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Hi everyoe,
I have a question regarding Commercial Awareness and Business Acumen modue – with the SWOT analysis and choosing this entity from the scenario:
‘Imagine you are applying for a trainee manager role at your chosen organisation. You have been asked to prepare a 10-minute presentation on your knowledge of the company’s current situation to the interview panel.’
Have you actually include entity’s name? Or could that be for instance ‘chosen company x – swot analysis’
Thanks!
Please see the question below:
Pluto Co is considering the purchase of a new plant worth $350,000 which it is anticipating will create operational savings. Annual cash inflows of $96,250 are expected. Plant will have life of 5 years and scrap value of $52,500 at the end of its useful life.
Operating the new plant will require an additional investment in working capital of $17,500 throughout the life of the machine.
Pluto Co can either purchase the plant using a bank loan with an interest charge of 9% or lease it for a lease charge of $70,000 payable annually in advance.
The corporate tax rate is 30% payable one year in arrears and capital allowances are available on a 25% reducing balance basis.
Pluto Co uses an after-tax cost of capital of 10% to appraise investments and has a target before-tax ARR of 15% where ARR is calculated on average investment basis.
Required:
(a) Calculate both the ARR and NPV of the proposed purchase and determine whether or not the plant should be acquired.
(10 marks)
(b) Assuming it is beneficial to acquire the plant calculate whether it should be purchased or leased.
(6 marks)
(c)Discuss strengths and weaknesses of ARR as a project appraisal technique.
(4 marks)
(Total: 20 marks)
