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).
TAX 30% 53,921 111,770
NET PROFIT AFTER TAX 125,815 260,797
The Bottom Line
as at 30 June 2015
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
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
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
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
Capital 442,722 70,155
Add: Net Profit After Tax 125,815 260,797
Total Owners’ Equity 568,537 330,952
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).