Please note that there are two components to this assignment.
There is an individual component and a group component.
The individual component is worth 5% and the Group Component is worth
15%. There are three parts to this assessment.
Both components are due on the same day. Assignments are due 18
th
May
2015 at 12:00 Midday. Late submissions will attract a late penalty of 20%
per day.
Instructions for submitting assignments.
1. All components will be submitted via iLearn
2. Prior to the submission date, students must use the group enrolment
function in iLearn to enrol their assignment group in a group. Groups
should be of between 2 and 4 members.
3. The individual component of the assignment should be submitted in
the turnitin link for your tutor.
4. The group component must be submitted using the assignment
submission link.
PART A: Individual Component
This is a research assignment and requires the use of independent, academic
research.
Imagine you recently heard the following statement at an industry even for young
accountants “The CFO’s role is all about preparing the financial statements. I
don’t know when they even teach finance to accounting students at University. It
certainly didn’t happen in my day”.
Using your own research evaluate the statement above. Do you agree? Why?
You will be assessed on the following criteria:
1. Strength and relevance of arguments presented. This will include the
persuasiveness (including breadth and depth) of the arguments presented.
Any material needs to be structured in a logical manner to enhance your
arguments. ( 3 marks)
2. Depth and Quality of research undertaken to support your arguments ( 1
marks)
3. Grammar, spelling and referencing style (1 Marks)
Assignments should be succinct in their language and arguments.
Acade mic Honesty
Policy http://www.mq.edu.au/policy/docs/academic_honesty/policy.html
You are required to submit the following:
1. You are required to submit an assignment of no more than 300 words in
ilearn by the due date. Any words beyond this limit will not be marked.
2. You are required to display the word count on the front page of your
assignment.
3. You are expected to submit a file using 12- point double spaced Arial
font.
4. You are encouraged to research this topic well in advance of preparing to
write your submission.
5. You are required to reference using the Harvard Referencing style.
6. References should be from credible sources (Note: Wikipedia and
Investopedia are not acceptable).
Part B: Group Assignment (This part is worth 10%)
Willie Wonka Glass Elevators
After the success of the Golden Ticket promotion at his chocolate factory, Mr
Willie Wonker is pleased to be diversifying his business operations and wants to
set up a new business that will design, manufacture and install glass elevators .
He has undertaken some research on the matter has commissioned world
renowned engineering consultant Mr Augustus Gloop to determine the viability of
such an investment. Mr Gloop’s report will be cost Wonka $50,000. Other costs
incurred by Mr Gloop include the cost of flights from Germany to t he United
Kingdon and appropriate accommodation. Given Mr Gloop’s rather large
proportions, he will need to fly first class and these flights will amount to $15,000.
Accommodation, meals and incidentals will cost $3,000.
Mr Wonka’s tax advisor is Miss Veruca Salt CA. She has advised that the report
is 100% tax deductible while 50% of the flights are tax deductible and the other
costs associated with the report a r e 25% deductible.
The report has been delivered by Mr Gloop and he has recommended that M r
Wonka go ahead with the project!
Unfortunately, Mr Gloop’s report was late and so he will only be paid $40,000.
Details of the project are as follows:
x Mr Wonka has decided to build his new factory at a piece of land that he
currently owns. This was recently valued at $4,000,000 by Oompa Loompa
Property Partners wh o are world- renowned experts in property valuation.
Miss Salt however believes this valuation is incorrect and the property is
actually worth $2,500,000 and needs to be used in any project evaluation.
x Site remediation costs in year 0 are expected to be $1,000,000 and can be
deducted in year 1.
x Machinery used to build the elevators will cost $6,000,000 and have a 10-year useful life. Tax authorities have
stated that such a machine will need
to be depreciated over 20 years using the reducing balance method.
x Delivery and installation costs will be $500,000. Ms Salt wants to capitalise
these a nd include them in the value of the machinery for depreciation
purposes however tax rules state that these must be deducted and that the
deduction must be claimed in the year of the expenditure.
4 ( 6 )
x Ms Salt expects that all her tax treatment requirements will be met or she
will not over further tax advice as “she is never wrong” according to her
website.
x Management of the new facility will be provided by Mr Charlie Bucket. Mr
Bucket previously worked at the chocolate factory. He will be paid
$200,000 per annum and this will increase by 10% per annum.
x Previously Mr Bucket was paid $100,000 with a 5% annual increase. His
replacement will be Mr Mike Teevee and his salary will be $150,000 in year
one and increase by 5% per annum.
x The new machine will be able to be sold for $3,000,000 at the end of the
projects life in year 10.
x Sales of the elevators are expected to be $8,000,000 in year 1 and
increase by 3% per annum.
x Mr Wonka will run tours of the new facility and these are expected to
generate revenue s of $100,000 per annum.
x As a result , tours of the chocolate factory will see lower demand. These
are expected to lose $20,000 per annum.
x The project is expected to need total working capital of $200,000 in the first
year.
x Costs of sales are expected to be 33% of sales.
x Working capital requirements over the period of the project are expected to
be 2% of elevator sales and 3% of cost of sales in the relevant period.
The company maintains a film library at its head office in Stoke on Kent. The
company devotes one floor of its head office to this library, which contains copies
of some of the most significant movies produced in the last 50 years along with
movie memorabilia.
If the project goes ahead , head office costs will stay the same but 23% of these
$1,000,000 annual costs will need to be allocated to the elevator business.
(These costs increase by the rate of inflation). Only 50% of this 23% will be tax
deductible. Ms Violet Beauregarde is the film historian employed by Mr Wonka.
The company plans to borrow 100 % of the funds required to purchase the new
machine from the Slugworth Bank. Interest rates are expected to be 8% per
annum fixed for the life of the loan. All interest payments are tax deductible.
5 ( 6 )
The firm maintains a cons tant debt -to -equity ratio of 60%. The real rate of return
of the ASX200 index is 10% pa and the real rate of return on government bonds
is 3% pa.
Note:
x The current rate of inflation is 3.0% p.a. Wonka pays tax at 30 cents in the
dollar.
x All tax benefits are received in the year in which the expenditure is incurred
unless otherwise stated.
x All amounts are in real dollars.
x The nominal rate of return expected on the project is 14 %.
x All analysis should be undertaken in real dollars.
Required:
You are required to form groups of between 2 and 4 to complete this
assessment. Groups of one and five or more will not be accepted. You
must register your group in iLearn prior to the assessment due date. No
consideration will be given for late assignment as a result of not following
these requirements.
The assessment must be produced on the Spreadsheet found in the
assignment tab on iLearn.
You will be assessed on the following criteria:
(a) Calculate the cash flows at the start of the investment (t=0). (2 Marks)
(b ) Calculate the cash flows over the life of the investment ( t=1,2,3… 9) . (2
Marks)
(c) Calculate the cash flows at the end of the investment (t=10). (2 Marks)
(d) What is the appropriate discount rate for the project? (2 Marks)
(e) What is the Net Present Value of the Project? (2 Marks)
Part C: Group Assignment
This section is worth 5%.
In this section the group is required to submit the following information
1. A 250 word summary of the information that they found the most difficult to
comprehend in the assignment.
2. A statement from each group member detailing what they contributed to the
group assignment.
3. Minutes of the meetings held for the assignment. Each group should have
a minimum of two meetings. The minutes must detail who attended, the
work assigned to them and the outcomes achieved.
(There will also be a blog available for discussion by team members of
these discussions).
You are required to submit the following:
1. You are required to submit an assignment on ilearn by the due date.
2. You are required to display the word count on the front page of your
assignment.
3. You are exp ected to submit a file using 12- point double spaced Arial
font.
Note: Questions about the assignment can only be asked via the
discussion board in iLearn.
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