Direct labor budget 28 Factory overhead budget 30 Selling and administration budget 34 Departmental budget 35 3.4 Also prepare a cash budget. 38 Cash budget 38 Master budget 42 Budgeted profit and loss 42 Budgeted balance sheet 43 Final review 46 Budget committee 47 Working capital 47 Liquidity ratio 47 ROCE 47 4.1 Calculate variances, identify possible causes and recommend corrective action. 48 4.2 Prepare and operating statement...
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