Financial Management and Control

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Assignment Question:

Part A: 600 words (36 marks)

Select a company listed on the Singapore Stock Exchange (SGX) and evaluate the performance of

the company over the most recent three years. You may be able to obtain the financial statements

from the company’s website and/or from its annual report. Annual reports can also be downloaded

from the respective company’s website. Alternatively, the financial information can also be

obtained from the SGX website (www.sgx.com).

Required:

Prepare a report to evaluate the most recent three years’ performance of the company in relation

to:

1. Profitability 2. Gearing 3. Stock market performance

The analysis must be supported by calculation of relevant ratios in the three areas mentioned above.

All ratio definitions and supporting calculations should be clearly shown. Consider to compare

against a competitor and/or industry norm.

(3 areas x 12 marks = 36 marks)

Part B: 900 words (30 marks)

Critically discuss whether the value of the firm selected in Part A would benefit from an increase

in leverage. Consider to use relevant capital structure theories to support your answer.

Part C: 500 words (34 marks)

Raffles Ltd. is planning to introduce a new product to expand on its existing product offering. The

new product will require several new equipment that will cost a total of $1,350,000 and be

depreciated by straight line over five years (assuming no salvage value).

The company expects to sell $720,000 of the new product in the first year, $950,000 each year for

Year 2 and Year 3, and $1,120,000 in Year 4 and Year 5. Direct cash costs including labor and

materials will be 40% of sales. Incremental overheads costs are estimated at $84,000 a year. No

additional working capital is required.

The company evaluates investment projects using a discount rate of 14%. The company has an

investment policy which requires the initial outlay to be recovered within 3 years.

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Required:

1) Compute the following investment appraisal measures to determine whether the project should be accepted. Provide your workings and reasoning for your decision for each of the methods

(i) Payback Period (ii) Net Present Value (NPV) (iii) Internal Rate of Return (IRR) (18 marks)

2) Critically evaluate the effectiveness and popularity of the Internal Rate of Return (IRR) method as an investment appraisal tool.

(16 marks)

Further details:

This assignment contributes 100% to the final assessment mark for this course.

Please note that the University policy on cheating collusion and plagiarism will be applied to this

piece of work.

Marking Guide:

Marks will be awarded with respect to the following assessment criteria.

 Provision of clear and concise answer addressing the all components of the question.

 Evidence of supporting data to analyse and draw inferences and conclusions.

 Evidence of background reading and relevance of the material to the question posed.

 Depth of analysis based on relevant theoretical and empirical literature and financial data analysis.

 Appropriate conclusion based on relevant evidence provided.

 References should be sourced from credible sources.

 Appropriate use of the Harvard referencing system.

END OF ASSIGNMENT QUESTION