Assignment Requirements
Important – instructions for submitting your work:
· You are required to submit your paper as a word document via Turnitin using the appropriate link on the MyCourse site for this unit. This link will allow multiple submissions of drafts through Turnitin to enable you to check your work. The submission of the final version of your paper should be made via the same link and by the date and time given on the front of this briefing.
· The Turnitin submission page for the assignment will include 2 links. The first should be used for on-time submissions. The second link should only be used for late submissions.
· You should also submit the excel file containing your spreadsheet. This should be submitted using the separate link on the mycourse site.
Other instructions
You should provide an exact word count (excluding references and bibliography) on the front page of your assignment and append a full bibliography at the end of your discussion. You should use the Harvard Referencing System for references in both the main body of your assignment and the bibliography.
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Assessment Task Assessment TaskAssessment TaskAssessment TaskAssessment Task Assessment TaskAssessment TaskAssessment Task Assessment TaskAssessment TaskAssessment Task
Note: there are two parts to this assignment. You are required to answer them both.
You are working in the management accounting department of Theme Parks International, a UK-based company which operates a number of family tourist attractions in locations across Europe. Your manager has asked you to write a paper which addresses issues relating to capital investment decisions.
a) The current approach used by the company is to estimate the net present value of proposed projects using a company-wide discount rate in order to make investment decisions. The manger initiating the project is required to present an investment proposal to the board which make the final decision on whether to provide the finance required. This proposal incorporates their estimates of the costs and benefits of the project and the results of the financial appraisal. However the directors of the company have recently raised the question of whether changes should be made to the decision-making process to make it more robust.
You are required to discuss the following in your paper:
A discussion of the key elements of the investment decision making process and a recommendation for an approach for the company that would ensure that sound decisions are taken. Your discussion should include:
· A critical appraisal of a range of alternative investment appraisal techniques, including a discussion of approaches to setting decision-making criteria.
· Other aspects of the financial appraisal, in particular ensuring the reliability of estimates of costs and benefits
· Additional elements of the decision making process including:
– The importance of sound decision making
– Financial and non-financial factors affecting decisions and how these should be taken into account
– Making decisions in an uncertain environment
– Any other issues which you believe the company should consider
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b) You have also been asked to review proposals for one specific project. Your manager feels that there are a number of areas of uncertainty affecting this project and this particular project should be examined more closely.
You are required to:
· Use a spreadsheet approach to carry out a financial appraisal for this project. Your spreadsheet should enable you or colleagues to investigate the impact on the appraisal of changes in any of the variables in the appraisal.
· Within your paper, present an analysis of the results of your financial appraisal in an appropriate format. This analysis should:
include an assessment of the impact of changes in key variables
demonstrate the practical application of recommendations made in part a).
· Provide a full commentary on your analysis, with reference to points made in part a). Your discussion of the analysis should indicate the decision you believe the company should make on this project, including a discussion of the assumptions you have made in carrying out your appraisal and the potential impact of changes to variables and how this affects your conclusion.
Further information on the project can be found on the next page.
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Information on project
Theme Parks International is a UK-based company which operates a number of family tourist attractions in locations across Europe. They are now considering opening a new park in the United States as part of a strategy to expand globally over the next 20 years.
The expected initial investment is £100 million. This includes £10 million for the purchase of land at the proposed location for the park.
Since this would be the first park the company has operated in the United States the currently intention is to sell the park to another operator after 5 years and transfer the learning from the operation of the first park into new attractions to be opened later in the expansion programme. The current estimate is that the park could be sold for £40 million.
Expected revenue and costs:
Revenues:
Ticket price (giving entry to all areas of the park)
£30 per visitor
Purchases of refreshments
£5 per visitor
Purchases in gift shop
£10 per visitor (based on 50% profit margin on all goods sold)
Variable operating costs (excluding cost of goods sold in shop):
Variable costs of operating attraction
£8.50 per visitor
Cost of refreshments
£1.50 per visitor
Fixed costs:
Maintenance
£500,000
Fixed staff costs
£100,000
Visitor numbers:
The marketing department has produced the following estimates of visitor numbers:
Number of visitors
Probability
1 million
25%
0.8 million
40%
0.6 million
35%
The company normally uses a cost of capital of 10%.
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Assessment Criteria Assessment CriteriaAssessment CriteriaAssessment CriteriaAssessment Criteria Assessment CriteriaAssessment CriteriaAssessment Criteria Assessment CriteriaAssessment CriteriaAssessment Criteria Assessment Criteria
(15%) Identification and discussion of an appropriate range of investment appraisal techniques and approaches to setting decision making criteria.
(10%) Discussion of the other aspects of the financial appraisal process.
(20%) A recommendation for a sound decision making process.
(10%) Construction of spreadsheet.
(25%) Commentary on spreadsheet analysis and presentation and discussion of results.
(10%) Effective communication and appropriate style of presentation.
(10%) Use and presentation of academic research to support arguments.
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