Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

can someone help me please? Scenario Opened in Leeds in 1895, Gerahwin Bros Lid manufactures talored and dross unitomis for the mititary. Now omploying 70

can someone help me please?
image text in transcribed
Scenario Opened in Leeds in 1895, Gerahwin Bros Lid manufactures talored and dross unitomis for the mititary. Now omploying 70 akilled and sembskaled workers at ever factory and distribution plant in Wortley. Gershwins are looking to expand their operatoris oversoas to take advantage of new markets opening up in Eastern Europe and the Bablins. To facilitate their planned growth, the Directors have viated severai sutable sites for a manufacturing and distribution facility oversens. They have ogreed that their new factory should be built in Serbia and although the devolopment oosts are potentially high, the firm believes that to compete successfully for larger contracts in Eastom Eurpoe they need to take the risk of finaneing and bulling the new focility, which would have a working life of around 30 years once complete. Although profitable, the company has elected not to pay a cash dividend since 2018 and shareholders are becoming increasingly dissatisfied with the direction in which management appear to be taking the company. As a result, the Directors are seeking to demonstrate the potential increase in shareholder value such a new tacility might achieve in the medium term and dispel the fears of shareholders about the risks involved. Questions ( 50 Marks) 1. Outline and explain two measures of retum the Directors ahould employ when considering the viability of opening a new production division. What other factors should Financial Managers consider before deciding to go ahead with the new plant? (20 marks) 2. How might the company fund its long term development? What are the advantages and disadvantages to the company and its shareholders of debt and equity funding in this case? ( 20 marks) 3. With reference to the case study facts and your understanding of dividend policy, explain why the directors may have elected not to pay a cash dividend since 2018 and how this may affect company valuation and their ability to raise long term finance. (10 marks) Scenario Opened in Leeds in 1895, Gerahwin Bros Lid manufactures talored and dross unitomis for the mititary. Now omploying 70 akilled and sembskaled workers at ever factory and distribution plant in Wortley. Gershwins are looking to expand their operatoris oversoas to take advantage of new markets opening up in Eastern Europe and the Bablins. To facilitate their planned growth, the Directors have viated severai sutable sites for a manufacturing and distribution facility oversens. They have ogreed that their new factory should be built in Serbia and although the devolopment oosts are potentially high, the firm believes that to compete successfully for larger contracts in Eastom Eurpoe they need to take the risk of finaneing and bulling the new focility, which would have a working life of around 30 years once complete. Although profitable, the company has elected not to pay a cash dividend since 2018 and shareholders are becoming increasingly dissatisfied with the direction in which management appear to be taking the company. As a result, the Directors are seeking to demonstrate the potential increase in shareholder value such a new tacility might achieve in the medium term and dispel the fears of shareholders about the risks involved. Questions ( 50 Marks) 1. Outline and explain two measures of retum the Directors ahould employ when considering the viability of opening a new production division. What other factors should Financial Managers consider before deciding to go ahead with the new plant? (20 marks) 2. How might the company fund its long term development? What are the advantages and disadvantages to the company and its shareholders of debt and equity funding in this case? ( 20 marks) 3. With reference to the case study facts and your understanding of dividend policy, explain why the directors may have elected not to pay a cash dividend since 2018 and how this may affect company valuation and their ability to raise long term finance. (10 marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Project Financing Analyzing And Structuring Projects

Authors: Frank J Fabozzi, Carmel De Nahlik

1st Edition

9811232393, 9789811232398

More Books

Students also viewed these Finance questions