Question 1 jack tar, cfo of sheetbend & halyard, inc. opened the

Question 1

Jack Tar, CFO of Sheetbend & Halyard, Inc. opened the company confidential envelope. It contained the draft of a competitive bid for a contract to supply duffel canvas to the U.S. Navy. The cover memo from Sheetbend’s CEO asked Mr. Tar to review the bid before it was submitted.

The bid and its supporting documents had been prepared by Sheetbend’s sales staff. It called for Sheetbend to supply 100,000 yards of duffel canvas per year for 5 years. The proposed selling price was fixed at $30 per yard.

Mr. Tar was not usually involved in sales, but this bid was unusual in at least two respects. First, if accepted by the navy, it would commit Sheetbend to a fixed price, long-term contract. Second, producing the duffel canvas would require an investment of $1.5 million to purchase machinery and to refurbish Sheetbend’s plant in Pleasantboro, Maine. Mr. Tar set to work and by the end of the week had collected the following facts and assumptions:

The plant in Pleasantboro had been built in the early 1900s and is now idle. The plant was fully depreciated on Sheetbend’s books, except for the purchase cost of the land (in 1947) of $10,000.

Now that the land was valuable shorefront property, Mr. Tar thought the land and the idle plant could be sold, immediately or in the future, for $600,000.

Refurbishing the plant would cost $500,000. This investment would be depreciated for tax purposes on the 10-year MACRS schedule.

The new machinery would cost $1 million. This investment could be depreciated on the 5-year MACRS schedule.

The refurbished plant and new machinery would last for many years. However, the remaining market for duffel canvas was small, and it was not clear that additional orders could be obtained once the navy contract was finished. The machinery was custom built and could be used only for duffel canvas. Its second-hand value at the end of 5 years was probably zero.

Table below shows the sales staff ’s forecasts of income from the navy contract. Mr. Tar reviewed this forecast and decided that its assumptions were reasonable, except that the forecast used book, not tax, depreciation.

But the forecast income statement contained no mention of working capital. Mr. Tar thought that working capital would average about 10 percent of sales.

Armed with this information, Mr. Tar constructed a spreadsheet to calculate the NPV of the duffel canvas project, assuming that Sheetbend’s bid would be accepted by the navy.

 

He had just finished debugging the spreadsheet when another confidential envelope arrived from Sheetbend’s CEO. It contained a firm offer from a Maine real estate developer to purchase Sheetbend’s Pleasantboro land and plant for $1.5 million in cash.

 

Should Mr. Tar recommend submitting the bid to the navy at the proposed price of $30 per yard? The discount rate for this project is 12 percent.

 

[60 Marks]

 

See table attached for foracsted income statement for 5 years

 

 

 

Question 2:

 

Critically appraise how companies set their financing – both short-term and long-term policies, and explain the factors that a company should consider in setting its policies to raise capital for investment and in determining the level of debt equity balance to be maintained. The debt and equity financing strategy should be highlighted in detail.

 

Support your arguments by reference to TWO FTSE100 firms in the SAME INDUSTRY. Your comments should incorporate both theoretical and academic arguments and real world practices. You should research the subject beyond the basic facts, and must provide calculations, references and critical commentary to support the points. You should also provide a brief introduction on the key issues and a conclusion consistent to your discussion.

 

Note: You can visit the link below to select one industry of your choice from the available list of industries.

 

http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/indices/constituents-indices.html?index=MCX

 

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.

Read more

Free-revision policy

The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.

Read more

Privacy policy

The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.

Read more

Fair-cooperation guarantee

By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency