DAL Plc. Potential Investment Opportunities

CASE STUDY ASSESSMENT FOR COMPLETION ONLINE
Session:

2022/23

Faculty:

School of Accounting, Finance & Economics

Programme/Course:




Level:

2

Module Title and Code:

Corporate Finance


ACFI2393

Date:

12th -13th January 2023

Duration:

24 Hours

The case study assessment window is from Thursday 12th January at 12:00noon- Friday 13th January 12:00noon UK time.
For the duration of the case study assessment see ‘duration’.
You are reminded that your answers must be completed and submitted by Friday 13th January 12:00 noon UK time.
Statement of Own Work
By submitting your answers, you are confirming that your effort is an individual effort, entirely your own work and that you have not engaged in bad academic practice and/or an academic offence.   All students should note that it is your responsibility to upload your answer sheet through the Turnitin portal within the duration. Students who fail to submit through Turnitin, or within the assessment duration, will be awarded 0% for this assessment.
Student Guidance on Taking Remote assessments
Students are reminded that guidance on taking online assessments is available on the Examinations web page.
If you find what you perceive to be an error in any of the questions please state your assumptions and continue with your answer.
-63561595
There are four (4) questions in this assessment. Each question carries 25 marks. You must answer ALL questions.
Where a word count is listed against any discursive question part, please note that this is for guidance only and no penalty will be given for exceeding it.
DAL Plc. is a machining company. Due to the impact the Covid-19 outbreak has had on raw material supplies and prices, DAL Plc. has had to adopt a more conservative investment strategy. Recently DAL Plc. has discussed 8 potential investment opportunities which would help the business expand and mitigate some of the issues being caused by the cost of living crisis. For this financial year DAL Plc. has £1,510,000 for investment purposes. Below are the 8 investments being considered. The projects are divisible and all cashflows are in annuity.
Project

Cost (in £)

Project duration (in years)

Annual cash inflow (in £)

1

1,500,000

18

222,500

2

350,000

7

175,000

3

165,000

7

41,000

4

245,400

12

62,000

5

752,100

11

146,600

6

192,500

9

55,500

7

613,000

15

101,250

8

783,000

4

263,000

[The estimated cost of capital is 14%]
DAL Plc. is now implementing a capital rationing strategy. You as the Financial Manager have been asked to advice the company on which of the 8 projects should be invested in.
Required
1 Calculate the Net Present Value (NPV) for each project
* State the NPV decision for each of the 8 projects (independently of the budget)
In order to calculate the Net Present Value (NPV) for ea...