ASSIGNMENT

UNIT 13 Managing Financial Course BTEC EDEXCEL

Principles and Level 7
Techniques (MFPT)

Lecturer Surendra Sthapit VERIFIER M Shameem

Hand Out Date 8 APR 2011 Final Submission 4 MAY 2011

Name of Student TERM JUNE 2011

ASSIGNMENT GUIDELINES

1. This assignment is designed to help you achieve a good result in this unit.
2. During your assignment, you are required to answer each question of the outcome
assessment criteria (next page) which has been covered separately in respective lessons.
3. In your answer, write about the key processes and concepts highlighted by the lessons.
4. Study the required descriptors below to ensure that your work demonstrates compliance in
order for it to be considered for pass grade.

It is important that the work you produce is your original work, is carefully planned and written.
Your work should demonstrate your understanding of the theory you have learned
(underpinning knowledge) and your ability to apply it in contemporary situations/case studies
(applied knowledge). You will need to do some research to find answers to the theory part of the
question.

Please Note:

1. Cover sheet should be clearly marked with your name, student ID, title and date. All pages
should be numbered. Give a table of content.
2. Present your work in a structured format with clear sections and use graphs and tables
where appropriate.
3. Follow Harvard Referencing system. All work should be properly referenced and sources
acknowledged clearly, including books, journals, newspapers and websites.
4. The report should be typed 1.5 spaced, 12 point fonts
5. Plagiarism MUST be avoided.
 RESULT DESCRIPTORS

PASS DESCRIPTORS Learner’s Evidence Shows Tutor to Comments/Feedback

(FROM Outcomes check
Assessment Criteria)
1. Be able to use apply financial appraisal methods
financial appraisal to analyse competing investment
techniques to make projects in the public and private
strategic investment sector
decisions for an
organisation make a justified strategic investment
decision for an organisation using
relevant financial information

report on the appropriateness of a

strategic investment decision using
information from a post-audit appraisal

Any other comments

RESULT GIVEN BY Pass

TUTOR Date:
Refer
Tutor Signature
IV Result Check
Agree
Date
Disagree
IV signature
Student’s Response

Signature Date
 ASSIGNMENT BREIF

Imperial Electronics Ltd has recently developed a new mobile phone. The
product is now fully developed and the directors of the company are considering
which of the three options should be taken to exploit the potential of the new
product. They have to select one option only. The options are as follows:

1. Option 1: The company could manufacture the mobile phone itself. The
production process will require equipments costing £12 million
immediately. The predicted sales for the next 5 years are as follows:

2012 2013 2014 2015 2016

Number 400,000 700,000 900,000 600,000 300,000

of units

The profit from each unit is expected to be £10.00 each.

2. Option 2: Imperial Electronics Ltd could agree to another company

manufacturing and marketing the product under license. A multinational
company has offered to manufacture the product and, in return, will make
a royalty payment to Imperial Electronics Ltd of £5 per unit (sales figures
are same as above). If Imperial Electronics decided to give the license,
they will not have to spend any money for equipments now.

3. Option 3: Imperial Electronics could sell the patent rights to Nokia

Company for £12 million, payable in two equal installments. The first
installment would be payable immediately and the second installment
will be payable in the second year(in 2013). The option gives Nokia
company exclusive right to manufacture and market the new product.

4. The cost of capital (discount rate) is 10% for all situations.

The Director of the Imperial Electronics Ltd. has come to your agency for
consultancy and advice.

 Task 1: What are some of the financial appraisal techniques and methods
for determining the investment decisions? Explain the various methods.
 Task 2: Calculate the net present value for each of the options above
available to Imperial Electronics Ltd.
 Task 3: What do you consider to be the most suitable option out of the
three mentioned above and explain why?
 Task 4: What would be the Internal Rate of Return (IRR) if Imperial
Electronics manufactured the mobile phone itself (use the Higher rate as
40% and Lower Rate as 10%).
 Task 5: Identify and discuss any other factor which Imperial should
consider before arriving at a decision.