7BSP1245 : Finance for International Business Hatfield Manufacturing Systems plc - Accounting and Finance Assignment Help

Assignment Task:

Task:

Hatfield Manufacturing Systems plc (HMS plc) is an engineering firm which specialises in the design, development and manufacture of additive layer manufacturing systems (3D printing). Not only do HMS produce and sell 3D print machines to other engineering firms, but recently they have been supplying components to the aerospace and motor vehicle industries on a R&D trial basis. The trial has been so successful in terms of both component durability and production cost that HMS are evaluating a proposal to invest in a new plant dedicated to the manufacture of these components to be located in Turkey.

Turkey has a number of advantages in terms of plant location. The Turkish government is keen to attract inward investment and has been investing heavily to improve infrastructure. Turkey has an increasingly competitive automotive industry which achieved record output of 1.75 million vehicles in 2017 and a substantial and developing aerospace sector. Thus there is a high level of local engineering skills.

Turkey also has a large and growing young population which is well educated. The unemployment rate in Turkey is currently 9.7%. However, the non-agriculture rate is 11.4% and amongst young people the rate is 16.9%. The HMS Board view is that this should give scope to recruit, train and retain staff without wage costs getting out of control. The Turkish economy is experiencing good growth with GDP growing by 7.3% in 2017 led by government investment in infrastructure and is on track for 5.5% growth in 2018.

There are, though, some challenges. The country is still dealing with fallout from the recent coup and negotiations with the EU have stalled. More recently a trade spat with the USA has created some instability particularly for the currency which is now trading at TL8.8257/£. Exchange rate and inflation data relating to Turkey and the UK is shown in Table 1 below.

Required:
Evaluate the investment proposal on behalf of Hatfield Manufacturing Systems plc and advise the firm whether the project is acceptable on a financial basis. Also, comment on the potential impact of foreign exchange risk on the project. You should support your arguments with relevant theory and calculations

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