country
$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!
Add File

Error goes here

8006FMGT Financial Management

tag 0 Download8 Pages / 1,954 Words tag Add in library Click this icon and make it bookmark in your library to refer it later. GOT IT
  • Course Code: 8006FMGT
  • University: Australian Institute Of Business
  • Country: Australia

Question:

Background: Case Study

SoCal is a manufacturer of suitcases that operates in Los Angeles since 1984. The company has been facing a few issues that you - the chief financial officer - will have to act on as requested by the Board of Directors (BoD). Most prominently, SoCal's revenues have substantially decreased, with the demand for its suitcases at levels not seen since 2010. To overcome the obstacles entailed by such situation, the marketing department has suggested to launch an aggressive campaign whereby the payment period to wholesale customers is extended from 20 to 40 days, leading to (forecasted) sales of 12,500 suitcases per year (based on a unitary price of $90 per suitcase). Regardless of prolonging its accounts receivable period, the company would still be liable to pay its suppliers in 15 days, with production levels of 50 suitcases per day.

To accommodate the increase in demand (and considering that suitcases stay in stock for a period of 30 days), SoCal would need to buy new machines costing $1,200,000, with a lifetime of 6 years.

Moreover, the marketing campaign will involve a cash cost of $400,000 per year. Variable costs associated with the production of suitcases would remain the same ($50 per suitcase paid to suppliers). During their lifetime, the new machines will be able to generate free cash flows in the amount of $675,000 per year, having 'zero' salvage value by the time they need to be replaced.

To implement the strategy suggested by its marketing department, SoCal can dispose of assets in its balance-sheet, or else borrow money in the financial markets. Particularly, the company has (i) 1,500 units of Australian government bonds ($1,000 face value, 10 years to maturity, annual coupons of

$40 and yield to maturity of 5% per year), and (ii) 130,000 ordinary shares of XYZ (a public listed company whose last paid dividend was $0.50 per share, with growth prospects of 5% per year and exposure to market risk i.e. beta of 1.2). Based on its balance-sheet (80% debt, 20% equity), SoCal can borrow funds paying an interest rate of 20% per annum (the tax-shield in the U.S. is 30%), whereas its cost of equity is equal to that of XYZ (assume an annual rate return on the market portfolio of 9%, and a risk-free rate of 2% per year).

Tasks

Based on the background provided in the case study, you are to write a report addressing the following key questions:

  1. In terms of working capital requirements, what are the implications of increasing the payment period (or average collection period) from 20 to 40 days? Please refer to the operating and cash conversion cycles in your answer.
  2. Based on the forecasted sales, is it possible for SoCal to achieve the corresponding cash and accounting break-even points? Based on your calculations for each - and from a pure cost management perspective - is the marketing department's proposal acceptable? Explain.
  3. Use the net-present value criteria to assess whether the investment in the new machines is warranted (Hint: use SoCal's cost of capital as its discount rate). Explain to the BoD the benefits of the NPV vis-a-vis other capital budgeting methodologies.
  4. If the market price of 10 years Australian government bonds is currently at $850 per unit, whereas the stock of XYZ is being negotiated in the market for $10 per share, which asset SoCal should sell to raise the necessary funds? Explain the reasons behind your decision.
  5. Based on the answers to the previous questions, determine whether to endorse the plan suggested by the marketing department to the BoD.
 
Download Sample Now

Earn back the money you have spent on the downloaded sample by uploading a unique assignment/study material/research material you have. After we assess the authenticity of the uploaded content, you will get 100% money back in your wallet within 7 days.

Upload
Unique Document

Document
Under Evaluation

Get Money
into Your Wallet

Total 8 pages, 1 USD Per Page

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2020). Financial Management. Retrieved from https://myassignmenthelp.com/free-samples/8006fmgt-financial-management.

"Financial Management." My Assignment Help, 2020, https://myassignmenthelp.com/free-samples/8006fmgt-financial-management.

My Assignment Help (2020) Financial Management [Online]. Available from: https://myassignmenthelp.com/free-samples/8006fmgt-financial-management
[Accessed 23 September 2020].

My Assignment Help. 'Financial Management' (My Assignment Help, 2020) <https://myassignmenthelp.com/free-samples/8006fmgt-financial-management> accessed 23 September 2020.

My Assignment Help. Financial Management [Internet]. My Assignment Help. 2020 [cited 23 September 2020]. Available from: https://myassignmenthelp.com/free-samples/8006fmgt-financial-management.


Finding an appropriate topic is one of the most challenging aspects of writing an essay or research paper. If your topic is not attractive, then the chances are that your assignment won't be evaluated properly. But, do not worry as academic writers at MyAssignmenthelp.com provide exciting research topics to draw the attention of the professors. Essay topics should be relatively less known and the content should be informative. Good research topics provide you with a scope to cover an array of issues and data. Our experts are always on the lookout for interesting informative speech topics to write about.

Latest Management Samples

SOCIOL105 Cultural Studies And Society

Download : 0 | Pages : 4
  • Course Code: SOCIOL 105
  • University: The University Of Auckland
  • Country: New Zealand

Answer: 1. 1. The signing of the Treaty in two different languages – Drafting the Treaty in the Maori and English language create confusion and hence, long-running conflicts. 2. The English version of Article 2 of the Treaty states that the Crown has the exclusive right to deal over land transactions with Maori. This factor contributed to the conflicts over lands and thus affected Maori health 3. ...

Read More arrow

TABL5810 Dissertation Proposal

Download : 0 | Pages : 14

Answers: Introduction, Aims and Objectives This paper is basically focused on the issue of Islamic banking operation as compared to conventional banking: in context of bank Al-Rayan bank and HSBC”. Islamic banking is based on the Islamic faith and the activities are conducted within the Islamic law (Iqbal and Molyneux, 2016). The origin of Islamic banking dates back from the beginning of Islam in the seventh century. As per the principl...

Read More arrow

CID133 : PROJECT MANAGEMENT

Download : 0 | Pages : 9
  • Course Code: CID133
  • University: University Of Sunderland
  • Country: United Kingdom

Answer:   1.Factors to consider  The factors to be considered have to be in line with the mission and vision statement of th3e organization (Hartney, 2016). The first factor to consider is the properties of the systems. However, this may be limited by the amount of money required as well as the preference of the various shareholders. Initial considerations will have to be made on the flexibility, scalability, compatibility, security ...

Read More arrow

IITC001 Introduction To Technical Communication

Download : 0 | Pages : 2
  • Course Code: IITC001
  • University: University Of Technology Sydney
  • Country: Australia

Answer: Difference between technical communication and other types of communication Technical communications are more formal compared to the other types of communication. Technical communications generally involves technical messages whereas general communication may comprise of any types of messages. Other than a strict format is maintained for technical writings whereas no such formats are followed in general communication writings. Reachi...

Read More arrow

EMDV8008 Research Proposal

Download : 0 | Pages : 19

Answer: Topic: Applicability of Technology in Employee Motivation and Employee Training Rationale Increasing the rate of competition in the market has rendered a revolutionary change on the overall business scenario. Business experts in quest of gaining competitive advantages have to focus on dealing with advancement of technology. In last five years, businesspersons of hospitality industry have faced innumerable challenges in maintainin...

Read More arrow Tags: Czech Republic Prague Management Mathematical Skills for Business University of Prague 
Next

Save Time & improve Grade

Just share requirement and get customized Solution.

watch
question
We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits

Add File

Error goes here

1,422,199

Orders

4.9/5

Overall Rating

5,092

Experts

Our Amazing Features

delivery

On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.

work

Plagiarism Free Work

Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.

time

24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat. If you are unable to calculate word count online, ask our customer executives.

subject

Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.

price

Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

Assignment writing guide
student rating student rating student rating student rating student rating 5/5

2279 Order Completed

97% Response Time

Zachary Perez

PhD in Computer Science and Information System

Washington, United States

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

1592 Order Completed

96% Response Time

Jane Sima

Ph.D in Psychology with Specialization in Industrial-Organizational Psychology

Singapore, Singapore

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 4/5

3076 Order Completed

99% Response Time

Emily Wei

Doctor of Philosophy (Ph.D) in Civil Engineering

Singapore, Singapore

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 4/5

1309 Order Completed

100% Response Time

Gemmie Chen

MSc in Nursing

Singapore, Singapore

Hire Me

FREE Tools

plagiarism

Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.

essay

Essay Typer

Get different kinds of essays typed in minutes with clicks.

edit

GPA Calculator

Calculate your semester grades and cumulative GPa with our GPA Calculator.

referencing

Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.

calculator

Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than $2000

Check your estimated earning as per your ability

1

1

1

Your Approx Earning

Live Review

Our Mission Client Satisfaction

I received an A. The paper was formatted and was cited with no errors. The professor loved the language used.

flag

User Id: 353486 - 23 Sep 2020

Australia

student rating student rating student rating student rating student rating

The expert follow all the instructions and the assigment information. and delivered the assigment before time. The writer did excellent writing.

flag

User Id: 495021 - 23 Sep 2020

Australia

student rating student rating student rating student rating student rating

this assignment was pass or fail mark. I have passed. Thanks to all the team with a support. A big thanks to the writer by following the information provided and writing my assignment accordingly and given on time. Happy with my assignment and I will...

flag

User Id: 474662 - 23 Sep 2020

Australia

student rating student rating student rating student rating student rating

If you\'re thinking about it just do it, this site is good!! I get good grades every time I use it.. It definitely helps me out

flag

User Id: 423421 - 23 Sep 2020

Australia

student rating student rating student rating student rating student rating
callback request mobile
Have any Query?