Reference no: EM132857194 , Length: word count:4500

Scenario

The case study below illustrates how Syngenta, a company created from the fusion of two agronomical divisions of two conglomerates, plans its investments with the help of analytical tools such as the Average Rate of Return (ARR) and the Payback Period.

Case study

Formed in 2000 by the merger of the agronomical divisions of Zeneca and Novartis, Syngenta is one of the world's leading suppliers of seeds and crop protection systems. A multinational company, Syngenta employs 26,000 people across 90 countries. In 2010, its sales exceeded $11 billion. Syngenta's mission is ‘bringing plant potential to life'. It uses the latest science and technology to develop products that help its customers improve crop productivity. Syngenta's products are used by farmers to protect crops against weeds, pests and fungal diseases. The company's herbicides, pesticides and fungicides are usually based on complex chemicals. To develop products that can improve farm output without damaging the natural environment requires intensive Research and Development (R&D). To protect its investment, Syngenta obtains patents for its new products.

In 2008, Syngenta was faced with a major investment decision. As the Amistar range of fungicides moved through its product life cycle, its maximum capacity was approached. Syngenta could not produce more Amistar without investing in its production facilities. A proposal was put forward to expand production through a £150 million investment at the Grangemouth site in Scotland. The company had to decide whether increasing production would be financially viable and worthwhile investment.

Part A
The table below shows the estimated cash flow for the Grangemouth expansion project.

Cash flows (£'s million)

	Year	0	1	2	3	4	5	6	7	8	9
	Cash Inflow
	Sales		200	400	400	400	400	400	400	400	400
	Total Inflow		200	400	400	400	400	400	400	400	400
	Cash Outflow
	Investment	150
	Manufacturing Costs		80	160	160	160	160	160	160	160	160
	Sales and Marketing		15	30	30	30	30	30	30	30	30
	Other Costs		25	25
	Total Outflow	150	120	215	190	190	190	190	190	190	190
	Net cash flow	-150	80	185	210	210	210	210	210	210	210

Required:

1. An explanation of the sources of finance, the Syngenta Company, could have used and an assessment of the risks involved in the identified sources.

2. using the different ratios, analyse the performance of the Syngenta and propose recommendations on how the proposed investment would benefit the books of the organization.

3. An analysis of the potential investment decisions and strategies available to the Syngenta Company. Use the data provided to calculate the payback period and accounting rate of return.

4. An assessment of the global environment decisions and strategies affecting the Syngenta Company.

Word Count - 2500 words

Part B You are required to choose a Public Limited Company on which to base your assignment.

Task 1 Prepare a meeting paper that can be used by Company Directors to review their current Global Finance Strategies.

You must include the following in your meeting paper:

• An analysis of the nature and types of cost in the organization and how it affects the financial position of the organization
• Identify and analyse different costing techniques and suggest appropriate costing methods for the organization with your own justification.
• Discuss the role of accounting in support of decision making.
• Discuss the risks involved in any financial decision and identify the key risk and methods to mitigate for the specific case of your chosen organization.
• Critically evaluate different budgetary techniques/types and suggest a budgeting technique for your chosen organization.
• Carry out a detailed analysis of the investment evaluation techniques and suggest how the organization can attain the required investment.

Word Count - 2000 words