Case study on Capital Budgeting

By Anup Singhania - CPA | CFA L2 | 5K+ students | A++
Bachelors/Undergraduate, Masters/Postgraduate
Homework, Assessment
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Paper plc is a public limited company, whose shares are quoted on the Alternative Investment Market in London and has been operation in the UK for the past 5 years. Paper plc provides intellectual property to financial services, HR consultants, Marketing companies, Tourist companies and investment property funds all over the UK. For the past 5 years, Paper plc has been a profit making firm as it has retained its previous clients, in addition to capturing an increasing share of the market. However, the Finance director of Paper has recently engaged your firm to help them source Finance for their expansion plans.

New Software

The current software product that Paper has been selling to companies is now deemed to be outdated and the company is looking to invest in a new product, and there are two proposals on offer. The details of these two proposals are outlined below.

Paper Super

Paper super is the first of the two proposals. The expected life of this product is 5 years and its working capital requirements and the cost

You will be required to write a management report to the management of Paper limited directors in which the following points should be discussed.

  • Provide an explanation on the different sources of funding the company can have and their advantages and disadvantages and make recommendations as to how the company can manage the same to help in the planned expansion program. 

  • Analyse the Investment proposals by using NPV and provide recommendations. You should also briefly comment on other investment proposal techniques that Paper may use, and the limitations of using those techniques 

  • The use of management tools such as Breakeven analysis and Budgets. 

  • A computation of your breakeven analysis and the cash budget for the first 3 months. 

  • An evaluation of the estimated company performance or position during the same period 

  • A detailed Literature Review of the tools you have used such as breakeven analysis and 
budgets and their importance to business. 

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