Description

INTM004CL

MANAGERIAL FINANCE (60%)

COURSEWORK 2 (Individual Work)

FFS Limited is a limited company, whose head office in based in South Africa. The company has been operation in the UK for the past 15 years. FFS provides financial services to a number of organisations which include SME’s, property developers and investment property funds in the UK and Africa. For the past 15 years, FFS 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 FFS has recently got in touch with your professional consulting firm has engaged your firm with the mandate to provide them with an explanation of the cash flow problem that FFS Limited had been facing. The company is also dependent on the parent based in South Africa for and when required.

In the past 2 weeks there has been a number of meetings in London and South Africa where it has been agreed that FFS Limited should do its best to raise capital in England or Europe so as not to depend so much on cash coming from the parent company all the time.

New Software

The current product that FFS Limited has to offer mostly to property developers and investment funds companies is outdated. 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.

All of the above estimates have been prepared in terms of present day costs and prices. Assume that cash flows arise at the end of each period. In addition, you need to take the costs of Senior Technology Managers, inflation and the rise in the revenue, overheads and working capital consideration, which are the same for the Capital Suite. The selling price per package of the Capital Platform is £5625. The discount will also be the same as with capital suite. New Company Acquisition FFS Limited is also considering to grow its operations across continental Europe, and at the moment there are two potential target companies that can help FFS in creating a presence in Europe, Madison Fund Holland and Ulendo Financial Services Spain. For the purpose of this analysis, assume that the required investment funds can be sourced from parent company or FFS can source these funds from other sources. It should be noted that FFS is only willing to acquire only one of the companies. The data for the past three years is given below:

Capital Suite is the first of two proposals, the expected life of this software will be 5 years and its working capital requirements, the cost of the new software, expected revenue, components cost and overheads are as follows;

All of the above estimates have been prepared in terms of present day costs and prices. Assume that the cash flow arise at the end of each period. In addition the following information has been given:

Capital Suite is the first of two proposals, the expected life of this software will be 5 years and its working capital requirements, the cost of the new software, expected revenue, components cost and overheads are as follows; All of the above estimates have been prepared in terms of present day costs and prices. Assume that the cash flow arise at the end of each period. In addition the following information has been given:

• Revenues, overheads and working capital are expected to rise by 5% per year from year 1.

• The cost of component AK and component NK are expected to rise in line with inflation of the 6% per year from year 1.

• Each package of software will be sold at £5500.

• The costs of Specialist Technology Managers (STM), who have come from South Africa have not been taken into consideration in the forecast and are as follows: