With Reference To Recently-Announced Plans To Raise Long-Term Funding By A Large: Finance For Business Assignment, MU, Ireland

Please attempt both Questions in full:

Q1) With reference to recently-announced plans to raise long-term funding by a large, internationally trading organization AIRBNB, write a report on the type and nature of the funding.

The report must address the following issues:

a)A discussion on the type of funding being sourced

b)The business requirement for the raising of funds

c)Discussion on the possible alternatives to that funding that could be available to the business

Q2) Savannah LaserCo. is considering the launch of a new product. The initial capital investment will be €5,550,000 in plant & machinery.

The selling price of the products produced by the machinery will be €300 per unit. This price is expected to increase by 4% per annum until the start of year 5, the final year that the product will be on sale.

Savannah Laser Co. has forecasted the following demand:

The company expects to earn a contribution of 50% and expects fixed costs to increase by €700,000 per annum.

Savannah Laser Co. pays Corporation tax at 25%. No capital allowances are available to the firm.

The plant and machinery is expected to be used for the full 5 years, and then sold for €740,000

The Cost of Capital of Savannah Laser Co. is 11% per annum

Required:

(a)   Calculate the Net Present Value of the Capital Investment

(b)   Calculate the Internal Rate of Return of the Capital Investment

(c)    Comment on the financial acceptability of the project