Financial analysis, Financial Management

Assignment Help:
Task

I am sure you are aware that the corporate annual meeting is coming up soon. As part of the Treasurer''s presentation, I have been asked to propose a Special Capital Requirements Report for the following cash needs:

• Project Alpha -- capital required: $1,250,000, March 1, 2013
• Project Beta - capital required: $240,000 per month, Oct. 2012 through and including the end of 2014
• Pension funding through 2014 (our underwriters advise that an annual funding of $4,500,000, due at the end of December, will be needed for 2012, with increases thereafter of 7% per annum)
• Purchase of a Tesla Roadster for the Chairman of the Board (for his birthday in September at $101,500)
• Management retention bonuses for 2012 and 2013, payable, as usual, in March of the following year, not to exceed $10 million per year.

These are all special projects, requiring funding from sources other than operating revenues. I will handle scheduling the appropriate deposits into the Special Capital account at Penultimate National Bank and, except as specified below, you are not to concern yourselves with where funding may be obtained, only with how much will be needed.
Also, sinking fund requirements for the Series of 2025 Subordinated Debentures will be funded from the Special Capital account in single payments at the end of 2013 and 2014, only (that is, no more than two years of sinking fund payments need be funded - disregard any future payments). The indenture requires redemption of 2% of the $600 million issue per year. Retirement of the balance of the bonds will be funded elsewhere.

At the last meeting, the Board accepted the offer of Western Widgets for purchase of our widget winding facility in West Winona which will produce net proceeds in the amount of $16,500,000. This sale will be completed this month, and on the first of next month I will be depositing those funds in the Penultimate National Bank Special Capital account at 4.5% to provide at least a start on funding these projects. (This same 4.5% rate should be used for all discounting computations without regard to the company''s cost of capital).

In addition, it is possible, but not certain, that the Wilmer Widget Wrapping plant may also be sold for as much as $20 million (net) in June 2013. Since this is not certain, it should be treated as an alternative partial solution to the cash needs problem.
To assist me in putting together my report, please prepare the following for distribution to the Board Members, and attach them to your explanatory memo:

1. A cash requirements budget for the above expenditures.

2. A handout for the Board Members showing the present value of the total expenditures by item, how you calculated your results and why you did it the way you did. Some of the Members have no substantial financial training.
HINT: liberal use of appendices is recommended!!

3. Your estimate of the monthly deposits required to meet the above expenses, assuming the sale of the West Winona facility, with an explanation for the Board as to how you came up with that figure.

As usual, I am sure it is unnecessary to point out again that most of the members of the Board of Directors have no particular training in accounting and are interested only in a clear explanation of the amounts and application of the funds discussed in this memo. Accordingly, I do not expect you to use GAAP - I expect you to use common sense! Give me documents I can present to the members and that they can understand. In other words I do not expect you to use any standard financial statement forms. In addition, please disregard all tax issues.

I will be accompanying the Chairman on an important fact-finding mission to Tahiti next week, and, accordingly, will not be available to clarify any of the above details. If there are facts you feel need to be further developed, you will have to make appropriate assumptions (and specify any such assumptions made in your work product).
Don''t forget that salary reviews are scheduled for the week following the Meeting.

Related Discussions:- Financial analysis

What is an annuity?, What is an annuity? An annuity is a sequence of e...

What is an annuity? An annuity is a sequence of equal cash flows, spaced consistently over time.

Value of a warrant, Value of a Warrant: The market price of a warrant f...

Value of a Warrant: The market price of a warrant fluctuates between minimum and maximum limits. When the current market price of the stock Ps is greater than the exercise pri

Corporation, Corporation - Form of doing business pursuant to a charter gra...

Corporation - Form of doing business pursuant to a charter granted by a state or federal government. Corporations mainly are characterized by the issuance of freely transferable CA

Operational cycle, using the operating cycle and any other financial manage...

using the operating cycle and any other financial management knoweledge,dicuss the applicability of such a cycle to the poultry biussiness in uganda (consider broilers)

Explain the benefits of delegation from point of view of yt, YT is the Fina...

YT is the Finance Manager of SBM Magazine Publishing Company. He has recently had his appraisal and was expecting that he would get a excellent review, as he felt that he had met a

Aims of financial services authority, Aims of FSA The aim of FSA is to ...

Aims of FSA The aim of FSA is to promote efficient, orderly and fair markets, and to help retail consumers to get a fair deal. In fact, FSA has set out its aims under three bro

Determine the wealth maximisation decision criterion, Wealth Maximisation D...

Wealth Maximisation Decision Criterion This is also called as value maximisation or net present worth maximisation. Presently academic literature value maximisation is almost u

What is current asset, Q. What is Current Asset? Current Asset - ASSET ...

Q. What is Current Asset? Current Asset - ASSET which one can reasonably expect to convert into cash, sell or consume in operations within a single operating cycle or within a

#title.case let., this case has been framed in order to test the skills

this case has been framed in order to test the skills

Testing the hypothesis - chi square test, Testing the Hypothesis To tes...

Testing the Hypothesis To test the null hypothesis, we compare the observed and the expected frequencies. If the actual and the expected values are nearly equal to each other w

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd