Case study: Making GM Firm Investment Decision 代写
Major Assignment Guidelines: Case Study (20%)OverviewThe 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 businessenvironment. 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 atthe beginning of the class of Week 6 (if you cannot come to the class at that week, you can send the copy via email firstname.lastname@example.org). You need to but your details carefully in the front page, or the email if you not coming, in order torecognize in which course you are? Otherwise your assignment will be lost.DetailsThe 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 anexecutive-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 executivesummary should cover:i. Definition of the problemii. Objectivesiii. Methods (here you need to explain the methods, Payback period, NPV and IRR, form at least 3 references and list them atthe 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 shouldhave been taken into consideration (theory only).Case study: Making GM Firm Investment DecisionGM is a large carpentering firm considering replacing one of its sawing machine with either of two sawing machines, machineA or machine B. Machine A is highly automated, computer-controlled machine; machine B is a less expensive machine thatuses standard technology. To analyse these alternatives, David Ray, a financial analyst, prepared estimates of the initialinvestment and incremental (relevant) after-tax net cash flows associated with each machine. These are showing in thefollowing table:Machine A Machine BInitial investment $660,000 $360,000Year Net cash inflows1 $128,000 $88,0002 182,000 120,0003 166,000 96,0004 168,000 86,0005 450,000 207,000Note 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 allprojects to have a maximum payback period of four years.Required1. 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 ofeach 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 haveconflicting 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 standardsThe assignment weighs 20 per cent of the course assessment. Allocation of marks to individual requirement is indicated nextto each requirement (see the case). A summary of the marking guide is given below.Report marking guideCATEGORY BELOW STANDARD MEETS STANDARD ABOVE STANDARDFormat –Ex-summary,definitions of theproblem, etc.(5%)There is no cleardefinitions andrecommendation.There is definitions butdoes not include arecommendation.Effective definitions andappropriaterecommendationsupported by analysis.Body –(95%): Analysis of theprojectIncorrect identificationof cash flows,inappropriate discountrate.Correct identification ofcash flows but the othercalculations areincorrect.Correct identification ofcash flows, appropriatediscount factor, neat andclear analysis followedby the appropriaterecommendation.Case study: Making GM Firm Investment Decision 代写
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