NAME:
GOHAR AFSHAN
ID :
10841
COURSE:
FINANCIAL MANAGEMENT
ASSIGNMENT 01
1. Based on the broadcast market data—particularly advertising spends, how would
you estimate projected revenues for MBL? How do you find Samjad’s estimate of
`100mn as revenue in the first year?
The most well-known strategies that financial backers use to examine the
advantages and dangers related with long haul interests in the securities exchange
incorporate principal investigation, specialized examination, and quantitative
examination.
The evaluations volumes and reports created by Nielsen incorporate an abundance
of information about the geographic business sectors reviewed, the segment
qualities of the families and people studied, including:
The hour of day when individuals sit in front of the TV or pay attention to the radio.
The sorts of projects that draw in the biggest crowds. the time spent by various sorts
of individuals utilizing broadcast media. the gadget the individual was utilizing to
watch or tune in.
While it isn't required for each communicator to figure out how to decipher the
information in the appraisals volumes, see how this data is utilized.
Appraisals data decides the promoting rates charged by TV and radio broadcasts,
assists communicators with understanding something about the qualities of media
purchasers, and gives a preview of the sorts of media programming that are well
known or powerful among crowds.
The Internet has turned into a significant publicizing medium and Nielsen, alongside
various new organizations, give "evaluations" administrations for web and portable
promoting. These organizations track use of web and portable destinations
dependent on things like the quantity of special guests to a website on an hourly,
day by day, week by week or month to month premise, and they likewise can give
fundamental data regarding how clients move around at a specific web or versatile
webpage.
Numerous computerized destinations request that clients give extra data about
themselves, like segment data (pay, family profiles, ways of managing money), and
media experts can consolidate that information with the following of site visits to
furnish promoters with an incredible type of custom-made crowd estimation for this
medium.
2. Following Samjad’s approach to estimating initial investments, revenue and costs, construct a
statement of 6 years’ financial projections for MBL.
Answer: The development of realistic financial planning documents for a business is an important
process. The following pages provides you with tips, that if followed, will result in the completion of
financial forecasts worthy of presentation to lenders, investors, and others. The development of a
good financial plan takes a team effort which involves your internal accounting / bookkeeping team,
your external accountants, your management team, Alberta Agriculture and Forestry staff, and you
as the owner.
By reading through the content below you will receive a high- level understanding of the following:
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The purpose of good financial planning
The approach to arriving at realistic Start-up or Expansion Costs
The up-front homework and planning process in developing Key Assumptions for sales, cost of
production and general and administration expenses
The up-front homework and planning process required in developing Key Assumptions for cash flow
planning
An overview and an example of a Balance Sheet and Income Statement
The importance of accurate Cash Flow Planning
Overview of Key Financial Performance Ratios – purpose and formulas
Comments on suggestions for monitoring the financial plan developed
If you run a multimillion-dollar empire, it’s likely that your accounting staff is using enterprise-level
software that can quickly and easily produce financial projections. But if you’re a sole proprietor,
freelancer, or micro-business owner, you’re likely to use data from your accounting software in order to
prepare financial projections, but the software won’t help you in the preparation itself.
While that may sound confusing, it just means that most software applications such as QuickBooks
Online, Sage 50cloud Accounting, can create the financial statements needed for you to prepare your
financial projections, but the software itself will not be used in the actual creation of the projections.
At a glance: How you can create and utilize financial projections
Three financial statements a balance sheet, income statement, and cash-flow statement are required for
any financial projections you create.
New businesses need financial projections, too. If you’re still in the planning stages, be aware that you
will still need to prepare projections for your business plan.
You’ll likely be using a template to prepare your projections. While accounting software provides the
basis for your financial projections, smallest business accounting software applications aren’t capable of
producing financial projections.
3. Prepare the financial appraisal of the project based on the data available. Calculate the hurdle rate,
NPV, IRR and payback period, and comment on the feasibility of the project. What are the assumptions
made? Why?
In capital budgeting, there are a number of different approaches that can be used to evaluate a project.
Each approach has its own distinct advantages and disadvantages. Most managers and executives like
methods that look at a company's capital budgeting and performance expressed in percentages rather
than dollar figures. In these cases, they tend to prefer using IRR or the internal rate of return instead of
the NPV or net present value. But using IRR may not produce the most desirable results.
Here, we discuss the differences between the two and what makes one preferable over the other.
IRR stands for internal rate of return. When used, it estimates the profitability of potential investments
using a percentage value rather than a dollar amount. It is also referred to as the discounted flow rate of
return or the economic rate of return. It excludes outside factors such as capital costs and inflation.
Unlike the IRR, a company's NPV, or net present value, is expressed in a dollar figure. It is the difference
between a company's present value of cash inflows and its present value of cash outflows over a specific
period of time.
NPV estimates a company's future cash flows of the project. It then discounts them into present value
amounts using a discount rate representing the project's capital costs as well as its risk. The investment's
future positive cash flows are then reduced into a single present value figure.
Although using one discount rate simplifies matters, there are a number of situations that cause
problems for IRR. If an analyst is evaluating two projects, both of which share a common discount rate,
predictable cash flows, equal risk, and a shorter time horizon, IRR will probably work.
The project has cash flows of:
Year 1 = -$50,000 (initial capital outlay)
Year 2 = $115,000 return
Year 3 = -$66,000 in new marketing costs to revise the look of the project.
A single IRR can't be used in this case. Recall that IRR is the discount rate or the interest needed for the
project to break even given the initial investment. If market conditions change over the years, this
project can have multiple IRRs. In other words, long projects with fluctuating cash flows and additional
investments of capital may have multiple distinct IRR values.
Q4. What alternative scenarios can be constructed? Would the decision on project feasibility and
financing be changed after evaluating multiple scenarios? If you were to finance the project, what would
you do?
Answer: A feasibility study is an analysis that considers all of a project's relevant factors—including
economic, technical, legal, and scheduling considerations—to ascertain the likelihood of completing the
project successfully.
Whether a project is feasible or not can depend on several factors, including the project's cost and
return on investment, meaning whether the project generated enough revenue or sales from
consumers.
However, a feasibility study isn't only used for projects looking to measure and forecast financial gains.
In other words, feasible can mean something different, depending on the industry and the project's
goal. For example, a feasibility study could help determine whether a hospital can generate enough
donations and investment dollars to expand and build a new cancer center.
Although feasibility studies can help project managers determine the risk and return of pursuing a plan
of action, several steps and best practices should be considered before moving forward.
KEY TAKEAWAYS
A feasibility study assesses the practicality of a proposed plan or project.
A feasibility study considers many factors, including economic, technical, legal, and scheduling to
determine whether a project can succeed.
Whether a project is feasible or not can depend on the project's cost and return on investment, which
might include revenue from consumers.
A company may conduct a feasibility study to consider launching a new business or adopting a new
product line.
It's a good idea to have a contingency plan in case of unforeseeable circumstances or if the original
project is not feasible.
A feasibility study is an assessment of the practicality of a proposed plan or project. A feasibility study
analyzes the viability of a project to determine whether the project or venture is likely to succeed. The
study is also designed to identify potential issues and problems that could arise from pursuing the
project.
As part of the feasibility study, project managers must determine whether they have enough people,
financial resources, and the appropriate technology. The study must also determine the return on
investment, whether it's measured as a financial gain or a benefit to society, as in the case of a
nonprofit.
In some cases, a feasibility study might include a significant change in how a business operates, such as
an acquisition of a competitor. As a result, the feasibility study might include a cash flow analysis,
measuring the level of cash generated from revenue versus the project's operating costs. A risk
assessment must also be completed to determine whether the return is enough to offset the level of risk
of undergoing the venture.