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Assignment Details:
- Topic : Managerial Finance
- Number of Words : 2500+ excel work
- Citation/Referencing Style : APA
CASE STUDY 1 – Pest Management and Environmental Sustainability
“Biopesticides Market – Growth, Trends, and Forecast (2020 – 2025)
“The Global Biopesticides Market is projected to register a CAGR of 14.7% during the forecast period. Due to the growing demand for food safety and quality, biopesticides are gaining increasing popularity, over their synthetic counterparts.
Africa is expected to witness the fastest growth in the forecast period. In addition, the United States is likely to be the largest individual market over the forecast period. While the prevalence of chemical or synthetic pesticides in crop protection is continuing, human, animal, and the environmental health concerns are playing key roles in driving the growth of biopesticides”
– ReportLinker , October 2020
CapPest Ltd is a privately held company that develops and manufactures conventional and synthetic pesticides for agricultural farming. Their mission is to enable farmers to extract high yields off scare agricultural land. The company currently manufactures a range of synthetic crop protection products such as insecticides, weedicides and fungicides for all crops types.
The market for agricultural biologicals – biopesticides and biofertilizers, is growing rapidly as global agriculture looks to move towards more sustainable ways to boost yields and new methods of crop protection. Greater knowledge among farmers of the hazards of chemical fertilizers is also accelerating B&B market growth. CapPest is evaluating a strategy of setting up research and production facilities for biopesticides.
A committee created to assess the project feasibility has collated the following forecasted investments, financing, cash flows and other relevant information.
a) Capital assets investment are estimated to be at $150 million. These include laboratory equipment and production facilities. This expenditure would have to be fully paid before commencement of production.
b) These assets are expected to have 8-years useful life, when biotechnology equipment and techniques are expected to go obsolete. At the end of useful life, these assets are estimated to be sold for $3 million. The company has always adopted a straight-line depreciation policy over assets useful life to zero.
c) First year sales is projected to be $50 million, with annual increase of 10% over the next 8 years. Selling price per unit is $50 per litre.
d) To begin production, CapPest would require an increase in current asset of $500 000 (such as supplies acquisition). Current liabilities will also be expected to increase by $200 000. This working capital will be released at the end of the project’s life.
e) Annual fixed operating expenses is projected as per
| Year | Fixed Operating Expenses
($’’000) |
| 1 to 3 | 2 500 |
| 4 to 6 | 3 500 |
| 7 to 8 | 5 000 |
Variable costs of production would be 30% of annual sales revenue.
f) The cost of capital for this project is forecasted at 12%.
g) Cap Pest pays a corporate tax rate of 20%. Capital gain on asset disposal is charged at corporate tax rate.
Case Study 2 – Budgeting Ahead
On 1 April 2021, CapPest is attempting to budget cash flows through 30 June 2021. On 31 May 2021, the principal of a secured bank loan, $10 million, will be payable. This bank loan was secured at 6% per annum. Cash Interest payment on this loan are settled monthly. An interim tax payable of $1.5 million is due on 30 June 2021.
The company only transact on credit sales. A discount of 5% is given to all customers who pay within one month. 50% of the accounts receivable will be received in the month of sale. 25% will be collected in the following month, and the remaining will be received in the month after next. There is a 5% provision for bad debt for accounts receivable in the month after the next.
Projected and Actual Sales are:
| Projected Sales ($) | Actual Sales ($) | ||
| January | 35 800 000 | January | 34 900 000 |
| February | 34 000 000 | February | 34 400 000 |
| March | 35 000 000 | March | 35 200 000 |
| April | 36 000 000 | April | – |
| May | 36 600 000 | May | – |
| June | 35 500 000 | June | – |
| July | 37 000 000 | July | – |
| For the Year ending
31 Dec |
500 000 000 | For Year to Date | 104 500 000 |
Purchases are made on basis of 60% the following month’s projected sales. 40% of the purchases are paid for in the month of purchase, and a 5% prompt settlement discount is received. The remainder is paid in full the following month.
Total budgeted fixed operating expenses for the year are $35 million Fixed costs are accrued evenly through the year. The operating variable costs is determined to be 20% of that month’s projected purchases, which accrued evenly with purchases. Both fixed and variable operating expenses are paid in the month incurred.
Opening cash balance as at 1 April 2021 is $4 million Requirements:
You will be required to write a management report in which the following points should be discussed.
- Analyse the Investment proposals by using NPV and IRR and provide recommendations. You should also briefly comment on other investment proposal techniques that CapPest may use, and the limitations of using these
- Provide an explanation on the different sources of funding available to the company, and their advantages and disadvantages and make recommendations as to how these funding sources are appropriate to the planned investment
- Analyse the level of breakeven required if CapPest proceeds with the
- Prepare a forecasted cash budget for April to June 2020.
- An evaluation of CapPest’s performance or position during the same
- A detailed Literature Review of the tools you have used such as capital investment techniques, breakeven analysis and budgets and their importance to the business.
- Other issues for management to consider that you think are vital for them to survive and make a Profit.
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