Reference no: EM133256637

Financial Management

Assignment 1: Case Study - America Coffee

Purpose
You will review and analyze the mission statement, case information, and financial statements of America Coffee House. You will use the information from your review to develop a SWOT analysis with the purpose of seeking support for proposed investment projects. You will also prepare a notional UCC asset tax values continuity schedule to analyze the impact of capital equipment disposals.

How to Proceed
Prepare your preliminary business case report by analyzing financial and non-financial data from the case information provided below. You will need to undertake, and include, the following:

1. Create a title page with your author identification (Full Name, Student ID).

2. Review the information and financial statements provided below to gain an understanding of potential investment initiatives that would be supportable by management. Describe the intent of the mission statement from the annual report, and prepare a SWOT analysis (strengths, weaknesses, opportunities, and threats). Based on your SWOT analysis, assess and explain in detail if America Coffee House is currently delivering on its mission statement.

3. Conduct financial statement analysis using liquidity ratios, debt ratios, profitability, and asset utilization ratios (at least three for each type of ratio). Comment on each of the ratios and what they say about the company's performance over the last five years.

4. Prepare an assessment for each of the investment proposals included below, with a rationale that is aligned with the SWOT analysis and financial statement ratio analysis. Recommend if ACH should go forward with any of the proposed investments based on this analysis.

5. Prepare a basic income statement forecast for the subsequent fiscal year, using a percentage of sales
approach and using that correspond for
revenue and expense. Each line item (e.g., marketing expenses) should have a note and an explanation on how it was calculated.

6. The CEO also needs help understanding the tax consequences of the disposal of a freighting truck. Prepare a CCA schedule for tax depreciation of a freighting truck purchased three years ago on January 1, 2015 for $350,000 (assume Class 16 with CCA rate of 40% and half-year rule applying). Calculate the tax consequence if the truck were to be sold at the beginning of this year (i.e., end of 2017) for either $90,000 or $120,000. The truck is the only asset in the class. Utilize the average tax rate that America Coffee House had in the last five years in your analysis of the tax impact.

Assignment 2: Case Study - America Coffee House

It is January 1st, 2018. You are a senior analyst at America Coffee House Inc. (ACH), one of the leading coffee chains and wholesaler of coffee/bakery products in North America. The CEO of America Coffee House, Susan Matthews, has reached out to you to draft a report to evaluate two investment proposals, building on your analysis from Assignment 1.

Purpose
For this case approach, you will demonstrate your ability to develop costing methods and a set of forecasts of future cash flows for two proposed investment projects. You will also be required to identify the cost of financing through the issuance of bonds.

How to Proceed
Building on your analysis and proposal from Assignment 1, develop your investment proposal business case draft:
1. Create a title page with the project proposal names and author identification.

2. Calculate the bond yield to utilize as your required return.

3. Prepare a summary narrative (i.e., a detailed description) of each proposal with detailed elements on the initial investment, as well as the costs/revenues over the life of each of the projects. Identify which revenues and costs are relevant to your analysis, and which costs are irrelevant. Identify the time horizon for each investment.

4. Calculate the after-tax cash flows during the life of each of the projects. Be sure to identify the total costs of ownership and deduct those costs from the benefits to arrive at the net cash inflow per year.

5. Utilizing the after-tax cash flows from part 4, evaluate each investment proposal utilizing the following criteria (unless directed otherwise):
a. Payback;

b. Discounted payback;

c. NPV;

d. IRR; and

e. Profitability index.

6. Clearly indicate whether any of the above criteria support each of the project proposals, and what the company should ultimately decide to do.

Format for Submission
Your report narratives may be done in Word or Excel, but calculations and tables of values must be prepared in Excel with the amounts derived from actual formulas that use your variables, rounded to four (4) decimals or lower.
The Excel tab worksheet must be print and presentation ready, formatted to print in 2 to 3 pages without page fragmentation of equations or tables between pages.
It is permissible to break your report down using the questions listed above as headings. Submit your report file(s) into the Assignment 2: Case Study dropbox on UM Learn.
Your assignment must be submitted by the deadline date found in the course schedule provided in the Course Outline.

Assignment 3: Case Study - America Coffee House

Purpose
Under this case approach, you will demonstrate your ability to undertake a detailed analysis to evaluate the buy versus lease options for an investment proposal, on a qualitative and quantitative basis. You will also be required to calculate the weighted average cost of capital (WACC). A supplementary scenario analysis of leasing options is required.

How to Proceed
1. Create a title page with your purchase versus lease report name and author identification.

2. Explain the advantages and disadvantages of leasing, including the possible reasons, right or wrong, that would make a company lease an asset (from the lessor and lessee perspective).

3. Calculate the weighted average cost of capital (WACC) to use in your net advantage to leasing (NAL) analysis, rounding to the nearest one tenth of a percent.

4. Prepare your Net Advantage to Leasing analysis of the investment using the WACC as the discount rate. In addition, determine the impacts of the sensitivity analysis in the case, including
a. changes in payments from beginning of period to end;

b. changes in salvage value;

c. security deposit; and

d. the break-even lease payment.

5. Explain and evaluate if the investment should be purchased or leased, depending on the different scenarios analyzed.

6. Determine the classification of the lease option being considered, and indicate what the effect would be on the statement of financial position.

Attachment:- Case Study - America Coffee.rar