Evaluate the projects using net present value method


Problem 1: You are hired as a financial consultant by the Government to evaluate the financial performance of a company listed in the Muscat Securities Market (MSM)/GCC Market by taking into consideration the following instructions.

  • Select a company listed in Muscat Securities Market/GCC Market (preferably other than banking and investment companies or Holding companies).
  • Collect annual financial reports of the chosen company for five consecutive years.
  • Use ONLY annual financial statements for analysis. Avoid using quarterly statements.
  • Provide references for the data collected (use Coventry Harvard style of referencing). Company websites can also be used for data collection.
  • From the financial statements and additional information collected, complete the below mentioned tasks.

Tasks A:

Compute the following ratios for each year

  • Liquidity Ratios - minimum of two ratios
  • Profitability Ratios - minimum of two ratios
  • Efficiency Ratios - minimum of two ratios
  • Capital Structure Ratios (Gearing) - minimum of two ratios
  • Market Ratios (dividend, PE etc.) - minimum of two ratios

Task B: Based on the above computations and literature review about the ratio analysis technique and ratios used in the calculations; analyze the liquidity, profitability and efficiency position of the company including specific LR to be used for benchmarking/ comparison with similar industry across the globe/GCC etc and use figures/ graphs to support your analysis. Provide recommendations for improvements

Task C: Based on the ratios and any other information contained in the financial statements and appropriate LR about the ratios used in the calculations, would you recommend buying these companies' shares. Why or why not? Justify your recommendation including specific LR to be used for benchmarking/comparison of similar industry across the globe/GCC etc and use figures/ graphs to support your analysis.

Task D: Write a reflection of your experience on attempting the online course mentioned below: Your reflection may include, your individual experience, What did you learn from this online course, how much progress you made in the online course, strengths of the online course, challenges you faced in attempting the online course etc. It is mandatory to attach the course completion certificate if completed, if the course not completed then to attach a few screenshots of the course in the appendix which clearly shows your registration details and your progress in this online course. Word range: 250 - 300)

Problem 2: Nesto LLC is considering three projects based on their Board's directions. Each project presents different set of positives and negatives and the initial outlay for each projects are also different. The net cash inflows are provided below,

Details

Project atIbra

Project at Sur

Project Nizwa

 

Initial cost

200,000

300,000

400,000

Cost of capital

10%

15%

12%

Cash flows

Year 1

60,000

90,000

140,000

Year 2

60,000

100,000

150,000

Year 3

60,000

100,000

160,000

Year 4

60,000

90,000

70,000

A. Evaluate the projects using Net Present value Method and profitability index method .

B. Based on the above analysis and on the basis of the relevant literature review about the techniques used to analyze the projects, which project would you recommend and why?

(LR: word range: 400 - 450: word range: 150 - 200)

C. Based on appropriate literature review, analyze the non-financial factors (minimum of 5 factors) to be considered while conducting project appraisal. (- word range: 300 - 350)

Problem 3: The following information is extracted from the records of Muscat Lightings LLC. The sales turnover and profit of the company for last two years were as follows.

Year

Sales(OMR)

Profit(OMR)

2018

150,000

40,000

2019

180,000

60,000

You are required to calculate:

A. P/V ratio

B. Fixed cost

C. Sales required to earn a profit of OMR. 120,000.)

D. Profit when sales are OMR. 300,000

E. Discuss the importance of Break Event Point (BEP) in taking business decisions with appropriate literature review.

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