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This is urgent!! can someone please solve this, thank you. that was all that was given Bryson ple is a multi-product manufacturer operating several plants
This is urgent!! can someone please solve this, thank you.
that was all that was given
Bryson ple is a multi-product manufacturer operating several plants and factories based in the north of England. After a long period of sustained growth, Bryson ple's results have begun to stagnate over recent years with static or declining sales in several of its existing product ranges. It is the last quarter of 2021. New developments in technology have been adopted and changes in consumer behaviour are being addressed. Bryson ple's Research & Development department have been busy developing new products or modifying existing products, whilst Operations & Production have been working with Sales & Marketing, reviewing the future of the company's existing lines of production. Several significant capital budgeting decisions and are now being considered Omega - New Product Line (Appendix A) Beta - Relocation to new site (Appendix B) Gamma - Discontinue production (Appendix ) Delta - Modification or ceasing production (Appendix D) Kappa - New Product Line (Appendix E) Alpha - Continue production for one-off Contract (Appendix ) The Financial Director has requested that your team of finance managers evaluate each investment proposal by considering the relevant cash flows involved and by performing financial appraisals on the basis of net present value. A report on your main findings is required. Information gathered on the particulars of each investment decision are given in the Appendices, along with the following general information regarding Bryson pic. 1 Bryson plc prepares accounts with a financial year ending 31" December and company earnings are subject to 19% corporation tax payable on a current year basis 2. Land and buildings quality for 5% reducing balance industrial buildings allowances whilst plant, equipment and machinery are subject to short-life asset election and attract 20% reducing balance tax allowances. Capital allowances can be claimed in the year of acquisition and every subsequent year of ownership except for the last year where a balancing allowance can be claimed or there will be a balancing charge to the company, unless otherwise specified in the particulars of each case 3. The general inflation rate is 3% pa and all operating cash flows revenues and operating costs) are quoted at current 2021 prices and subject to annual inflation, unless otherwise specified in the particulars of each case 4. Management consider the company's overall existing average cost of capital is an appropriate rate to appraise all capital investments 5. Extracts from Bryson ple's current Statement of Financial Position and additional information pertaining to the company's securities is given below. Sop ordinary share capital El preference share capital 260,000,000 12.5%E100 loan stock 2025 120.000.000 60.000.000 89.000.000 Net Assets Bryson pays a constant dividend of 33p per share and the loan stock is redeemable at current market value. The current market prices of the company's securities are as follows 5Op ordinary shares 220p B%E1 preference shares 960 12.5% loan stock 2025 100 Beta - Relocation to new site? Bryson plc is considering moving one of its factories to a new site. The new site would cause a significant disruption to existing production and sales of Beta, however the current production capacity of 6 million units would no longer be constrained by the size of the existing factory and hence, a higher output can be achieved to match a growing demand for Beta. Moving to the new premises would take place at the beginning of 2022. The existing premises would be leased out indefinitely commencing on 1" January 2022 for an annual rent of 200,000 payable in advance. Lease rentals would be subject to general inflation and corporation tax The cost of the new premises would be 10 million payable on 1" January 2022. The new premises would quality for 5% pa. Industrial buildings allowances on a reducing balance basis. For the purposes of investment appraisal, assume the allowances will be claimed indefinitely, Improved machinery for the new factory would be purchased on 14 January 2022 at a cost of 1 million. The machinery would be expected to be sold at the end of 2025 for 300,000. The old machinery, which has a zero written down value, would need to be scrapped but due to its specialist nature would not generate any proceeds. The maximum production capacity of the new factory would normally be 10 million units per year but due to initial setting-up time and disruption from moving the capacity of the new factory for 2022 would only be 5 million units. Potential sales demand for the company's output is estimated to be 8 million units in 2022,9 million units in 2023, 10 million units in 2024,8 million units in 2025 and 6 million units in 2026 onwards. Given that projected sales and output are equal for both factories from 2026 onwards, no incremental manufacturing costs of revenues will arise from the move after 2025 Labour is employed under flexible contracts and therefore the labour costs will vary directly with output, being fi per unit of output. This is the case for the existing and new factory of the company decides to move site, it is anticipated that some employees will refuse to move and hence it is expected that the company will have to make redundancy payments of 200,000 on 1 January 2022. The company will have to replace these employees and incur retraining costs of 100,000 payable on 31" December 2022 Material quantities per unit of Beta and costs per kg are as follows Quantity Cost per kg Material XR2 2 kps 1.50 Material T54 1kg E1 25 Material XR2 is only available from an overseas supplier during 2022 and 2023 leading to additional transport costs of 1.75 per kg of material purchases. From 2024 however, it is expected that a UK supplier will be able to provide the material at the basic 150 per ke The selling price per unit of Beta is set in order to achieve a contribution of 40%. Contribution is defined as selling price less variable costs (material and labour) it excludes transport costs, training and redundancy costs. All the above costs and revenues are quoted in current prices and subject to general inflation per annum, with the exception of the expected disposal proceeds and capital allowances. Financial Director's Requirement Identify the annual net incremental cash flows based on the incremental output) that would arise from the company's decision to move the location of its factory, and calculate the NPV of the investment Assignment Requirements & Assessment Criteria Investment Appraisals You should perform a Cash Flow Analysis of the selected investment as per the Financial Director's specific requirements. Investment Appraisals - The report should include a copy of each investment appraisal (excel NPV analysis) and your recommendations to the Financial Director's specific requirements for each investment. You should also refer to or include the WACC calculation Further considerations - the report should include a discussion on any other factors that must be considered, any useful additional analysis that should be performed, any assumptions made and any further information requirements, specific to each project or in general when ultimately making these capital budgeting decisions. WACC calculation (rounded to 1 dcp) - using the information given in the assignment, calculate Bryson ple's average cost of capital. You can now complete your investment appraisal by calculating the Net Present Value appraisal of your selected investment as per the Financial Director's specific requirements Bryson ple is a multi-product manufacturer operating several plants and factories based in the north of England. After a long period of sustained growth, Bryson ple's results have begun to stagnate over recent years with static or declining sales in several of its existing product ranges. It is the last quarter of 2021. New developments in technology have been adopted and changes in consumer behaviour are being addressed. Bryson ple's Research & Development department have been busy developing new products or modifying existing products, whilst Operations & Production have been working with Sales & Marketing, reviewing the future of the company's existing lines of production. Several significant capital budgeting decisions and are now being considered Omega - New Product Line (Appendix A) Beta - Relocation to new site (Appendix B) Gamma - Discontinue production (Appendix ) Delta - Modification or ceasing production (Appendix D) Kappa - New Product Line (Appendix E) Alpha - Continue production for one-off Contract (Appendix ) The Financial Director has requested that your team of finance managers evaluate each investment proposal by considering the relevant cash flows involved and by performing financial appraisals on the basis of net present value. A report on your main findings is required. Information gathered on the particulars of each investment decision are given in the Appendices, along with the following general information regarding Bryson pic. 1 Bryson plc prepares accounts with a financial year ending 31" December and company earnings are subject to 19% corporation tax payable on a current year basis 2. Land and buildings quality for 5% reducing balance industrial buildings allowances whilst plant, equipment and machinery are subject to short-life asset election and attract 20% reducing balance tax allowances. Capital allowances can be claimed in the year of acquisition and every subsequent year of ownership except for the last year where a balancing allowance can be claimed or there will be a balancing charge to the company, unless otherwise specified in the particulars of each case 3. The general inflation rate is 3% pa and all operating cash flows revenues and operating costs) are quoted at current 2021 prices and subject to annual inflation, unless otherwise specified in the particulars of each case 4. Management consider the company's overall existing average cost of capital is an appropriate rate to appraise all capital investments 5. Extracts from Bryson ple's current Statement of Financial Position and additional information pertaining to the company's securities is given below. Sop ordinary share capital El preference share capital 260,000,000 12.5%E100 loan stock 2025 120.000.000 60.000.000 89.000.000 Net Assets Bryson pays a constant dividend of 33p per share and the loan stock is redeemable at current market value. The current market prices of the company's securities are as follows 5Op ordinary shares 220p B%E1 preference shares 960 12.5% loan stock 2025 100 Beta - Relocation to new site? Bryson plc is considering moving one of its factories to a new site. The new site would cause a significant disruption to existing production and sales of Beta, however the current production capacity of 6 million units would no longer be constrained by the size of the existing factory and hence, a higher output can be achieved to match a growing demand for Beta. Moving to the new premises would take place at the beginning of 2022. The existing premises would be leased out indefinitely commencing on 1" January 2022 for an annual rent of 200,000 payable in advance. Lease rentals would be subject to general inflation and corporation tax The cost of the new premises would be 10 million payable on 1" January 2022. The new premises would quality for 5% pa. Industrial buildings allowances on a reducing balance basis. For the purposes of investment appraisal, assume the allowances will be claimed indefinitely, Improved machinery for the new factory would be purchased on 14 January 2022 at a cost of 1 million. The machinery would be expected to be sold at the end of 2025 for 300,000. The old machinery, which has a zero written down value, would need to be scrapped but due to its specialist nature would not generate any proceeds. The maximum production capacity of the new factory would normally be 10 million units per year but due to initial setting-up time and disruption from moving the capacity of the new factory for 2022 would only be 5 million units. Potential sales demand for the company's output is estimated to be 8 million units in 2022,9 million units in 2023, 10 million units in 2024,8 million units in 2025 and 6 million units in 2026 onwards. Given that projected sales and output are equal for both factories from 2026 onwards, no incremental manufacturing costs of revenues will arise from the move after 2025 Labour is employed under flexible contracts and therefore the labour costs will vary directly with output, being fi per unit of output. This is the case for the existing and new factory of the company decides to move site, it is anticipated that some employees will refuse to move and hence it is expected that the company will have to make redundancy payments of 200,000 on 1 January 2022. The company will have to replace these employees and incur retraining costs of 100,000 payable on 31" December 2022 Material quantities per unit of Beta and costs per kg are as follows Quantity Cost per kg Material XR2 2 kps 1.50 Material T54 1kg E1 25 Material XR2 is only available from an overseas supplier during 2022 and 2023 leading to additional transport costs of 1.75 per kg of material purchases. From 2024 however, it is expected that a UK supplier will be able to provide the material at the basic 150 per ke The selling price per unit of Beta is set in order to achieve a contribution of 40%. Contribution is defined as selling price less variable costs (material and labour) it excludes transport costs, training and redundancy costs. All the above costs and revenues are quoted in current prices and subject to general inflation per annum, with the exception of the expected disposal proceeds and capital allowances. Financial Director's Requirement Identify the annual net incremental cash flows based on the incremental output) that would arise from the company's decision to move the location of its factory, and calculate the NPV of the investment Assignment Requirements & Assessment Criteria Investment Appraisals You should perform a Cash Flow Analysis of the selected investment as per the Financial Director's specific requirements. Investment Appraisals - The report should include a copy of each investment appraisal (excel NPV analysis) and your recommendations to the Financial Director's specific requirements for each investment. You should also refer to or include the WACC calculation Further considerations - the report should include a discussion on any other factors that must be considered, any useful additional analysis that should be performed, any assumptions made and any further information requirements, specific to each project or in general when ultimately making these capital budgeting decisions. WACC calculation (rounded to 1 dcp) - using the information given in the assignment, calculate Bryson ple's average cost of capital. You can now complete your investment appraisal by calculating the Net Present Value appraisal of your selected investment as per the Financial Director's specific requirements Step by Step Solution
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