University : Kaplan Business School UniLearnO is not sponsored or endorsed by this college or university.
Subject Code : FIN203
Assignment Task :

Company Perspective – Blackmores Group

a) What is the Net Working Capital for Blackmores both in 2108 and 2019. What type of current  asset management strategy is the company pursuing? Explain why and what are the pros  and cons of this strategy.  

b) You are trying to value Blackmores share today (End of 2019). Assume the current price of  the share in the stock market is $88.16 and that you would like to hold the investment for 5  years. Assume that the total dividend paid by Blackmores in the 2019 year were paid as a  lump sum (at once) today. You also estimate that for the next two years dividends will grow  respectively at 30%, 25% per year. After this (starting in time 3) you estimate dividends will  grow at a constant rate of 6% forever. Assume that today the Australian treasury notes 2.5%,  the market risk premium is 8% and the beta of Blackmores is 1.16. Based on this price would  you purchase the share? Why or why not? 

c) What was the market capitalization of Blackmores, on the 16 January 2020, assuming that  the total number of share outstanding is the same as per the end of the 2019FY? (Use the  closing price on that day). 

d) Consider the Blackmores Group 2017 Annual Report. Based on the note to financial  statements about “Financing”, what type of source (non-current) is Blackmores primarily using to finance its long-term operations? Is Blackmores improving its financial position  between 2018 and 2019?

e) Assume that the Blackmores Group would like to replace its bank loan facilities (2019) with  a new issuing of bonds. Assume that the issue will have a coupon rate of 1.5% with a 10  year maturity. Assume this are semi-annual coupon bonds and each have a face value of  $1.000 and the required rates of return for similar bonds in the market is 2.5%.What would  be the issuing price of these bonds? How many bonds Blackmores will have to issue in order  to replace its bank facilities?

 

2. Capital Budgeting – Blackmores Group 

Answer the below questions in your word file and refer to your excel spreadsheet as a supporting  document. Upload your excel spreadsheet under “Excel Submissions”. 

All amounts are in $AUD. Blackmores is evaluating to invest into a new manufacturing facility in Asia. In order to mitigate the risk and assess the fit for purpose of this manufacturing plant  Blackmores asked “SGS Ltd.” to conduct a technical due diligence on the plant and advise on  the feasibility of this project. “SGS Ltd.” is asking $1 Million as a fixed fee for its consulting  services. The manufacturing plant has an initial outlay of dollars $500 million and will produce  150,000,000 tablets ready for sale starting at the end of year 1 until the end of year 5 and  250,000,000 tablets starting at the end of year 6 until the end of year 10. It will also incur working  capital expenses at the end of year 1 to 5 of $1 million (this working capital will not be  recovered). Assume that the average selling price of a single tablet is $1 over the ten years. 

The operating costs of the project will be 35% of the revenues from year 1-10. The investment  will be depreciated on a straight-line basis over ten years to 0 book value. Blackmores has  estimated that the manufacturing plants can be sold at the end of year 10 for $10 million. The  tax rate is 30%. All cash flows are annual and are received at the end of the year. The weighted  average cost of capital for Blackmores is 10%. 

a) Based on the above information calculate the FCFs of the project.

b) Calculate the NPV for the new manufacturing facility. 

c) Blackmores would like to recover the investment within 5 years. What is the Discounted  Payback Period for the project? 

d) What is the IRR for the project?  

e) Based on your analysis a) to d) should Blackmore undertake this project? Justify your  answer with reference to theory.

 

This Finance Assignment has been solved by our Finance Experts at UniLearnO. Our Assignment Writing Experts are efficient to provide a fresh solution to this question. We are serving more than 10000+ Students in Australia, UK & US by helping them to score HD in their academics. Our Experts are well trained to follow all marking rubrics & referencing style.

Be it a used or new solution, the quality of the work submitted by our assignment experts remains unhampered. You may continue to expect the same or even better quality with the used and new assignment solution files respectively. There’s one thing to be noticed that you could choose one between the two and acquire an HD either way. You could choose a new assignment solution file to get yourself an exclusive, plagiarism (with free Turnitin file), expert quality assignment or order an old solution file that was considered worthy of the highest distinction.

Eureka! You've stumped our genius minds (for now)! This exciting new question has our experts buzzing with curiosity. We can't wait to craft a fresh solution just for you!

  • Uploaded By : Grace
  • Posted on : January 22nd, 2018

Whatsapp Tap to ChatGet instant assistance