only 10,11,12 and 13

ACTG103: Financial Theory and Techniques Things to know about the assignment: Excel Spreadsheet for calculations You need to use the attached excel sheet titled "ACTG103 Group Assignment" to do all the calculations in Excel. Weekly progress reporting (to your tutor) Please check-in weekly with your tutor about your progress and any clarification you need. You are also required to report on any member who does not participate. Submission deadline The deadline of Excel file and PowerPoint online submission is by end of week 12, Sunday (30 May 2021) at 11:55pm. Group submission - single submission (collaborative work) This is a group assignment and you have to submit your work in group. You cannot submit the assignment individually except with the permission of the unit coordinator. Presentation Each group will present in their tutorial during week 13 (6 June 2021). Regarding your Group Presentation in PowerPoint, you should do the following: o The red fonts are guidelines for your presentation. That is what you need to present to your peers during presentation week. o Present all parts of the assignment and do not skip any part, otherwise you will be penalised. o Do not get screen shots from the tables but rather draw graphs on the white board. o Regarding capital budgeting, for objective measures, you should draw the relationship between the two measures. If NPV>0, then IRR>WACC. Substitute your calculations into this relationship to prove it (your teacher will guide and explain) o All group members must present their assignment. Anyone who will not present, will get ZERO! o The maximum slides number is 15 slides. o The maximum time allocated to all group members for each assignment is 10 minutes to present. If you exceed the 10 min., your tutor will ask you to stop and you will be penalised. There will be a stopwatch with the tutor. Wish you all the best. Group Assignment Andrew is a current student at SIBT. He is also a budding entrepreneur and while studying has thought of a business idea. He has a project in mind. The project will involve Andrew setting up snack vending machines in SIBT. For this, he plans to buy 10 snack machines. To ensure that his business idea is successful, he has gathered information helpful for him to consider whether the project is viable (i.e. money making): NOTE: Each Group will be provided with different project numbers. Business set up cost: Vending machines cost $5,000 each; Funding for the machine will come from 30% equity contribution by Andrew as a business owner. He will borrow (debt finance) the rest from a bank. Borrowing a business loan to help finance the investment project: St Thomas Bank has read Andrew's business plan and for the loan proposes the following terms and conditions: A 5 year loan with repayment instalments at the end of each year, Interest charged on the loan is fixed at an effective annual interest rate of 8%; To repay the loan, Andrew anticipates that he will be able to use the cash flow generated from the snack vending machine business. According to the Business plan the stream of cash flow from the snack vending project is as follows: $5,000 at the end of year 1; $10,000 at the end of year 2; $15,000 at the end of year 3; $20,000 at the end of year 4; and $25,000 at the end of year 5 Setting up a business as a small company with ordinary shares. He would like to register the business and incorporate it as a privately owned company through share issue. The following is information relating to this: The business will have outstanding ordinary shares of 10,000 at $1.5 per share. The market Beta for a business investment of similar type is 1.4; The market risk free rate is 4%; and The expected market risk for similar investments is 14%. Required: Andrew is enrolled in ACTG103 and realises that he has learnt valuation techniques that can help him work out whether his proposed Business Plan is a good plan. We are also curious to help Andrew identify the different valuation techniques and when to apply them to work out Part 1: Loan Amortisation (1) Calculate the size of annual instalment. (1 mark) What does this calculation establish? (2) Calculate the total repayments over the term of the loan. (1 mark) Presentation: Over the term of 5 years, Andrew will end up repaying SXX. This amount includes the original loan (principal) and interest payments (cost of borrowing) (3) Calculate the total interest payable over the term of the loan. (1 mark) Presentation: To breakdown the individual components from part (2) during the loan lifetime by computing total principal and total interest payable. (4) Create a loan repayment schedule for the loan amortization. (3 marks) Presentation: Andrew needs help to work out whether the business is able to meet the yearly loan repayments (interest and principal). He has asked you to design a Loun repayment Schedule'. This is a summary of what is owed at the start of each year, what is to be repaid according to the repayment schedule and what is owed at the end of each year Based on the Loan Repayment Schedule, satisfy the following: (5) Calculate the loan outstanding at the end of year 2. (1 mark) (6) Calculate the loan outstanding at the end of year 3. (1 mark) (7) Calculate the total principal repaid in year 3. (1 mark) (8) Calculate the total interest paid in year 3. (1 mark) (9) Create a loan repayment schedule for the fourth and fifth periods of the loan. (1 mark) 3 Part 2: Cost of Capital As Andrew is expecting to borrow a loan from the bank, he is worried that he may not be the true owner of the snack vending machine business. So, he proposes to value the business using techniques learnt in ACTG103: (10) Calculate cost of equity. (1 mark) Presentation: What is the purpose of calculating the cost of equity for Andrew? (11) Calculate post-tax weighted average cost of capital if tax rate is 30% (2 marks) Presentation: Briefly, why would a WACC be calculated? Is the cost of capital different from the cost of equity? Why (Debt & Equity) Part 3: Capital Budgeting Please write a short story-line to make students understand that these are different forms of valuation tools. (12) Calculate net present value for this project. (1 mark) Watch the following video to learn about how to compute NPV NPV: https://www.youtube.com/watch?v=cd64NkxTP_1 Presentation: Draw a proper cashflow timeline. Work out the "time value of money" at time zero. Now put everything together (compute NPV) and decide on the viability of the project (13) Calculate value creation per share price. (1 mark) Presentation: Please talk a little on why Andrew as an equity investor would like to know about value creation. ACTG103: Financial Theory and Techniques Things to know about the assignment: Excel Spreadsheet for calculations You need to use the attached excel sheet titled "ACTG103 Group Assignment" to do all the calculations in Excel. Weekly progress reporting (to your tutor) Please check-in weekly with your tutor about your progress and any clarification you need. You are also required to report on any member who does not participate. Submission deadline The deadline of Excel file and PowerPoint online submission is by end of week 12, Sunday (30 May 2021) at 11:55pm. Group submission - single submission (collaborative work) This is a group assignment and you have to submit your work in group. You cannot submit the assignment individually except with the permission of the unit coordinator. Presentation Each group will present in their tutorial during week 13 (6 June 2021). Regarding your Group Presentation in PowerPoint, you should do the following: o The red fonts are guidelines for your presentation. That is what you need to present to your peers during presentation week. o Present all parts of the assignment and do not skip any part, otherwise you will be penalised. o Do not get screen shots from the tables but rather draw graphs on the white board. o Regarding capital budgeting, for objective measures, you should draw the relationship between the two measures. If NPV>0, then IRR>WACC. Substitute your calculations into this relationship to prove it (your teacher will guide and explain) o All group members must present their assignment. Anyone who will not present, will get ZERO! o The maximum slides number is 15 slides. o The maximum time allocated to all group members for each assignment is 10 minutes to present. If you exceed the 10 min., your tutor will ask you to stop and you will be penalised. There will be a stopwatch with the tutor. Wish you all the best. Group Assignment Andrew is a current student at SIBT. He is also a budding entrepreneur and while studying has thought of a business idea. He has a project in mind. The project will involve Andrew setting up snack vending machines in SIBT. For this, he plans to buy 10 snack machines. To ensure that his business idea is successful, he has gathered information helpful for him to consider whether the project is viable (i.e. money making): NOTE: Each Group will be provided with different project numbers. Business set up cost: Vending machines cost $5,000 each; Funding for the machine will come from 30% equity contribution by Andrew as a business owner. He will borrow (debt finance) the rest from a bank. Borrowing a business loan to help finance the investment project: St Thomas Bank has read Andrew's business plan and for the loan proposes the following terms and conditions: A 5 year loan with repayment instalments at the end of each year, Interest charged on the loan is fixed at an effective annual interest rate of 8%; To repay the loan, Andrew anticipates that he will be able to use the cash flow generated from the snack vending machine business. According to the Business plan the stream of cash flow from the snack vending project is as follows: $5,000 at the end of year 1; $10,000 at the end of year 2; $15,000 at the end of year 3; $20,000 at the end of year 4; and $25,000 at the end of year 5 Setting up a business as a small company with ordinary shares. He would like to register the business and incorporate it as a privately owned company through share issue. The following is information relating to this: The business will have outstanding ordinary shares of 10,000 at $1.5 per share. The market Beta for a business investment of similar type is 1.4; The market risk free rate is 4%; and The expected market risk for similar investments is 14%. Required: Andrew is enrolled in ACTG103 and realises that he has learnt valuation techniques that can help him work out whether his proposed Business Plan is a good plan. We are also curious to help Andrew identify the different valuation techniques and when to apply them to work out Part 1: Loan Amortisation (1) Calculate the size of annual instalment. (1 mark) What does this calculation establish? (2) Calculate the total repayments over the term of the loan. (1 mark) Presentation: Over the term of 5 years, Andrew will end up repaying SXX. This amount includes the original loan (principal) and interest payments (cost of borrowing) (3) Calculate the total interest payable over the term of the loan. (1 mark) Presentation: To breakdown the individual components from part (2) during the loan lifetime by computing total principal and total interest payable. (4) Create a loan repayment schedule for the loan amortization. (3 marks) Presentation: Andrew needs help to work out whether the business is able to meet the yearly loan repayments (interest and principal). He has asked you to design a Loun repayment Schedule'. This is a summary of what is owed at the start of each year, what is to be repaid according to the repayment schedule and what is owed at the end of each year Based on the Loan Repayment Schedule, satisfy the following: (5) Calculate the loan outstanding at the end of year 2. (1 mark) (6) Calculate the loan outstanding at the end of year 3. (1 mark) (7) Calculate the total principal repaid in year 3. (1 mark) (8) Calculate the total interest paid in year 3. (1 mark) (9) Create a loan repayment schedule for the fourth and fifth periods of the loan. (1 mark) 3 Part 2: Cost of Capital As Andrew is expecting to borrow a loan from the bank, he is worried that he may not be the true owner of the snack vending machine business. So, he proposes to value the business using techniques learnt in ACTG103: (10) Calculate cost of equity. (1 mark) Presentation: What is the purpose of calculating the cost of equity for Andrew? (11) Calculate post-tax weighted average cost of capital if tax rate is 30% (2 marks) Presentation: Briefly, why would a WACC be calculated? Is the cost of capital different from the cost of equity? Why (Debt & Equity) Part 3: Capital Budgeting Please write a short story-line to make students understand that these are different forms of valuation tools. (12) Calculate net present value for this project. (1 mark) Watch the following video to learn about how to compute NPV NPV: https://www.youtube.com/watch?v=cd64NkxTP_1 Presentation: Draw a proper cashflow timeline. Work out the "time value of money" at time zero. Now put everything together (compute NPV) and decide on the viability of the project (13) Calculate value creation per share price. (1 mark) Presentation: Please talk a little on why Andrew as an equity investor would like to know about value creation