In academic affiliation with STAFFORDSHIRE UNIVERSITY GULF COLLEGE GULF COLLEGE - MUSCAT - SULTANATE OF OMAN UNDERGRADUATE BUSINESS PROGRAMME Academic Year: 2016 2017 First Semester ASSIGNMENT Module Title: Strategic Finance and Decision Making

In academic

affiliation with STAFFORDSHIRE

UNIVERSITY

GULF COLLEGE

GULF COLLEGE - MUSCAT - SULTANATE OF OMAN

UNDERGRADUATE BUSINESS PROGRAMME

Academic Year: 2016 2017

First Semester

ASSIGNMENT

Module Title: Strategic Finance and Decision Making

Module Title:Strategic Finance and Decision Making

Module Code:BLI3 000504

Module Leader: Abdul Samad Khan

Weighting: 50%

Submission Time and Date: 1st January 2017 to rlJanuary 2817

You should hand in one copy of your assignment by the time and date mentioned above to the

appropriate 'hand-in location' at the Gulf College. Fill in the front cover (staple together with

your assignment). MAKE SURE that you fill in all the relevant details on this form An acknowledgement will be given to you upon receiving your assignment, This is your receipt, keep it You can submit work by post but you must send it recorded delivery, it must be postmarked two days before the deadFine date and a copy must be kept by you in case it is lost

in the post. Faxed assignments will not be accepted.

Assignments must be submitted by the due date. The only circumstance in which

assignments can be submitted late is if an extenuating circumstances form is submitted at the

same time. In these circumstances work may be submitted with in five working days of the original deadline for submission. if the extenuating circumstances are upheld, the assignment will be graded; otherwise a 0 will be awarded.

Maximum Word Length: 2500 words

Slate the number of words used at the end of your assignment. You may include diagrams, figures1

etc. without word penalty. A sliding scale of penalties for excess length will be imposed according to the amount by which the limit has been exceeded.

1-10%excessno penalty

'I 1-20% excess10% reduction in the mark

21-30% excess20% reduction in the mark

31%+ excessthe work will be capped at a pass 40%,

B. None of the above penalties will be used to change a student mark which is above the pass mark, to one that is below the pass mark. Therefore the maximum penalty for exceeding the word limit will be a reduction to a pass grade,

This assignment will assess the following learning outcomes:

L1: Understand the role of financial management in the performance of organizations and

critically appraise alternative sources of finance for business firms,

L2: Criticarry analyse the financial position and performance of an organisation using key

ratios.

L3: Apply advanced decision making techniques in a range of short-term and long- term situations.

This assignment is worth 50% of this 30 credit module. The written part of this assignment

must not exceed a maximum of 2500 words. Figures; tables and numerical analysis are not

included in the word count.

You are required to answer ALL questions Question 01

The financial year of Macaronic LLC is from 1s1 January to 31't December. Macaronic LLC is a listed company which recycles waste produce. The waste products are sent to Macaronic LLC from all around the world* You are a financial analyst (not employed by Macaronic LLC) with responsibility to provide advice concerning the performance of a company, based on the data which is available from the published financial statements. Extracts from the financial statements for the 2 years ended 31st December 2015 are as follows:

Macaronic LLC

Statement of Comprehensive Income for the year ended 3131 December

Description 315t December 2015 3PIst December 20141

OMR '000' ONIR '0001

Sales 38,80032,600

Cost of sales (24,300) (20,250)

I. Gross profit14,500

Administrative expenses (6,820)

(3,466)

4,214

Statement of Changes in Equity (Retained Earnings)

2015

Description

Balance at 1st January

Add profit for the year

less dividend paid

Balance at 31st December

Version 3

Mararonic LLC

Statement of Financial Position as at 31° December

2016 2014

OMR dOW OMR '000'

•■■

Non Current Assets

Land & Building

Plant & Equipment 44,960

16400 43,560

12,200

51,36055,760

Current Assets

Inventories 3.850 3500

Trade and Other Receivables6,800 7,040

Bank & Cash 730

Equity and Liabilities Equity

Shares Capital (OMR 0_500 per share)

Shares premium

Retain earning

■•■

Loans repayable on 31'' December 2018

Current Liabilities

Trade & Other Payables

Legal provisions

I Taxation Payable

Bank overdraft

Required: -

Write a report for management which analyses the financial performance of Macaronis LLC

over 2 years ended 31't December 2015, Assume that inflation is negligible. All sales and purchases are on credit.

Note: Your analysis should be based on the calculation of the appropriate financial ratios such as profitability. activity, gearing, investment arid liquidity for the years 2014 and 2015 of the company. The ratios should measure the company's performanc.8 in the specific years mentioned above. (Total 35 marks} question 02

Muscat Sports has incurred OMR 30,000 in patenting a new design of skateboard_ The company intends to start production and sales of the board from Al't January 2017. The marketing director has advised that in the fast moving skateboard market the product has a five year life and the company has therefore made the following estimates for the five years.

I_ Sales and Producton Costs

Year Sales ISales price

- - Variable cost Fixed cost

Units per unit per unit per annum

1 O MR OMR OMR

2017 I

2,000 50 40 75,000_1

2018 4,000 50 40 75,000

2019 10,00070 40 75,000

70 40 75 000

2020 I 6,000

2021 4,000 70 40 75,000

a Half of the sales are expected to be to major retailers who will expect a discount on safes price of 10% for unit sales above 1,000 units per annum.

3, initiai capita] expenditure on machinery of OMR 150,000 would be required , Residual

value at the end of 2021 is estimated at OMR 25,000, Depreciation on the straight iine basis is included in fixed costs.

4 Working capital required to set up operations is estimated at OIVIR 15,000, Ns should

all be recoverable in 2021

5, The fixed cost would not be incurred if the skateboard was not manufactured,

6. The company has a required rate of return of 8%.

7. Assume all cash flows except initial cost occur at the and of the respective year.

Ire October 2016 the company is approached by a major sports company who have offered to

purchase the exclusive rights to manufacture and set' the skateboards_ They propose an initial

payment on rt January 2017 of OMR 50,000 and an annual fee of OMR 5 per board sold

payable at the end of each of five years. Assume pattern of sales and prices will be as in (1)

above.

Required:

A. Calculate the net present value and internal rate of return if the company manufactures

and sells skateboards.(20marks)

B. Calculate the net present value of the proposal by the major sports company. Would

you recommend acceptance of this proposal giving justification for your

recommendation? (10marks)

C. Cdtically evaluate the factors which influence the required rate of return on an

investment.

Cigestip: 03 (1 0 marks)

(Total 40 Marks)

A. Compare and differentrate between the financial and investment decisions making. (15 Marks)

B. Critically discuss some of the important contributing factors which explain why

shareholders of predator companies rarely benefit from takeovers.(10 Marks)

(Total 25 Marks)

(Grand Total: 100 Marks)

Warrslin

Summary

• Plagiarism occurs if you use somebody else's work in an assignment or exam answer,

but fail to state where you got the material from, You need to b also Very careful about the

amount of words you are using from somebody else's work.

I it can happen in any type of assessment where you are given the questions or tasks in

advance.

• If another student uses yojir work in hi her answer(s), both you and he/she will be

punished when caught.

• Punishments for committing plagiarism can be very severe.

The details

Plagiarism is a form of cheating in which students use the work of others and present it as their

own, Staffordshire University per a fully detailed description of what the term 'plagiarism'

means on the University's main web-site under the heading 'Procedures for dealing with

suspected cases of academic dishonesty We strongly recommend that you go and read the

full document at the above address, Meanwhile, here is an extract of some of the relevant

content. You will have committed pFagiarism and may be caught, reported and punished (as

described below) if you

S Copy extensively from the work of others (from sources such as books, magazines,

journals, web-sites for example) and submit the work as your own, NB it is acceptable to

refer to the work of others as long as you do not use too much, and reference your

sources properly. If you do not know how to do this, please foltow the guidelines given in

the document entitled 'Adding quotations and references to your written work' at this web-

site address: http://www. staffs_ ac.uldschoolsibusinessibsadministaffisMamr.htm

• Copy another students' work and submit it for assessment under your own name.

• Allow another student to copy your work and they then submit it for assessment under

their name

This last item is of particular importance; few students seem to understand what it means. If,

for example, you allow another student to borrow your work and they subsequently copy some

of that work and present it as their own, you and they will both be punished even though

someone else copied your work.

The risks of working with other students

Some assessment tasks are explicitly designed for group works and it will be made clear that a

group answer is expected from you. All other tasks are intended as an assessment of your

Version 3

individual comprehension and performance, and group answers are not permitted. In

individually assessed forms of assessment your work must be different from that of every other

student. Plagiarism can occur in assignments and any examination where the questions are

issued to students in advance. In both cases it is possible for you to ask other people about

how best to answer the questions or complete the necessary tasks.

You shoOd be aware that different modules and subjects may have different requirements. In

some subjects, answers to questions may, for example, require every student on a module to

employ or refer to the same diagram(s), concepts and the like in order to construct an

acceptable answer. You should note, however, that even in these circumstances your

explanations of what the diagrams mean, and any other writing referring to any common

diagrams and concepts should all be In your own words_ Moreover, the situation may be very

different on other modules, were the submission of work that has a very similar structure, or

the use of very similar materials such as concepts, diagrams, quotations and the like, to that of

another student, may lead to you being accused of plagiarism.

The picture is complicated and, unfortunately, it is not possible to give advice that is directly

relevant to every module you study. If you are unsure about how to avoid plagiarism in any

specific module, then rather than hoping and guessing, you should ask for guidance from the

member of staff who delivers that module.

Our overall advice is straightforward; by all means discuss how best to apswerrquestions or

complete tasks vifith your colleagues, but when it comes to actually writing your answers - DO

IT ALONE!

What happens if you get caught?

Examination Boards may punish offending students in any manner that they deem fit. Typical

punishments Boards may choose range from reducing grades, making students re-sit modules,

through to failing students on a module or an entire award. The University regards this form of

cheating as a serious offence. Full details of the range of likely punishments can be found on

the University's web-site under the heading 'Procedures for dealing with suspected cases of

academic dishonesty.

Please consider yourself warned!