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Finance & Financial Management

In: Business and Management

Submitted By Anwar1973
Words 1526
Pages 7
MBA
Master of Business Administration
International

Finance & Financial Management
ASSIGNMENT
2015– 2016
The questions in this assignment require some quantitative work and some interpretation. When answering the discussion questions you should try to make full use of the relevant theoretical propositions and concepts.

The assignment should be undertaken in groups of four or five. All members of the group should participate in the development of the answers to all the questions. If individuals are not able to work on a group basis they can submit their own assignment, answering three instead of the four questions, and the marks will be adjusted appropriately. Question 1: Capstaff Ltd: A Capital Expenditure Decision
Capstaff Ltd is a relatively small engineering company that manages to compete effectively with larger companies by adapting to changing market requirements and specialising in innovative products with limited markets. The products are sold to a wide range of companies, but most of its sales are to companies in the oil industry. On this basis it has maintained a high rate of return on capital employed in relation to the engineering sector as a whole. The latest product to be developed, a high pressure valve, has completed its testing stage and the company now has to decide on whether or not to invest in a production facility and a marketing programme.
The work already undertaken on the product has cost £1.3 million and it is anticipated that some further development work will cost a further £0.2 million. It is estimated that an investment of £9.00 million will be necessary in plant and machinery. This expenditure can be written off (capital allowances) for tax purposes on a straight-line basis over the product’s expected six year life. It is anticipated that the re-sale value of the equipment will be about £2.00 million at the

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