Calculate the accounting rate of return using the original investment technique for all options

Comparative finance analysis: the case study questions will be uploaded, answer the required section (please follow the marking criteria, the text in italics in the required section.)
References will be finance academic theories/definition based on the findings.
Net present value table will be uploaded as well.
Individual assignment guidelines
The following is a business case that you are required to analyse as per the ‘Required’ section on page 4, by answering the parts of requirement 1 and compiling a Reference List as per requirement 2.

The business case data is as follows:

Bottom Line Pty Ltd has been operating as a medium sized suburban sports gym in Hornsby, for the past 5 years. The following is an extract of their of their Income Statement and Balance sheet for the year ended 30 June 2015. Comparatives are also provided.
The bottom line is planning on opening up another gym in a different location in order to expand its operations. They have a choice of 4 different locations, which vary in capital cost and expected cash flows based on detailed market research, however they are mutually exclusive (see table 3).

Table 1.
(BEFORE TAX)
TAX 30%                                                 53,921        111,770
NET PROFIT AFTER TAX                             125,815        260,797

Table 2.

The Bottom Line
Balance Sheet
as at 30 June 2015
2015    2014
Assets
Current Assets
Bank    115,957    15,765
Inventory    81,284    10,000
Accounts Receivable Control    5,475    10,654
GST Receivable    3,757    4,566
Total Current Assets    206,473    40,985

Non-Current Assets
Gym Equipment    266,959    365,832
Furniture & Fittings    242,286    352,123
Motor Vehicle    48,850    55,567
Computers    14,817    17,543
Total Non-current Assets    572,912    791,065
TOTAL ASSETS    779,385    832,050

Liabilities
Current Liabilities
Accounts Payable Control    25,426    32,984
GST Payable    2,000    1,344
Tax Payable    53,921    111,770
Loan – L & L L           9,500    25,000
Total Current Liabilities    90,847    171,098

Non-current Liabilities
Loan – Republic Bank    120,000    330,000
Total Non-current Liabilities    120,000    330,000
Total Liabilities    210,847    501,098
Net Assets    568,538    330,952

Owners’ Equity
Capital    442,722    70,155
Add: Net Profit After Tax    125,815    260,797
Total Owners’ Equity    568,537    330,952

Table 3.

Proposal    Cammeray    Pymble    Thornleigh    Dural
Project cost    450,000    300,000    230,000    230,000
Year 1 before tax net cash flow     120,000    95,000    30,000    90,000
Year 2 before tax net cash flow    170,000    95,000    80,000    90,000
Year 3 before tax net cash flow    110,000    95,000    100,000    90,000
Year 4 before tax net cash flow    150,000    95,000    90,000    90,000
Year 5 before tax net cash flow    60,000    95,000    80,000    90,000

Required: *Marking criteria

Comment on the year on year performance of the Bottom Line’s financial results. Using table 1 & 2.
Makes a relevant comment on each of the three aspects of Bottom Line report.

Using a series of ratios which you feel are suitable (from any of the following categories: liquidity, profitability, leverage and activity), provide a detailed analysis of the business.
States 6 or more relevant ratios with meaningful commentary for each.

You are asked to calculate the payback period for each of the new location proposals in table 3. Comment on your findings.
Correctly calculates the payback period for 4 proposals and suggests one option based on the correct results.

Calculate the accounting rate of return using the original investment technique for all options (from table 3.) Assume a company tax rate of 30%. Bottom Line is able to invest any excess funds in a cash management trust at 12%, so it is not interested in proposals yielding less than that. Comment on your findings.
Calculates the correct ARR on all investments and uses the after tax profit and commentary includes the opportunity cost analysis.

Calculate the net present value of each proposal using a weighted average cost of capital of 10% (from table 3.) Rank your investments and suggest which one Bottom Line should invest in.
Calculates the correct NPV on all 4 investments and applies the tax cash outflows. Provides a thorough recommendation with dollar advantage over the other projects.

Suggest how the new gym should be funded in the new location using your response from e.
Provides a suggestion with valid reasoning based on correct results and analysis.

Prepare a budgeted income statement, balance sheet and cash budget using for 2016 using all your proposals and suggestions above.
Prepares a 3 budgets but only uses substantial data from the financial results and analysis and provides assumptions and reasoning.

2.      Reference List:

Includes any references you have used and cited in your report. You must use the APA style referencing system. (Note:  the reference list is not included in the word count).

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