Corporate Finance - Brady Plc - Case Study - Accounting and Finance Assignment Help

Assignment Task:

Task:

Question 1 (25 marks)
Consider the following investment appraisal project: Brady Plc is considering an investment appraisal project about which the following information is available:

1. The investment outlay on the project will be $100m. This consists of $80m on plant & machinery and $20m on net working capital. The entire outlay will be incurred at the beginning of the project.
2. The project is expected to lead to a revenue of $60m in the first year, expected to increase at 5% each year for the next 5 years. Expected costs in the first year are $20m for material, $10m as employee related expenses, and $5m as other expenses.The costs may be considered to inflate at 3%.
3. Considerable amount of R&D has been done to decide whether to go ahead with the Project. Expenses to the tune of $10m have already been incurred.
4. Plant and machinery will be depreciated at the rate of 25% per year as per written down value method. Effective tax rate is 30%.
5. The life of the project is expected to be 5 years. At the end of 5 years, fixed assets will fetch a net salvage value based on the final depreciated value of the plant & machinery, and the net working capital will be liquidated at its book value.
6. The project will be financed with $45m of equity capital, $5m of preference capital, and $50m of debt capital. Assume the cost of capital of the project is 8%.

Question 2 (40 marks)
Amazon Inc is a listed company on the NASDAQ (Ticker: AMZN). Refer to the attached excel for a snippet of the Balance Sheet and Income Statement of Amazon for FY2017-2019. Being the finance manager, you are required to prepare a cash flow forecast for Amazon using the Discounted Cash Flow (DCF) approach and come up with a meaningful estimate of its share price.

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