Description
University of Sunderland
PGBM134 Finance and Project Management
Individual assignment
Weighting – 100% of the marks for this module
This is an individual assignment of 4,000 words. The word count is for guidance only.
The hand in date is: 6 October 2023
Requirements:
Part A of the assessment is compulsory for all students with a marking allocation of 50% awarded within this element.
Part B of the assessment is compulsory for all students with a marking allocation of 50% awarded within this element.
The assignment has been designed to cover the following learning outcomes associated with successful completion of the module:
PART A (50%)
Question 1 ABC & Co (25%)
The finance manager of ABC & Co is evaluating two mutually exclusive projects with the following cash flows.
| Year | Project X £ | Project Y £ |
| 0 | (150,000) | (200,000) |
| 1 | 50,000 | 50,000 |
| 2 | 50,000 | 80,000 |
| 3 | 30,000 | 40,000 |
| 4 | 40,000 | 80,000 |
| 5 | 20,000 | 40,000 |
The company’s current return on capital employed is 10 per cent (average investment basis) and the company uses straight-line depreciation over the life of the project i.e. 5 years with a zero residual value. (straight line depreciation means equal monetary amount of depreciation each year)
Required:
(a) Advise ABC & Co which project should be undertaken using:
(i) The payback method of investment appraisal
(ii) The accounting rate of return (ARR) method of investment appraisal:
(iii) The net present value method of investment appraisal. (16%)
(b) Critically assess and discuss the problems that arise for the payback period method of investment appraisal, and explain how such problems may be resolved in practice. (9%)
Question 2 SuperPro Co. Limited (25%)
SuperPro Co. Limited manufactures electrical components, which are sold to industrial users. The abbreviated financial statements for each of the last two years are as follows:
Income Statement for the year ended 31 December
| 2020 | 2021 | |
| £ 000 | £ 000 | |
| Revenue | 1,500 | 1,600 |
| Cost of sales | (750) | (900) |
| Gross Profit | 750 | 700 |
| Operating expenses | (250) | (230) |
| Depreciation | (80) | (90) |
| Operating Profit | 420 | 380 |
| interest | (20) | (15) |
| Profit before taxation | 400 | 365 |
| taxation | (160) | (145) |
| Profit for the year | 240 | 220 |
Statements of financial position as at 31st December
| 2020 | 2021 | |
| £ 000 | £ 000 | |
| Assets | ||
| Non – Current assets | ||
| Property, plant and equipment | 750 | 780 |
| Current assets | ||
| Inventories | 145 | 180 |
| Trade receivables | 100 | 120 |
| Cash | 10 | 10 |
| 255 | 310 | |
| Total Assets | 1,005 | 1,090 |
| EQUITY AND LIABILITIES | ||
| Equity | ||
| Ordinary Share Capital (£1 shares fully paid) | 500 | 500 |
| Retained earnings | 250 | 490 |
| 750 | 990 | |
| Non – Current liabilities | ||
| Borrowings – bank loan | 100 | 80 |
| Current liabilities | ||
| Trade Payables | 60 | 10 |
| Other payables and accruals | 20 | 0 |
| Taxation | 25 | 0 |
| Short term borrowing (all overdraft) | 50 | 10 |
| 155 | 20 | |
| Total Equity and Liabilities | 1,055 | 1,090 |
Required:
Calculate the following financial ratios for both years (using year-end figures for statement of financial position items):
- Return on capital employed. (2%)
- Operating profit margin. (2%)
iii. Gross profit margin. (2%)
- Current ratio. (2%)
- Acid test ratio. (2%)
- Settlement period for trade receivables. (2%)
vii. Settlement period for trade payables. (2%)
viii. Inventories turnover period. (2%)
Produce a report for the Board of Directors of SuperPro Co. Limited that evaluates the performance of the company across the two years within the areas of profitability, liquidity, and efficiency. You may wish to suggest methods for improving these key indicators and the overall performance of the business. (9%).
PART B (50%)
Question 3 First Health Corporation (50%)
The First Health Corporation designs and manufactures medical equipment for hospitals for years; the company enjoyed a stable marketplace and a relatively predictable business environment. Although there had been a boom in local medical care business in recent years, First Health Corporation was keen to develop overseas market. Success in entering new markets depended upon staying cost competitive.
With the removal of trade barriers and other Globalized international trade agreements, the First Health Corporation found itself competing with other medical equipment manufacturers headquartered in countries around the world. A decision was then made to set up production site in Asia to allow more agility and efficiency within their manufacturing supply.
The Project
The project was to include the set up of a production site and transfer of medical equipment assembly machines, along with ancillary equipment into Asia (China). Scheduling the project had to take six months from end of September before production must start on April to supply potential customers. A site had been selected although the appointed Project Manager and potential team members had not visited the area, nor did they understand the weather conditions of wind, rain and snow that prevailed in this area.
The assembly machines were to be transported by sea and then road haulage before arriving at the new site. Road infrastructure was again an area that required attention.
Adam Greenman
Adam Greenman has been appointed as the Project manager for this project. He is a 29- year-old graduate of a well known University in the UK with a B.S.degree in Mechanical Engineering. After graduation, he worked for five years in Engineering Design Industries. Although he took a significant pay cut, he jumped at the opportunity to return to his home location with First Health Corporation. His job in Engineering Industries had been very demanding. He was confident that he had the requisite technical expertise to excel at his new job with the First Health Corporation.
The Team
Adam had a part-time team of five assistants on placement from the departments within First Health Corporation. At first, he was not sure how freely he could delegate work to the assistants bearing in mind they also reported to other managers within the organisation. He quickly realised that they were all very bright, competent workers who were anxious to leverage this project experience into a lucrative career.
The project has an investment of £1,000,000 pounds and is scheduled to take 6 months to complete; taking into account, the project would be completed during the winter which would be difficult. Adam and his team would first need to visit the new location and start to consider the project activities.
Required:
You are required to prepare a report concerning the main issues to be addressed by Adam Greeman from a project management perspective. From a project management perspective base on Project life cycle outline the activities required to be completed by Adam to successfully implement this new initiative, e.g. Project Scope Statement, Project Priorities (with a balanced trade-off and justification), Work Breakdown Structure (with brief details of work packages) and Cost Estimation (with time-phased budget) ensuring that it can operate on-time, and within budget. Adam Greenman is only Project Managing the transfer of equipment and not the actual facility building project. (Assume the building has already been completed.)
Your report should be based on the four stages of Project life cycle and include examples of the concerns, Project Life cycle stages, associated with managing the lifecycle of this major project.
Don’t forget you must provide the followings:
- Project scope Statement
- Work Breakdown Structure (with brief details of work packages),
III. Network diagram,
- Cost appraisal methods (theory), and
- Any other relevant table or information as an Appendix & also any practical examples in relation to relevant theories should be derived from the case study.
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