USE THE INFORMATION BELOW TO ANSWER SECTION A AND B. The following are information and extract of financial statements for MS Tech Berhad, a manufacturer of semiconductors and the largest technology sector company in Malaysia: Statements of Financial Position as at 30 June 2019 and 2020 2019 RM'000 RM 000 ASSETS Non-current assets Property, plant and equipment 489.505 400.353 Investment in subsidiaries Intangible assets 2.200 2,145 Deferred tax assets 2.205 Total non-current assets 493.910 407,637 2020 5.139 172,694 202.929 30.119 160,521 202,352 30,647 Current assets Inventories Trade receivables Other receivables, deposits and prepayments Amount due from subsidiaries Tax recoverable Deposits, cash and bank balances Total current assets TOTAL ASSETS 10,967 429,716 846,425 1,340,335 656 529.962 924,138 1.331,775 650,450 29.995 437.973 1.118,418 3.541 1.121.959 607,781 14,832 439,525 1,062,138 8.679 1.070.817 EQUITY AND LIABILITIES EQUITY Equity attributable to owners of the Company Share capital Other reserves Retained earnings Non-controlling interests Total equity LIABILITIES Non-current liabilities Borrowings Deferred rental Retirement benefits obligations Deferred tax liabilities Total non-current liabilities Current liabilities Trade payables Other payables, accruals and other liabilities Borrowings Preference shares Tax payable Dividend payable Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES 8,709 185 407 8,583 17.884 14,545 244 44 6,393 21.226 81,764 79,012 6,161 1,786 31.769 200,492 218,376 1,340,335 88.467 80,773 9,010 2.307 9,054 50.121 239.732 260,958 1.331,775 Page 2 of 7 2020/2021 Trosodd Turn Over Comparative Statement of Profit or Loss with Global Industry Average for the Financial Year Ended 30 June 2020 Group Global Industry Average (GIA) RM'000 % Revenue *1.152.860 100.00 (*50% of total sales were on credit terms) Cost of sales **(883,411) (**50% of total purchases were on credit terms) Gross profit 269,449 46.69 Other income 12,478 Finance income 9,370 Gain on disposal of assets Administrative expenses (73,819) Operating profit 217,478 22.48 Finance costs (1.273) Profit before tax 216,205 21.61 Tax expenses (23.858) Profit for the financial year 192,347 19.77 The following information relates to the existing capital of the firm as at 30 June 2019: The market price of ordinary shares RM2.00 The following information relates to the existing capital of the firm as at 30 June 2020: The market price of ordinary shares RM2.69 Weighted average number of ordinary shares 3.164.975.000 units Beta of company (3) 6.8% Yield of a 3-month Malaysian Islamic Treasury Bill (R) 1.60% Expected returns on a market portfolio (RM) 5.02% MS Tech annual dividends for the last five (5) years: Year 2016 2017 Dividend per share (RM) 0.044 0.052 2018 0.084 2019 0.084 2020 0.098 The average ratios for the subsector of semiconductor Ratio Global Industry Average (GIA) Current ratio 1.96 times 0.89 times Quick ratio Debt-to-equity ratio 0.08 times Interest coverage ratio 25.76 times Receivable turnover ratio 6.30 times Inventory turnover ratio (Revenue) 8.72 times Inventory turnover ratio (Cost of sales) 4.67 times Asset turnover ratio 0.53 times Return on asset 10.52% Return on investment 16.57% Return on equity 19.17% Page 3 of 7 2020/2021 Trosodd Turn Over 4. MS Tech's hurdle rate for the year 2020 and 2021 is assumed to be at 23.6%. a. MS Tech has the opportunity to team up with MIT Semiconductor Pte Ltd of Singapore to supply semiconductor process tools. In this three-year project called "MS-MIT JV', the required investment outlay from MS Tech is RM8.56 million (or RM8,560,000). The projected cash flows for MS Tech from Day 1 until the end of Year 3 are presented to you as below: End of Year 1 Day 1 RM (8,560,000) End of Year 2 RM 6,528,600 RM 3.760,400 End of Year 3 RM 9,579,500 MS-MIT JY i. ii. Determine the Net Present Value (NPV) for the MS-MIT JV project. Show your workings. (3 marks) Determine the Profitability index (PI) for the MS-MIT JV project. Show your workings. (2 marks) Determine the Payback period (PP) for the MS-MIT JV project. Show your workings. (3 marks) iii. b. MS Tech has another opportunity to grow its light emitting diode (LED), fibre and sensor product portfolio. In this three-year project called 'LED 2021', the required investment outlay from MS Tech is RM10.2 million (or RM10,200,000). The projected cash flows for MS Tech from Day 1 until the end of Year 3 are presented to you as below: Day 1 RM (10,200,000) End of Year 1 RM 5,000,000 End of Year 2 RM 5,000,000 End of Year 3 RM 10,000,000 LED 2021 Page 5 of 7 2020/2021 Trosodd/Turn Over BFN5013 FINANCIAL MANAGEMENT SEP 2020-JAN 2021 Final Assessment CONFIDENTIAL i. ii. Determine the Net Present Value (NPV) for the LED 2021 project. Show your workings. (3 marks) Determine the Profitability index (PI) for the LED 2021 project. Show your workings. (2 marks) Determine the Payback period (PP) for the LED 2021 project. Show your workings. (3 marks) ill. c. i. ii. iii iv. Based on your assessments in (a) and (b) above, determine which project(s) that you would endorse for your company to commit, if the projects are independent and the selection criteria is based on NPV. Give reason to your decision. (2 marks) 6/7 Based on your assessments in (a) and (b) above, determine which project(s) the would endorse for your company to commit, if the projects are mutually exclusive and the selection criteria is based on NPV. Give reason to your decision. (2 marks) Based on n your assessments in (a) and (b) above, determine which projecte project(s) that you would endorse for your company to commit, if the projects are independent and the selection criteria is based on Pl. Give reason to your decision. (2 marks) Based on your assessments in (a) and (b) above, determine which project(s) that you would endorse for your company to commit, if the projects are mutually exclusive and the selection criteria is based on Pl. Give reason to your decision. (2 marks) Based on your assessments in (a) and (b) above, determine which project(s) that you would endorse for your company to commit, if the projects are independent and the selection criteria is based on PP. Your target payback period is 1.9 year. Give reason to your decision. (2 marks) Based on your assessments in (a) and (b) above, determine which project(s) that you would endorse for your company to commit, if the projects are mutually exclusive and the selection criteria is based on PP. Your target payback period is 1.9 year, Give reason to your decision. (2 marks) (TOTAL: 28 marks) V vi