Case study: Making GM Firm Investment Decision 代写

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    • Case study: Making GM Firm Investment Decision 代写

    Major Assignment Guidelines: Case Study (20%)
    Overview
    The aim of this assessment task is to assess students’ ability to demonstrate their knowledge related to learning outcomes 1,5,6
    & 7. It provides students with the opportunity to apply their knowledge in financial decision making in a real business
    environment. It also helps them to develop writing and computing skills.
     Due: The assignment is due in Week 6 at lecture time. The hard copy of the report will be submitted to the lecturer at
    the beginning of the class of Week 6 (if you cannot come to the class at that week, you can send the copy via email to
    omar.aziz@top.edu.au). You need to but your details carefully in the front page, or the email if you not coming, in order to
    recognize in which course you are? Otherwise your assignment will be lost.
    Details
    The detailed case study is to be provided to students starting from Week 3.
    In this case study, assumes yourself as a financial advisor to a firm. As a financial advisor you are required to prepare an
    executive-style report, in a manner consistent with what is expected in the real world by a typical Board of Directors.
    1. Report title page:
    a. This is a distinctive title page prepared by your team with their names and students numbers as well.
    2. Executive summary (maximum 600 words):
    a. Write an executive summary to the CEO and the board supported by your capital budgeting analysis. The executive
    summary should cover:
    i. Definition of the problem
    ii. Objectives
    iii. Methods (here you need to explain the methods, Payback period, NPV and IRR, form at least 3 references and list them at
    the end of the report).
    iv. Key findings (here you do your calculations), (question 1 and 2 from the required questions in the case study below).
    v. Recommendations (question 3 from the required questions in the case study)
    vi. Conclusions (give snapshot for overall the case study in short)
    3. Other factors should the firm consider (maximum 50 words):
    a. Here you should be able to specify any further factors the company might overlooked or other factors that should
    have been taken into consideration (theory only).
    Case study: Making GM Firm Investment Decision
    GM is a large carpentering firm considering replacing one of its sawing machine with either of two sawing machines, machine
    A or machine B. Machine A is highly automated, computer-controlled machine; machine B is a less expensive machine that
    uses standard technology. To analyse these alternatives, David Ray, a financial analyst, prepared estimates of the initial
    investment and incremental (relevant) after-tax net cash flows associated with each machine. These are showing in the
    following table:
    Machine A  Machine B
    Initial investment  $660,000  $360,000
    Year  Net cash inflows
    1  $128,000  $88,000
    2  182,000  120,000
    3  166,000  96,000
    4  168,000  86,000
    5  450,000  207,000
    Note that David plans to mortise both machine over a five-year period. At the end of that time, the machines would be sold,
    thus accounting for the large fifth-year net cash flows.
    David believes that the two machine are equally risky and that acceptance of either of them will not change firm’s overall risk.
    He therefore decides to apply the firm’s 13% cost of capital when evaluating the machines. GM carpentering requires all
    projects to have a maximum payback period of four years.
    Required
    1. Use the payback period to assess the acceptability and relative rank of each machine.
    2. Assuming equal risk, use the following capital budgeting techniques to assess the acceptability and relative ranking of
    each machine:
    a.  Net present value (NPV).
    b. Internal rate of return (IRR)
    3. Summaries the preferences indicated by techniques used in questions1 and 2 in a table. Do the projects have
    conflicting ranking?
    4. Use your finding in question 1 to 3 to indicate on a theoretical and practical basis which machine would be preferred.
    Explain any differences in your recommendation.
    Marking criteria and standards
    The assignment weighs 20 per cent of the course assessment. Allocation of marks to individual requirement is indicated next
    to each requirement (see the case). A summary of the marking guide is given below.
    Report marking guide
    CATEGORY  BELOW STANDARD  MEETS STANDARD  ABOVE STANDARD
    Format –Ex-summary,
    definitions of the
    problem, etc.
    (5%)
    There is no clear
    definitions and
    recommendation.
    There is definitions but
    does not include a
    recommendation.
    Effective definitions and
    appropriate
    recommendation
    supported by analysis.
    Body –
    (95%): Analysis of the
    project
    Incorrect identification
    of cash flows,
    inappropriate discount
    rate.
    Correct identification of
    cash flows but the other
    calculations are
    incorrect.
    Correct identification of
    cash flows, appropriate
    discount factor, neat and
    clear analysis followed
    by the appropriate
    recommendation.
    Case study: Making GM Firm Investment Decision 代写