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Senior management at Dolapo Plc have identified that there is a strategic need for a replacement machine to be acquired in one of its production departments. They have to make a choice between two models of the machine they have in mind

 

 

Module

Business Decision Making

 
 

Code

BA4008QA

 
 

Coursework Number

2

 
 

Intake

Nov20

 
 

Available on WeLearn

   
 

Submission Date and Time

   

 

This second coursework should be submitted in a single Word Document.

Note: No Pdf, No excel

 

This Coursework contributes 30% to the overall marks for BA4008QA

Answer All questions

TASK ONE (70 marks)

Senior management at Dolapo Plc have identified that there is a strategic need for a replacement machine to be acquired in one of its production departments. They have to make a choice between two models of the machine they have in mind. Model 1 is called Dysn and model 2 is called Texla. They are unsure as to which of the two models they should buy. They have given you the following profiles of the two models.

Cash flow (£)

 

Period

Dysn: Model 1

Texla: Model 2

 

Year0

(£250,000)

(400000)

 

1

120,000

95000

 

2

90,000

125000

 

3

75,000

115000

 

4

80,000

125000

 

Scrap Value

10,000

90000

 

Cost of Capital

12%

 
 


QUESTION 1(a) :

They want you to appraise the two prospective projects using the following investment appraisal techniques [46 MARKS]

(i)              Payback (8marks)

(ii)               Accounting rate of Return (10 marks)

(iii)             Net Present Value (12 marks)

(iv)           Internal Rate of Return (16 marks)

 Note: Funds are only available for only one model.

QUESTION 1(b) :

Write a report (of around 500 words) to the senior management of the company explaining how each of the techniques works. Your report should include the advantages and disadvantages of each technique [16 MARKS]

QUESTION 1(c) :

Explain briefly (in around 200 words) which machine you would recommend to senior management of Dolapo Plc under each technique and state your reason why you would recommend that machine.[8 MARKS]

PLEASE NOTE ALL WORKINGS SHOULD BE SHOWN CLEARLY WITHIN YOUR REPORT.

TASK TWO (26 marks)

An analysis and evaluation of the performance, liquidity, and financial structure of Tesco plc over the three-year period 2017 – 2019.

QUESTION 2(a):

Explain the company’s (Tesco plc) performance and position using the accounting ratios shown below (see page 5) and any other information relevant to Tesco plc taken from the annual report and accounts for 2019 (see the link in page 6) and any other relevant source of evidence. [18 MARKS]

QUESTION 2(b):

Highlight any five (5) limitations in the use of accounting ratios that you found in your analysis and evaluation of the company over the three-year period.  This may include reference to the movements in the company’s share price particularly in 2019. [5 MARKS]

QUESTION 2(c):

Discuss other three (3) factors affecting Tesco in 2019 e.g. significant new items affecting the company’s performance, movements in share price, current retail and market conditions [3 MARKS]

A maximum of 4 MARKS will be awarded for a high-quality analysis, presentation and references.

Note: Harvard referencing format must be used

Information on TESCO Plc                                             

                                                         2019       2018        2017      

Performance ratios

 

Gross profit margin (% )                  6.48        5.83          5.19       

Return on total assets ( % )              3.41        2.89          0.32   

Return on capital employed ( % )    5.90        5.07          0.55        

 

Liquidity ratios

 

Current ratio ( : 1 )                          0.61          0.71        0.79         

Liquidity ratio ( : 1 )                       0.49          0.61         0.68        

 

Efficiency ratios

 

Inventory days (days)                  14.95       14.37       15.02

Trade receivable (days)                 3.42         2.96         3.20

Trade payable (days)                    32.84       34.39       32.08

 

Gearing ratio 

 

Gearing  ( % )                               161.26    233.35      454.44    

Source:  FAME Financial Database

SOURCES AND HYPERLINKS

Tesco plc Annual Report and Accounts 2019

https://www.tescoplc.com/media/476422/tesco_ara2019_full_report_web.pdf

Understanding Tesco plc

https://www.tescoplc.com/investors/understanding-tesco/

FAME financial database

http://student.londonmet.ac.uk/library/subject-guides-and-research-support/a-z-subject-guides-and-librarians/guildhall-school-of-business-and-law-/accounting-banking-economics--finance/key-subject-collection-databases/

BBC website:  2 March 2018   SFO seeks retrial of former Tesco bosses

http://www.bbc.co.uk/news/business-43253799

ASSESSMENT CRITERIA:

Task 1:

Total Marks for Task 1 = 70

Task 2 :

Total Marks for Task 2 = 26

18 MARKS for analysis and interpretation of accounting ratios for performance, liquidity and financial structure with some attempt to link this to business factors affecting Tesco over the three-year period

5 MARKS for brief comments highlighting any five (5) limitations in the use of accounting ratios for Tesco

3 MARKS for the discussion of other three (3) factors affecting Tesco in 2019 e.g. significant new items affecting the company’s performance, movements in share price, current retail and market conditions     

A maximum of 4 MARKS will be awarded for a high-quality analysis and presentation

Overall Marks (Task 1 & Task 2 and Presentation) = 100

Harvard referencing format must be used

Grading Criteria:

Marks

Grade

70-100

A

60-69

B

50-59

C

40-49

D

30-39

F1 (Condoned Pass)

0-29

Fail

 

 

 


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