Ba Finance

2191 WordsNov 7, 20129 Pages
7BSM1006 Managing Financial Value Drivers Coursework Semester A 2012 Assessment weighting 60% Bellingham plc Arthur Scroggs was a farmer. His family has owned and farmed 500 acres of prime land in the Vale of Aylesbury for four generations. In the mid 1980 's small farms were finding the financial climate difficult with falling farm incomes and much talk of putting farm land to "alternative use". By 1985 Arthur had already sold his dairy herd to focus on cereal production when a fortuitous meeting with Lucy Bellingham at a business conference led him to reconsider the future of the family farm. Bellingham is a designer of bespoke fitted kitchens who had a business plan but little capital. The plan was to manufacture top quality…show more content…
There has been a great deal of uncertainty about world economic growth and stock markets have been extremely volatile resulting low returns. However the firm’s ordinary shares have made good progress during the year. Ordinary share dividends have achieved substantial growth over the last two years although this rate of increase is not expected to continue. Ordinary dividends have grown at an average rate of 14% per annum over the past 10 years and this rate is a more realistic growth rate for future dividends. The present market prices for Bellingham 's shares and debentures are: £1 Ordinary shares £7.02 ex div £0.50p, 6% Pref shares £0.55 ex div 7% Debentures 2016 £100.51 ex interest Any new venture would be expected to achieve a return on capital employed in line with that experienced recently by Bellingham plc. The finance director favours a payback period of 5 years. Bellingham would therefore need to agree a realistic acquisition price for such a new venture and its future cash flows in order to determine whether these criteria could be met. Although a number of investment projects are being considered, the main proposal currently being investigated offers an expansion into the US prime-property market which is forecast to grow faster than the UK market. Bellingham 's finance director has already calculated the trends in the financial ratios of American Creations, an
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