Australian stock exchange

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Reference no: EM13904018

1. List and briefly describe the three general areas of responsibility for a chief financial officer (CFO) of a selected non-financial company which is listed on Australian Stock Exchange (ASX). How those responsibilities can affect ultimate objective of the company. The name of company you chose should start with the first letter of your name, surname or middle name.  (Maximum of 1000 words)  

2. Chill Mount Creamery manufactures a variety of Ice creams. The company is considering introducing a new product (Yugo cream). The company’s manager has been provided with the following information by their business analyst.

? The project has an anticipated economic life of 5 years.

? The Company plans to spend $1,300,000 on advertising campaign to boost sales.

? The Company’s interest expense each year will be $500,000.

? The Company is required to purchase a new machine to produce the new product. The machine’s initial cost is $5,500,000. The machine will be depreciated on a straight 

line basis over 5 years. The Company anticipates that the machine will last for 10 years; the salvage value after 5 years is $500,000.

? Six months ago the Company also paid $300,000 to a firm to do research regarding new product.

? If the Company goes ahead with the new product, it will have an effect on the Company’s net operating capital. The forecasted net working capital will be $200,000 (at time zero)

? The new product is expected to generate sales revenue of $1,500,000, 2,500,000, 3,500,000, 4500,000 and 5,500,000 in year 1, 2, 3, 4 and 5 respectively. Each year the operating cost (not including depreciation) expected to equal 30 percent of sales revenue.

? In addition the Company expects with introduction of new product, sale of other ice cream increase by $500,000 after taxes each year. 

? The Company’s overall WACC is 7.5 percent. However, the proposed project is riskier than the average project; the new project’s WACC is estimated to be 10 percent.

? The Company’s tax rate is 30 percent.

? What is the net present value, internal rate of return, payback period, discounted payback period, and profitability index of the proposed project. Based on your analysis should the project be accepted? Discuss.

Reference no: EM13904018

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