Reference no: EM132398848 , Length: word count : 3000
INTERNATIONAL CORPORATE FINANCE
Required
With reference to on-going market and economic conditions submit a3000 word Report via Canvas providing:
• a detailed evaluation of the two alternatives together with your evidence based recommendation
• an evaluation and recommendation concerning the potential liquidation of Mersey Airways
A. The Development & Operation of a New Oil Platform in the North Sea costing approximately £315 million
Activity A: Geological Studies
Geological studies lasting 12 months have just been completed at a cost of £10 million and the project is now entering the Technical & Financial Evaluation stage.
Activity B: Technical Evaluation
Production & Chemical Engineers will be asked to evaluate the feasibility of the project over the next 3 months
Activity C: Financial Evaluation
Your task is to present a Financial Evaluation & Recommendations to the Board in 3 months’ time to assist in their decision making.
Activity D: Board Consideration
The Board will consider both the Technical & Financial Evaluations before making their decision whether or not to proceed with the project.
Activity E: Safety Report
A shortage of safety engineers in the sector may well prove critical to the timely start of the project, though this could be solved by moving suitably qualified staff from Activity F to Activity E, though it is uncertain whether this action would then delay the project.
Activity F: Delivery & Construction of the Oil Platform including Drills, Pumps, Pipelines etc
Two suppliers have been identified, British Oil Machinery who have quoted £315,000,000 and Munchen Machinery Germany who have quoted of €350,000,000. Details of the contract have yet to be agreed but UK Oil will clearly need to reduce the risks associated with the tender and performance of the contract, particularly as the contractor may require an advanced payment of 10%.
Activity F: Material
In order to operate the site, emulsifiers to aid the separation of oil and water and corrosion inhibitors to protect the pipelines will be required. Three quotations have been received from potential suppliers:
Russia Rub 27000 CFR UstLuga Open Account - settlement 2 months after shipment
U.S.A US$ 425 CFR Dover D/A – Bill of Exchange payable 1 month aftershipment
Collection charges of 0.25% are payable by the buyer.
Netherlands € 400 CIF Dover Confirmed Irrevocable Documentary Credit – payment 3 months after shipment.
Documentary credit charges of 0.75% are payable by the buyer.
100,000 tons of material would be required each year of the project, with prices increasing in line with the national inflation rate, throughout the life of the project
Activity J: Sales
The project is expected to increase productivity in the North Sea enabling the company to secure an additional 6,500,000 barrels per year, for the next 25 years.
The additional crude oil will be sold to various oil refineries including a number of new customers in Europe.
Activity I & J: Production Costs
Annual Production Costs for this project are expected to be in line with previous projects detailed below:
Project Output (Barrels) Costs
A 2,000,000 £50,000,000
B 2,500,000 £65,000,000
C 2,300,000 £54,000,000
D 2,600,000 £62,800,000
E 3,000,000 £70,000,000
F 2,750,000 £66,100,000
G 2,900,000 £67,000.000
H 3,100,000 £69,000,000
I 1,800,000 £42,500,000
J 1,750,000 £40,200,000
B. The Merger or Acquisition of an Oil Refinery (Euro Refinery Plc.) located in Ireland approximately £320 million
Evaluate the position and recommend an appropriate strategy. Do we accept the proposed restructure or petition for their liquidation?
Attachment:- Assignment - CORPORATE FINANCE.rar