You are an investment adviser, working to build a foundation of wealth for your clients. One of your wealthiest clients already has a diversified portfolio, which includes managed funds, property; cash/fixed interest and a few direct share investments in Australia and around the world. The investor wishes to expand his/her portfolio and is considering your company’s share to add to the portfolio. (The investor has an extra $10 million that wishes to invest into your company). The company which you will examine is allocated by your lecturer. The assignment is a written comprehensive report and analysis of the firms’ financial performance (including referencing).
You are required to do the following tasks:
From research via the internet (using credible sources) or financial/business publications, note any significant announcements which may have influenced the share price of your company. These factors could include merger activities, divestitures, changes in management’s earnings forecasts, changes in analysts’ forecasts, unusual write-offs or abnormal items, macroeconomic factors, industry wide factors, significant management changes, changes in the focus of the company, impact of competitors or lawsuits etc. (Restrict the number of announcements to 5).
Assume that your selected company is considering a potential project with a new product that is expected to sell for an average price of $250 per unit and the company expects it can sell 500,000 unit per year at this price for a period of five years. Launching this project will require purchase of a $5,500,000 equipment that has residual value in five years of $500,000 and adding $ 80,000 in working capital which is expected to be fully retrieved at the end of the project. Other information is available below:
Depreciation method: straight line (n = 5 years)
Variable cost per unit: $150
Cash fixed costs per year $550 000
Discount rate: 9%
Tax Rate: 25%
Do a scenario analysis with cash flows of the assumed project to determine the sensitivity of the project’s NPV to different scenarios that are defined in terms of the estimated values for each of the project’s value drivers. Please work on two scenarios corresponding to the worst and best-case outcomes for the project. You need to provide your results in (a) relevant tables:
Number of slides: 15-20 slides of PowerPoint