Accounting and Finance - Exxon Mobil - ROOE - SENTO Corp - Report Writing Assessment Answer

Report Writing Assessment Answer

Assignment Task: PART A  EXXON MOBIL. Download annual report of EXXON MOBILfor the year 2017. You can access it from the URL You have been appointed as a consultant to prepare a report for consideration by the Board of Directors on details of and changes over two years to the ratio relevant to the shareholders namely Return on Owners Equity (ROOE). Required:

1. Using Du Pont Analysis, compute the ratios for two consecutive years covered by the annual report. Calculate Return on Owners Equity (ROOE) further analysed into Return on Sales, Total Asset Turnover ratio, Gearing Ratio. both return on Sales, Total Asset Turnover ratio can be further drilled down using 3 and 7 ratios respectively.
2. Your report analyzing changes in figures over 2 years. Scope of analysis covers changes in Return on Owners Equity (ROOE) further explained by changes in profitability, asset turnover and leverage ratio 

PART B (50%) SENTO Corp is a theme park company considering investing in Personal Mobility Devices (Project PMD) equipment to be rented out to tourists visiting Sentosa Island (Singapore’s most famous tourist attraction). The relevant information and data for the new investment Project PMD are as follows:

1. The project will be administered from a site that is currently earning annual rental income of $11,000.
2. The project will be administered by a manager drawing salary of $60,000 per year who is expected to devote 25% of his time on this project.
3. Another equipment which was meant to be sold for $30,000 today will be retained for this project for another 6 years after which it will be sold for $5,000.
4. Annual maintenance contract of $7,000 for this equipment will be extended for another 6 years.
5. A project support officer drawing an annual salary of $25,000 was supposed to be retrenched today will be retained to work on this project at the same salary. The retrenchment benefit of $10,000 would be delayed till the end of the project life.
6. Annual tax payment for this project is expected to be $15,000 for first year and growing at a rate of $2,000 per each year.
7. The project will be financed by borrowing $250,000 at 6% interest p.y..
8. The required rate of return for the project is 10%.

REQUIRED:

1. For the proposal of Project PMD, show relevant cash flows from the project. Justify exclusion of each irrelevant cash flow
2. Calculate (with detailed workings);
3. Accounting Rate of Return (on initial investment)
4. Payback Period
5. Discounted payback period.
6. Net Present Value
7. Profitability Index
8. Internal Rate of Return (IRR). (Use 10% & 20% to approximate IRR)

iii) Critically evaluate “ project evaluation decisions make or break a company”. Notes:

1. To obtain a high mark, you should:
   1. Make your report concise, precise and well-presented and structured;
   2. Draw logical conclusions from accounting information;
   3. Synthesise information in a coherent and useful way;
   4. Show evidence of key text and background reading;
   5. Incorporate your knowledge into an integrated piece of work;
   6. Demonstrate a critical understanding of financial management.

2. A Harvard standard referencing is required for the report