讲解 FINM1416 Workshop 4调试SPSS

FINM1416 Workshop 4

This assignment has two components: (1) An individual component (50%) to be completed individually on Blackboard, and (2) A group component (50%) to be completed in groups during and after your workshop.

Important:

. You must complete your Individual Component to take part in the Group Workshop (there is no point in attending the workshop if you have nothing to bring to the workshop for discussion with your team members).

. You must attend the workshop to receive a grade for the group component.

. You are expected to work in the same group that you did in your last workshop.

The individual component is due at 8:00AM on Monday of the workshop week. The group component will commence during the workshop where staff will be present to help ensure you are on the right track. It will be due at the same time one week after your workshop. Please refer to the Timetables and Links tab on Blackboard for details of due dates.

After submitting your group component work, you are required to complete the Peer Assessment individually on Blackboard to evaluate the level of contributions in various aspects made by your group peers. Your final workshop grade is adjusted for the Peer Assessment score given to you by your group members. The due date for the Peer Assessment is at the same time one week after the due date of your group report.

Preparation

The purpose of this workshop is to evaluate a capital budgeting decision and recommend a course of action. Make sure you have completed Modules 7-9, Tutorials 7-9, and Lectures 4-5, and understood the material covered. Not doing this will likely cause confusion and extend the time you need to spend on this workshop.

NPV Problem

Lite-Bikes Ltd. (LB) is a company in Brisbane that has been selling light-weight bikes for the last 10 years. In 2018, the Brisbane Council developed the “Transport Plan for Brisbane – Strategic Directions” (“Transport Plan”) in response to feedback from the community,  industry, and other stakeholders. Under this plan, the city seeks to encourage e-mobility, which aims for efficient and low-energy travel in the city. The city predicts that e-mobility, which includes e-bikes and e-scooters, will be popular in the years to come.

To forge ahead in this emerging market, therefore, LB is now considering making a new product line – electric scooters, an affordable “EZ-Scooter” . This model is not only eco-friendly and low-energy but can also allow travel up to 100km on one charge – a remarkable distance as compared to existing models in the market. It runs on a silent 1,000-watt motor within the rear wheel that is backed by a powerful Lithium battery.

Manufacturing this new e-scooter would require investments in new machinery and five small 3-D printers to print parts. As LB wants to remain competitive, it expects that if the product sells well, it will make an upgraded version of the EZ-Scooter in six years and cease producing the original model.

You have worked for LB for a year now, and your manager has asked you to help analyse the potential new product. Your team has collected the following estimations and grouped them into two areas: (1) Revenue & Costs, and (2) Capital Expenditures (Machinery and 3-D printers).

1. Revenue & costs

. LB conducted market research costing a total of $35,000. The report shows that annual sales are expected to be 20,000 units in the first year but will grow at 10 % per year over the next six years.  The company has also invested $75,000 in R&D (20,000 of which is from a stimulus package from the City Council) to come up with the design and technology for this new product.

. Each  EZ-Scooter  will  be  sold  for  $2,200  in  the  first year.  However,  it will increase at the inflation rate over the next six years.

. If the new EZ-Scooter is launched, LB estimates that net revenue from their existing light-weight bikes will decrease by $2,000,000 per year (2,000 bikes × $1,000 per bike).

. In the first year, the variable cost of making an EZ-Scooter is $1,700 per unit, but over the next six years it will increase at the same rate as inflation.

. The production of EZ-scooters requires fixed costs $1,500,000 per year.

. Because  of  the  new  product  line,  the  company’s  administrative  costs  will increase by $150,000 per year. However, this new line of bike production will be charged with an annual share of the business’s administrative costs, totalling $100,000 per year.

. If LB launches the new e-scooter, they will increase their box order with Pacco Ltd., reducing their per-unit box cost on other product lines. This is estimated

to save $35,000 per year.

. To manufacture EZ-Scooters, LB plans to use part of its current factory, which it currently rents out for $200,000 per year.

. To finance this new production line, LB will borrow part of the capital required from a local bank, with an interest cost of $30,000 per year.

2. Capital Expenditures

.    The EZ-Scooter production assembly line will cost $7,000,000. The company estimates that this system will be sold for $2,000,000 at the end of six years. The ATO regulations require depreciation on a straight line to zero over 20 years.

.    The hybrid technology machine will cost $3,000,000, which will be sold for $1,000,000 at the end of six years. The ATO regulations require depreciation straight-line to $100,000 over 10 years.

.    The total cost of the five required 3-D printers is $2,000,000 (5 × $400,000 per unit). At the end of six years, the cash proceeds from the sale of these printers are $500,000. The ATO regulations require depreciation on a straight line to zero over 10 years.

Additional Information

.    The project will require working capital of $25,000, which will be fully returned at the end of the project.

.    LB is subject to a corporate tax rate of 30%.

.    LB estimates the cost of capital for this project to be 15%.

.    ZB’s policy is to reject projects with a payback period of more than 3 years.

.    Inflation rate is expected to be 3.5%.

REQUIRED

PART 1 – INDIVIDUAL COMPONENT (DUE 8:00AM, TUESDAY, 7 May 2024)

Complete the Excel template to answer following parts and submit your answers on Blackboard.

Q1: Which cash flows are not relevant? Why? Fill out the yellow items in the sheet “Input Variables” and, in your template, highlight in red those items which you think are not relevant for your analysis and state the reason. (12 marks)

Q2: Calculate the net proceeds at the end of the project for the three items of capital expenditures. What are the net proceeds for the manufacturing assembly line system? The hybrid technology machine? The 3-D printers? Fill out the light blue items in the “Input Variables” sheet (to be submitted in Q6 below). (10 marks)

Q3: Calculate after-tax FCF in the sheet “Cash Flows” . What is the project’s initial (Year 0) investment outlay? What are the project’s Years 1, 2, 3, 4 and 5 after-tax FCF? (They should be different, as we have growth rates for several inputs). What is the project’s terminal (Year 6) after-tax FCF? (12 marks)

Q4: What is the project’s NPV? IRR? Payback period? (8 marks)

Q5: Should the company accept or reject the project? Why? (8 marks)

PART 2 – GROUP COMPONENT (ATTEND 2-HOUR WORKSHOP + GROUP REPORT DUE ONE WEEK AFTER YOUR WORKSHOP)

In Workshop 4, you will continue to work with the same members as in your previous workshop. You can change your groups, but you must inform us in the workshop. You must attend the workshop to get marks for this component and you must join the session within the first 10 minutes.

First 5min: Introduction to workshop. Your first task is to share your answers with your members. This is a crucial and necessary part of starting your group task.

Remaining workshop time: Review and discuss the different answers of your group members. Then, begin to brainstorm and write up the answers for your group report (up to 1,000 words, including references):

1.   Explain which inputs are irrelevant and the reasons. (6 marks)

2.   What are the final NPV, IRR, and payback values? (Attach your completed Excel file as a separate file) (10 marks)

3.   Were there any differences in your individual Excel files? Where did they come from and how did you resolve them? (If no differences are identified, then list what was most challenging about this exercise and why). (8 marks)

4.   Conduct break-even and sensitivity analyses in the Excel tab “Break-Even & Sensitivity” . Report and briefly discuss your findings of your analysis in Excel. (8 marks)

5.   Conduct a scenario analysis. LB considers 5 different scenarios (probabilities provided) that are possible for the next six years. The scenarios are from the worst case to the best case in terms of macroeconomic conditions  and regulations. Depending on the political party elected, there will be more subsidies, incentives, and infrastructure in place for e-scooting.

Report and briefly discuss yourfindings of your analysis in Excel. Provide bar charts that illustrate the NPV, IRR, and payback period of the project under all the scenarios. (10 marks)

6.   Your  recommendations  to  the board  regarding  the  project.  Explain  which capital budgeting method(s) you have relied on and the reasons, should a conflict in decision arises for different methods. (8 marks)

You should attach your Excel analysis as an appendix (not counted in the word count).

MARKING

Your final score for the workshop will be computed out of 100 marks. Your best three workshops will each count for 15% of your final grade. Marks will be allocated as follows: