Public Listed Company

Please only carry out assignment 1 and based on Malaysian public listed company

Task Description: Assignment One (50%)

Choose a listed company on the London Stock Exchange (LSE) in any of the following sectors: Retailers, Food &Beverages, Health Care, Oil & Gas, Pharmaceuticals & Biotech, Telecommunications and Utilities. Agree your choice with your Lecturer at least 4 weeks before the Assignment submission date.

Obtain the annual reports of the company and one of its main competitors for the latest FIVE years from its website or other sources.

1. Write an introductory report on the activities of the company and its position in the industry with respect to its competitor.

b) Critically compare and analyse their financial performance over the last FIVE years. Relating to each category of ratios, which company has performed better? Overall, which company is better managed.

Explain your reasons.

c) Arising from your analysis, identify any strategic and operational issues that need to be addressed by the companies and make appropriate recommendations with justifications.

State clearly any problems, limitations and assumptions that you need to make to answer the questions.

Task Description: Assignment Two (50%)

SD Ltd is considering in investing in a new piece of machinery that will automate production and save the company a significant amount of money. There are two options for the machinery, and information about the initial investment and four different capital investment appraisal measures are given in the table below. The cost of capital is estimated at 15%, and this figure has been used in calculating the net present value.

The management board of SD is about to attend a meeting to consider which option to choose. The IRR measure was added after the original board papers were released. When asked to estimate the IRR before calculating it, the company’s Finance Director confidently stated that it would be “well over 15% for both options.”

The Z125 option would require all of SD’s major capital budget for the next three years to be allocated to it, so it is absolutely vital that the correct option is chosen.

Required

a) Critically discuss the usefulness of the respective capital investment appraisal measures in the table above and make a recommendation as to which option should be chosen.

b) Both payback and net present value (NPV) measure the financial viability of capital projects. Suggest reasons why payback favours the G120 option and NPV the Z125 option in this case.

c) The Internal Rate of Return (IRR) is quite difficult to calculate. Explain why the Finance Director was so confident that the IRR would be well in excess of 15% for both options.

d) At the management board meeting, the Technical Director produces details of a potential purchase of new engine build plant that would cost £2,080,000 with a NPV of £140,800. Discuss how this option would affect the capital investment decision to purchase either the G120 or Z125 machine.