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Finance for Strategic Managers
Scenario
You are a senior financial consultant. You have been appointed by a CEO owns and manages several retail stores that sell a range of electronic goods. The CEO is a member of the local
Business Chamber of Commerce and has been asked to chair a committee to research and study the success of Samsung Electronics Co. Ltd. The Chamber believes that there may be some useful learning from this study which members of the Chamber could use. You have been asked to provide specialist
support to the committee, including producing a range of materials for members of the committee to use. You have been provided with the following link to view Samsung Electronics Co. Ltd annual reports and investor information.
https://www.samsung.com/global/ir/financial information/audited financial statements/
Task 1: You are asked to produce a report for The CEO to use at the next committee meeting. The presentation should be based on your research of Samsung Electronics Co Ltd and other relevant information It must be accompanied by supporting notes. (LO1, LO3) Your report must includethe following:
- An evaluation of the sourcesof financialdata which can be used to informbusiness strategy
- An assessment of the importance of financial data and information in the formulation of business strategy.
- An analysis of the risks related to financially based business
- A review of techniquesthat can be used to appraise strategic capital
Task 2: A meeting has been arranged with CEO and other members of the committee and you have been asked to produce a discussion part which provides: (LO2, LO3)
- An interpretation of the financialstatements of Samsung Electronics Ltd. to assess the current viability of the organization.
- A comparative analysis of financial data using ratio analysis for Samsung Electronics Ltd. You are advised to download consecutive year’s accounts from the Samsung Electronics Co. Ltd. Website.
- Make recommendations to Samsung Electronics Co Ltd based on your analysis and interpretationof the financial position.
Task 3: The CEO has been supplied with information from a component manufacturer who has asked for advice on the best project to accept for the purchase replacement of a piece of machinery.(LO2, LO3)
- The company is considering selling its old machine that has a capital cost of £260 000 and replacing it with an up-to-date model costing £220 For immediate purchase, the company will receive £120 000 part exchange allowance. Both the current and new machines can meet the expected company demand, estimated at:
- After three years, it is predicted that demand will be zero due to the technological developments in the industry.
Additional Information
- The selling price for each component is £5.00 and this will remain constant for the next three
- The company expect the cost of direct materials and direct labour to increase by 5% each
- The company predictsthat repair and maintenance costs for the current machine will be £7000 per annum.
- The current machine is expected to have a zero residual value at the end of year
- The company predicts that repair and maintenance costs for the new machine will be £1000 per annum.
- The new machine is expected to have a £75,000 residual value at the end of year. The company’s cost of capital is 15%
Extract from the present value table for £1 a t 15%
The CEO would like you to produce part of your report that can be given to the company offering advice on the best course of action for the purchase replacement machine. Evaluate the capital expenditure proposals using appropriate financial techniques.