Assessment 3: Business Case Studies 2 ACC00716 S1 2019
\n1
\nACC00716 Finance Session 1, 2019
\nAssessment 3: Business Case Studies 2
\nDue date: 19 May 2019, 11PM
\nThis assignment has a 25% weighting in your overall mark for this unit and focuses on content from
\nWeeks 6, 7 and 8. The assignment will be marked out of 25 and marks will be allocated as indicated in
\nthe rubric on page 4. Your total assignment submission will consist of a word document and a
\nspreadsheet.
\nThe assignment is based on the case information below. While the company and financial data in the
\ncase are fictitious1
\n, the context is not. Many companies face similar investment decisions as well as
\nchallenges and opportunities to run more environmentally and socially responsible businesses.
\nDuoLever Limited operates in the personal care (e.g. skin and hair care products) industry. All its
\nproducts are sold in plastic packaging and a significant proportion in multi-layer sachets (or pouches)
\n2
\n.
\nManagers at DuoLever are acutely aware of the increase in world production of plastic and the
\nenvironmental impact of plastic waste ending up in landfills, rivers and oceans. For example, it is
\nestimated that 8 million metric tons entered the ocean in 2010 and this annual amount is predicted
\nto more than double by 2025, accumulating as show in the following graph3
\n:
\nTo help develop a closed-loop system related to the company\u2019s products, DuoLever has invested
\naround $50 million in soft plastic recycling research, development and pilot testing. The outcome is a
\nnew and efficient method for recycling sachet waste. In fact, their recycling method is more energy
\nefficient than producing virgin sachet plastic, reducing energy usage by 83%. The output plastic is of<\/p>\n
1 UniLever and its research and development in the area of multi-layer sachet recycling provides the inspiration for this case
\nbut all facts related to the financial analysis are fictitious.
\n2 While not necessary for attempting this case study, you will better understand the plastic packaging in this case context if
\nyou go to https:\/\/www.plasticpackagingfacts.org\/blog\/multi-layer-pouch-packaging-a-sustainable-story-animated\/ and watch
\nthe video on multilayer plastic pouches. Although many improvements to this packaging have been made, as pointed out in
\nthe video, there remains much to do in reducing the impacts of waste pouches on the environment.
\n3 Estimates from Jambeck, J.R., Andrady, A., Geyer, R., Narayan, R., Perryman, M., Siegler, T., Wilcox, C., Lavender Law,
\nK. (2015) Plastic waste inputs from land into the ocean, Science, 347, p. 768-771 and graph reproduced from p. 770. If you
\nare interested, see see https:\/\/jambeck.engr.uga.edu\/landplasticinput for further details and an infographic.
\nAssessment 3: Business Case Studies 2 ACC00716 S1 2019
\n2
\nsuch high quality it can be used in food grade packaging applications. Currently, no other recycling
\nmethod in the market can achieve this.
\nThe company now faces a decision: should it (1) add production of recycled sachet plastic to the
\ncompany\u2019s portfolio of businesses or (2) license use of the patented method? The CEO has asked you
\nto undertake a financial analysis of the options and present your recommendations in a short memo.
\nOption 1:
\nThe recycling production option requires an upfront investment in plant and equipment of $20 million,
\nwhich will be depreciated to a zero book value on a straight-line basis over 5 years. The plant will
\nprovide sufficient capacity to meet the company\u2019s forecast plastic packaging needs over the period of
\nits life. After this, it is expected that the plant will have no salvage value and will be updated using new
\nand better technology. Financing for the plant and equipment will be via a new 5 year debt issue,
\nresulting in interest costs of $1.4 million payable at the end of each year.
\nProducing recycled plastic has several financial benefits for the company. First, sales revenue of the
\ncompany\u2019s existing products, which will be packaged in the recycled plastic, is predicted to increase
\ndue to consumer demand for environmentally responsible products. Excluding this benefit, the
\ncompany\u2019s forecast sales revenue for the coming year is $200 million and this is expected to grow by
\n4% each year after that. The benefit of recycled packaging is expected to increase these sales forecasts
\n2% during the 5 year life of the project ( help with nursing paper writing from experts with MSN & DNP degrees).
\nThe second benefit is that the cost of plastic packaging for the company\u2019s existing products will
\ndecrease. The recycled plastic will be cheaper than buying virgin plastic due to lower energy costs and
\navoiding a supplier margin. The reduced energy costs will shave 15% off total variable packaging costs,
\ncurrently (without recycling) estimated at $22 million for the coming year and expected to grow by
\n3% per year after that. Avoiding a supplier margin will reduce total variable packaging costs by 10%.
\nHowever, the benefits of avoiding the current supplier margin will be offset by the need to pay a new
\npartner, Clean World Ltd, who will set up a plastic waste collection system to supply sufficient raw
\nmaterial for the recycling plant. Apart from these changes, it is expected that variable costs and net
\nworking capital will be equivalent to existing forecasts. However, an additional $2 million annually in
\nselling, administrative and general expenses directly related to the project ( help with nursing paper writing from experts with MSN & DNP degrees) (excluding depreciation)
\nwill be incurred.
\nOption 2:
\nOption 2 involves licensing use of the patented recycling method to another company, Clean World
\nLtd, which has shown interest in taking on the entire project ( help with nursing paper writing from experts with MSN & DNP degrees), not just supply of raw material. Initial
\nnegotiations between DuoLever and Clean World have reached some agreement on what the terms
\nof the arrangement would involve. Clean World would produce recycled plastic using DuoLever\u2019s
\nmethod for the next 5 years and all output during that time would be supplied exclusively to DuoLever
\nfor the same cost as DuoLever\u2019s existing virgin plastic supply forecasts. This means that Clean World
\nwould capture the energy savings associated with the new recycling method, along with a supplier
\nmargin. The benefits for DuoLever would be no initial outlay for plant and equipment and locked in
\npackaging materials supply costs for the next 5 years. DuoLever would also retain the ability to market
\nthe environmentally responsible characteristics of its recycled packaging and so retain the expected
\nAssessment 3: Business Case Studies 2 ACC00716 S1 2019
\n3
\nadditional sales revenue benefits of Option 1. Annual selling, administrative and general expenses
\nwould be just $1 million annually under Option 2, as no additional production administration would
\nbe required.
\nOther information:
\nDuoLever has an 8% weighted average cost of capital and is subject to a 25% tax rate on its income.
\nRequired:
\nPrepare (1) a spreadsheet financial analysis of the proposed options and (2) a memo to DuoLever\u2019s
\nCEO that briefly explains and justifies your chosen methods, inputs and any assumptions made,
\nsummarises your findings, and presents your recommendations on the proposed options. Ensure you
\nnot only address base case cash flows but also analyse potential uncertainty. Recommendations
\nshould address the decision to be made, along with any further follow up or other matters the
\ncompany should consider prior to making a final decision.
\nInstructions:
\nSubmit your spreadsheet separately in the provided spreadsheet link in the BCS2 section of the unit
\nsite. By submitting the spreadsheet, you are confirming that it is entirely your own work. Save the
\nspreadsheet with your details in the file name using the following format (failure to do so could result
\nin your spreadsheet not being considered in marking):
\nStudent ID_Full_name_ACC00716A3
\nFor example: 13579246_Jennifer_Harrison_ACC00716A3
\nThe memo will be submitted as a word document via a Turnitin assignment link in the BCS2 section of
\nthe unit site and include your name, student ID, unit code (ACC00716), assessment number (A3) and
\nword count at the beginning of the document. The remainder of the document should be set up as a
\nformal memo and include an appendix with a screen shot(s) of your base case figures from the
\nspreadsheet. Within the memo body, you may provide tables and figures that are discussed in the text
\nand Help decision makers understand your methods, findings and their implications for decision
\nmaking. The word document submission must not exceed 1,000 words (excluding the screen shot
\nappendix and reference list).
\nThis is an individual assessment exercise. The unit teaching team is very experienced at marking such
\nassessments and recognising the differences between individual and \u201cgroup\u201d work, as well as data,
\nfacts, statements and ideas of others that have not been appropriately acknowledged. To avoid any
\npotential for academic misconduct investigation, ensure that every aspect of your work is your own
\nand that you acknowledge all sources you have directly drawn upon in your submitted work.
\nQuotations should be shown as such. We are not fussy about referencing style, just that you reference
\nwhen needed.
\nAssessment 3: Business Case Studies 2 ACC00716 S1 2019
\n4
\nMARKING
\nCRITERIA Excellent Very Good Good Satisfactory Poor
\nAccurate
\nestimation of
\nrelevant base case
\ncash flows and
\ndecision criteria
\n(12 marks)
\nAll relevant base case cash flows
\nhave been accurately
\nincorporated into the analysis
\nand net cash flows and decision
\ncriteria are correct. (12 marks)
\nNearly all relevant base case
\ncash flows have been
\naccurately incorporated into
\nthe analysis and decision
\ncriteria are correct based on
\nyour net cash flows (10
\nmarks)
\nMost relevant base case cash
\nflows have been accurately
\nincorporated into the analysis
\nand decision criteria are
\nmostly correct based on your
\nnet cash flows. (8 marks)
\nAbout half the relevant
\nbase case cash flows have
\nbeen accurately
\nincorporated into the
\nanalysis and decision
\ncriteria are mostly correct
\nbased on your net cash
\nflows. (6 marks)
\nLess than half the relevant
\nbase case cash flows have
\nbeen accurately incorporated
\ninto the analysis and decision
\ncriteria may be mostly
\nincorrect based on your net
\ncash flows. (0 to 4 marks)
\nAccurate and
\nappropriate
\nanalysis of
\nuncertainty (5
\nmarks)
\nYou have accurately analysed
\nproject ( help with nursing paper writing from experts with MSN & DNP degrees) uncertainty using
\nappropriate techniques. You have
\nshown insight by judicious input
\nchoices that are well-articulated
\nand linked to case facts. The
\nanalysis is easy to follow. (5
\nmarks)
\nYou have accurately analysed
\nproject ( help with nursing paper writing from experts with MSN & DNP degrees) uncertainty using
\nappropriate techniques and
\njudicious input choices that
\nare mostly well-articulated
\nand linked to case facts. The
\nanalysis is easy to follow. (4
\nmarks)
\nYou have analysed project ( help with nursing paper writing from experts with MSN & DNP degrees)
\nuncertainty using appropriate
\ntechniques and mostly
\njudicious input choices that
\nare mostly well-articulated
\nand linked to case facts. The
\nanalysis is easy to follow. (3.5
\nmarks)
\nYou have analysed project ( help with nursing paper writing from experts with MSN & DNP degrees)
\nuncertainty using at least
\none appropriate technique.
\nInput choices lack
\njustification, are
\nunreasonable or the
\nanalysis is not easy to
\nfollow. (2.5 marks)
\nYou have not analysed project ( help with nursing paper writing from experts with MSN & DNP degrees)
\nuncertainty using appropriate
\ntechniques or have
\nattempted to use at least one
\nappropriate technique but
\nwith no demonstrated
\nconsideration of input choices
\nin a hard to follow analysis or
\nthere are major inaccuracies.
\n(0 to 2 marks)
\nAppropriate
\ninterpretation and
\nrecommendations
\nbased on the
\nproject ( help with nursing paper writing from experts with MSN & DNP degrees) analysis (8
\nmarks)
\nYou have accurately interpreted
\nthe results of your financial
\nanalysis and made appropriate
\nand insightful recommendations
\nwith the basis of those
\nrecommendations clearly and
\nconcisely explained.
\nRecommendations go further
\nthan simply accepting or rejecting
\nthe project ( help with nursing paper writing from experts with MSN & DNP degrees) by recognising the
\nsubtleties of project ( help with nursing paper writing from experts with MSN & DNP degrees) decision
\nmaking and needed additional
\nanalysis or considerations. Use of
\nlanguage makes meaning
\nconsistently clear; no or very few
\ngrammar, syntax and spelling
\nerrors. (8 marks)
\nYou have accurately
\ninterpreted the results of your
\nfinancial analysis and made
\nappropriate
\nrecommendations.
\nRecommendations go further
\nthan simply accepting or
\nrejecting the project ( help with nursing paper writing from experts with MSN & DNP degrees) by
\nrecognising some subtleties of
\nproject ( help with nursing paper writing from experts with MSN & DNP degrees) decision making
\nand\/or needed additional
\nanalysis or considerations.
\nUse of language mostly makes
\nmeaning clear; no or very few
\ngrammar, syntax and spelling
\nerrors. (6.5 marks)
\nYou have accurately
\ninterpreted most of the
\nresults of your financial
\nanalysis and made some
\nappropriate
\nrecommendations. Subtleties
\nof project ( help with nursing paper writing from experts with MSN & DNP degrees) analysis and
\ndecision making have
\ngenerally not been
\nrecognised. Use of language
\nmostly makes meaning clear;
\nseveral grammar, syntax and
\nspelling errors. (5.5 marks)
\nYou have accurately
\ninterpreted some of the
\nresults of your financial
\nanalysis and made at least
\none appropriate
\nrecommendation. Use of
\nlanguage mostly makes
\nmeaning clear; several
\ngrammar, syntax and
\nspelling errors. (4 marks)
\nYou have not correctly
\ninterpreted most results from
\nyour financial analysis or no
\nrecommendations have been
\nmade or recommendations
\ndo not follow from the results
\nor interpretation. Use of
\nlanguage mostly makes
\nmeaning unclear; many
\ngrammar, syntax and spelling
\nerrors. (0 to 3 marks)
\nBusiness Case Studies 2
\nBy (Name)<\/p>\n
Course
\nProfessor
\nUniversity
\nPhysical Address
\nDate<\/p>\n
MEMORANDUM
\nTO: CHIEF EXECUTIVE OFFICER, DUOLEVER LTD
\nFROM: PROJECT MANAGEMENT DEPARTMENT
\nDATE: May 18, 2019.
\nSUBJECT: INVESTMENT OPTIONS
\nThis is to inform you on behalf of the project ( help with nursing paper writing from experts with MSN & DNP degrees) team that we have evaluated the two investment options for the recycling system and developed a report for the best investment option. Two investment option is evaluated using the current base case, then investment option 1 which involves the purchase of new equipment and machinery as well as investment option 2 which involves the licensing of a patented recycling method of Clean World Ltd. The report discloses, the assumptions, methods, findings, recommendations and conclusion on the two investment options.
\nAssumptions
\nGeneral assumptions
\nThe investment options were evaluated through a time value of money using the weighted average cost of capital of the company of 8%.the income taxes rate was the rate for locally registered companies at the rate of 25%. The investment options are evaluated for a useful life of five years with no salvage value for all cases.
\nBase case assumptions
\nThe annual revenue remains constant at $200 million, and there is no expected future growth. The variable costs remain constant at $22 million the entire project ( help with nursing paper writing from experts with MSN & DNP degrees) life. There is no depreciation, and interest expenses but the selling, general and administrative expense that will be incurred were $2 million which remain fixed.
\nInvestment in new equipment and machinery
\nThe initial outlay cost is $20 million, which is to be used up within the five years of the project ( help with nursing paper writing from experts with MSN & DNP degrees). Depreciation is estimated on a straight line basis for every accounting year but is added back to obtain net cash flows (Ball et al., 2016, pg.28). The revenues are expected to grow at an annual growth rate of 4%. Also, there are recycling benefits which are expected to increase the revenues from investment into the new machinery. The company makes cost savings of 10% in energy costs and 10% for the supplier margin in raw materials. The variable costs are expected to grow at 3% every year.
\nInvestment in patented recycling methods
\nThe revenues are expected to remain the same as the investment in new equipment and machinery. The costs will increase at 3% annually with energy cost savings are offset with supplier margin utilised in the provision of materials. The selling, general, and administrative expenses reduced to $2 million. There is no initial capital outlay as the project ( help with nursing paper writing from experts with MSN & DNP degrees) involves the use of existing plant and machinery.
\nMethods
\nThe investment appraisal of the two options involved the use of net present values and discounted cash flows. The profitability index was also estimated, but both the base case and option 2 could not yield a profitability index since there was no initial capital outlay. Net present value approach was used since it allows for the comparison of the present value of cash flows with the initial cost to determine the change in value. The project ( help with nursing paper writing from experts with MSN & DNP degrees)ed with the highest net present value is selected since it is the most viable to invest (Widhiwaluya and Faisal, 2016, pg.15).
\nFindings
\nThe investment appraisal established that investment in new equipment and machinery results in high net present value compared to the base case and the use of a patented recycling method. The net cash flows of the investment option 1 are higher compared to the base case, which has constant annual net cash flows, while option 2 has low net annual cash flows. Also, the first investment options have more cost savings compared to the base case and the second investment option even though it incurs more selling, general, and administrative costs. The second investment option has higher variable costs; this is why there are low net cash flows. The analysis further showed that investment into a new plant and machinery results in a higher profitability index of 30.91. The table below shows the net present value and profitability index performance of each investment option (Azizurrofi, 2017, pg.1).
\nInvestment option Net present value (NPV) Profitability Index (PI)
\nBase case $527,037,724.89 –
\nOption 1 $598,212,797.32 30.91
\nOption 2 $596,338,081.09 –
\nTable 1: Summary of findings on net present value and profitability index of each option
\nConclusion and Recommendations
\nDuoLever Ltd needs to invest in the new plant and machinery. The investment option results in a higher net present value of the net cash flows. Also, the project ( help with nursing paper writing from experts with MSN & DNP degrees) has a higher profitability index of 30.91, which means the project ( help with nursing paper writing from experts with MSN & DNP degrees) ranks higher in terms of investment, and its cash flows are likely to generate higher returns in the future. Therefore, the decision is to invest in new equipment and machinery since project ( help with nursing paper writing from experts with MSN & DNP degrees)s with higher net present value and profitability index are considered for investment.
\nMoreover, DuoLever Ltd needs to invest in option 2 since the project ( help with nursing paper writing from experts with MSN & DNP degrees) results in high-cost savings in both energy costs and supplier margin. Therefore, this shows this will help the company in improving sustainability as a result of the reduction in energy costs (Pombo et al., 2016, pg.284). All in all, investment in new equipment and machinery is the most viable project ( help with nursing paper writing from experts with MSN & DNP degrees) as there are high net cash flows, net present value, and profitability index.<\/p>\n
References Assessment 3: Business Case Studies 2 ACC00716 S1 2019 1 ACC00716 Finance Session 1, 2019 Assessment 3: Business Case Studies 2 Due date: 19 May\u2026<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7725,1386,7831,7836,7829,7727,7835,7830,7837,7833,7832,7834],"tags":[3959,7839,7838,7841,630,7840,6,435,2447,2776,7842,7843],"class_list":["post-82775","post","type-post","status-publish","format-standard","hentry","category-best-research-paper-writing-services","category-best-research-paper-writing-services-in-usa","category-companies-that-write-research-papers","category-custom-research-paper-writing-service","category-free-research-paper-writing-service","category-legit-research-paper-writing-services","category-need-help-with-writing-a-paper","category-pay-someone-to-write-my-paper","category-research-paper-writing-service-reddit","category-research-papers-written-for-you","category-write-my-research-paper-for-me","category-write-my-research-paper-online","tag-best-dissertation-writing-service-uk","tag-best-essay-writing-services","tag-best-thesis-writing-services","tag-cheap-custom-essay-writing-service","tag-college-paper-writing-service","tag-custom-essay-writing-services","tag-medical-research-paper-writing-service","tag-professional-thesis-writing-service","tag-research-paper-writer-online","tag-research-paper-writing-service-free","tag-thesis-writing-service-online","tag-thesis-writing-service-uk"],"_links":{"self":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/82775","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/comments?post=82775"}],"version-history":[{"count":0,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/82775\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/media?parent=82775"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/categories?post=82775"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/tags?post=82775"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nAzizurrofi, A., Firdaus, R.R., Akbar, W.J., Adisatria, A.R.I.N.G.G.A., Asnidar, A.S.N.I.D.A.R., Iskandar, A.R.I. and Misfaroh, Z., 2017, April. Economic Analysis of Profitability Index and Development Cost Based on Improved Oil Recovery (IOR) Projects in Indonesia. In IOR 2017-19th European Symposium on Improved Oil Recovery.
\nBall, R., Gerakos, J., Linnainmaa, J.T., and Nikolaev, V., 2016. Accruals, cash flows, and operating profitability in the cross-section of stock returns. Journal of Financial Economics, 121(1), pp.28-45. Taxation Law Homework Help<\/a>
\nPombo, O., Allacker, K., Rivela, B., and Neila, J., 2016. Sustainability assessment of energy saving measures: A multi-criteria approach for residential buildings retrofitting\u2014A case study of the Spanish housing stock. Energy and Buildings, 116, pp.384-394.
\nWidhiwaluya, D.N., and Faisal, F., 2016. Analisis Determinan Earnings Management. Diponegoro Journal of Accounting, 5(4), pp.15-24.<\/p>\n","protected":false},"excerpt":{"rendered":"