Case Study

Decent Essays
ASSIGNMENT 1: Strategic Corporate Finance
Type of Assessment: Case Study: 2500 words (equivalent)
Submission deadline: Upload to Moodle before 14:00 noon Friday 22nd March 2013.
Weighting: 50% of module mark
Uploading to Moodle * Attach the feedback sheet and marking grid to the front of your assignment * Upload your spreadhseet

Learning outcomes 1. Analyse different capital budgeting techniques

2. Evaluate the information derived from different capital budgeting techniques

You work at the headquarters of the Yorkshire Wind Farm Company and are responsible for the evaluation of capital projects. The business is currently trying to decide between 2 proposed wind farms. One is onshore, located in
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c) All costs and revenues are expressed at today’s prices (year zero) Therefore there is no inflation. d) This equipment will have a zero resale value at the end of year 20. e) The government grant will be received in year 1. However it has been spread over the life of the project in the profit and loss accounts f) The preparatory costs have already been incurred. g) The daily management fees for both projects include a fee of £10,000 which is an apportionment of head office overheads. h) The refurbishments in year 5 require the use of specialised equipment that will be borrowed from another division of the Company. This is not reflected in the profit and loss accounts but will cost the other division additional hire costs of £200,000 per project. i) An initial cash reserve is needed for each project. It will be paid back at the end of year 20. * Onshore £1,000K * Offshore £1,500K j) Ignore taxation. k) The Yorkshire Wind Farm Company has a cost of capital (discount rate) of 10%. l) They have a current return on capital employed of 12% and this is expected to be met by new projects. m) They expect projects to have a payback period of no more than 10 years.


Task 1 Calculations (using the spreadsheet) a) Enter relevant figures into the cash flows worksheet and justify any adjustments to the profit and
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