Assignment AYRCo. is considering two separate projectsknown as ‘Aspire’ and ‘Wolf’ which are quite different but each of which has the potential to increase AYRCo.’s market share.To date $120,000 has been spent on market research into the increase in demand that can be expected for each project. The next stage is to conduct a financial appraisal to determine which project should be taken forward as AYRCo. can only afford to fund one project at this time.Project Aspire:This project will require the acquisition of plant and machinery costing $2,250,000 which is payable immediately. This machinery will have a scrap value of $375,000 at the end of the 5 years. There is also $140,000working capital to be used immediately. This amount has been taken from the company’s retained profitsand will be repaid at the end of the project. Cash inflowsare expected to be $650,000 in year 1 rising at a rate of 7.5% per annum for years 2 to 5inclusive. Variable costsin year 1 are expected to be$27,000 per annum and are expected to rise at 6.75% per annum. Capital allowances are available on the plant and machinery as follows:$Year 1Year 2Year 3Year 4Year 5600,000390,000345,000300,000240,000This project will expand the current product range and will appeal to existing and potential customers. Project Wolf:This project will require an immediate outlay of $2,250,000. This expenditure will not attract capital allowances. Annual cash inflowsof $955,000 areexpected to be constant for the life of the project.Material costs are expected to be $14,400 in the first year, rising at an annual inflation rate of 7.5% per annum. Other expenses are expected to be $18,000in year 1and these are expected to fall by 7.5% per annum over the life of the project.To undertake Project Wolf, factory space which is currently generating rental income will need to be used for the project. The rental income,which would nothave been expected to change over the five-yearperiod,is $75,000 per annum.This project will take the company in a new direction appealing to a different type of customer.Additional financial information:Corporation tax is paid at a rate of 20% and tax is payable one year in arrears.The weighted average cost of capital is 10% and, unless otherwise stated, cash flows occur at the end of the year to which they relate. A straight line method of depreciation at a rate of 20% is applied to allnon-currentassets.Theinitial investment of $2.250m, for whichever project is chosen, issignificantin terms of valuefor AYRCo. The board of directors isconsidering ways to finance the investment, and will choose between,increasing equity by issuingnew ordinary shares, ortaking on new debt in the form of a bank loanat a fixed rate of interest.AYRCo.is currently financed as follows:Capital Employed$millionEquity holder funds20Long term debt18Total38Required:Prepare a report to the Directors of AYRCo. which includes the following.1.A calculation of the Net Present Value (NPV), Internal Rate of Return (IRR) and Payback Period for projects Aspireand Wolf. Detailed calculations should be included as an appendix to the report. All cash flows should berounded to the nearest $. 30% 2.Analysis and evaluation of the investment project options as follows:i.A recommendation regarding which project (if any) to undertake;ii.Justifications for your recommendation including an evaluation of the investment appraisal techniques used in task 1 above.iii.Asummary of other factors that should be considered and information that may be needed prior to making a final decision.30%3.A discussion of the two sources of finance being considered by the board of AYRCo. Your report should include:i.A description of Equity and Debt.ii.An explanation of the costsof each sourceof finance.iii.An analysis of the effectthe selection of the source of finance may have on AYRCo.’s weighted average cost of capital.iv.An assessment of the impact of the selection of finance oncurrent and potential shareholders and lenders. 30%Marks are available for presentation of the report, which must not exceed 3,000 words. 10%
Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?
Whichever your reason may is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.
Our essay writers are graduates with diplomas, bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college diploma. When assigning your order, we match the paper subject with the area of specialization of the writer.
You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.
Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.
You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.
The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.
PLACE THIS ORDER OR A SIMILAR ORDER WITH NERDY ASSIGNMENT HELP TODAY AND GET AN AMAZING DISCOUNT