The assisgnment is based on accounting and finance and must be completed in 10 pages (2,500 words) by using Harvard reference style of writing.
Question 1: Ratio analysis and Interpretation of Big 3 UK Supermarkets
You are an external investor who is interested in investing in the UK Grocery and food sector. Evaluate the three big UK supermarkets namely Tesco Inc., J. Sainsbury and M&S using ratio analysis technique. Using the last 5 year end annual financial figures from the company’s accounts provide a comprehensive review of the firm’s performance. Analyse the three companies based on any THREE of the following sets of ratios (Profitability, Liquidity, Gearing, Investors and Efficiency – you have to use at least two variants of each of the ratio sets). Clearly explain why the chosen sets of ratios are relevant for evaluating the companies. Use appropriate graphs to display the trend and comparative evaluation across the three firms and provide a clear rationale for your critical evaluation. Draw a clear conclusion based on your analysis and discuss the findings in light of the limitations and assumptions of ratio analysis technique. You are required to use appropriate in-text citations and relevant academic references in your report. Please ensure you provide the relevant inputs to your calculations in a tabulated form in the appendix.
Question 2: Short-Term decision making and CVP analysis
National Entertainers Ltd. operates in the leisure and entertainment industry and one of its activities is to promote concerts in location throughout North America. The company is examining the viability of a concert in New Jersey. Estimated fixed cost is $125,000. These include fees paid to the performers, the hire of venue and advertising cost. Variable cost consist of the cost of a pre-packed buffet which will be provided by a catering firm, which is currently being negotiated, but it is likely to be in the region of $10 per ticket sold. The proposed price for the sale of ticket is $25 and the management expects 10,000 tickets to be sold. The management of National Entertainers have requested the following information:
1) The number of tickets that must be sold to breakeven (both in terms of sales and units)? Explain your results.
2) How many tickets must be sold to earn $30,000 profit?
3) What profit/loss would result if 8,000 tickets are sold?
4) Estimate the margin of safety for a sale of 10,000 tickets (both in sales and % age terms). Explain your result.
5) Suppose if the management expectations of ticket sales increase by 25%, with fixed cost and selling price per ticket remaining constant, what would be the % age increase in profit?
6) Draw a CVP Graph for the given scenario based on volume range of 0 tickets to 14,000 tickets sold? Label the graphs and clearly indicate the BEP (units/sales), profit/loss region and the cost lines.
7) Using appropriate literature, Explain the results in light of the assumptions and limitations of CVP analysis.
Question 3: Investment appraisal and decision making
Consider three mutually exclusive investment projects Alpha, Beta and Delta that your company is considering for investment. The initial outlay at Year 0 and expected residual value at the end of 4 years, along with the expected cash flow each year is provided below. Using various investment appraisal techniques rank the 3 projects and comment on the feasibility of the investment option. State your preference for each project in line with the advantages and disadvantages of the each method used. Use appropriate in-text citation and referencing to justify your results.
(Figures in $) Alpha Beta Delta
Project Investment outlay 5,000 8,000 10,000
Residual value (4yrs) 1,000 2,000 3,000
End of year cash flow
Year 1 1,000 3,000 5,000
Year 2 1,000 3,000 5,000
Year 3 3,000 3,000 1,000
Year 4 3,000 3,000 1,000
Total Profits 8,000 12,000 12,000
1) Rank the 3 projects using ARR method.
2) Considering the company’s historical ROCE to be at 25%. Which of the three projects are worth considering for investment?
3) Rank projects using Payback period method (6 marks).
4) Considering company maximum acceptable Payback Period to be 3 years. Which of the 3 projects are worth considering for investment?
5) Rank projects using Net Present Value method. Consider discount rate of 5%.
6) Which of the 3 projects are worth considering for investment?
7) Rank projects using IRR method.
8) If the company’s required rate of return is at 15%. Which of the 3 projects are worth considering for investment?
9) Having evaluated the projects using alternative investment appraisal technique, provide an overall conclusion of the most appropriate method/methods you would consider for appraising the three projects and Why?
10) Provide a critical analysis of the appraisal methods used to evaluate projects and Justify your recommendation in light of the advantages and disadvantages of each of the method used to evaluate long term investment projects?