The aim of this case study is to help you to understand and apply financial analysis.
The assignment assesses all 4 module learning outcomes.
Having completed your Masters degree at Coventry University you now work in the Head Office of Trenton Brewery. Your boss Ms Trenton, the Chief Financial Officer and a member of the Trenton family, has asked you to review a new product investment proposal and its financing and to advise on the current value of the company.
Working individually or in pairs prepare a report for Ms Trenton
The report should be presented in 4 clearly defined sections to cover the following 4 specific tasks.
Estimate the “Weighted Average Cost of Capital” (WACC) for Trenton. (The process you adopt is more important than the final figure you arrive at so ensure you clearly explain the sources of your data, your assumptions and your calculations).Advise how the company might use this figure in its investment appraisal.
Appraise the new product proposal using any techniques you think are appropriate and make a clear recommendation as to whether the project should be accepted. Apply the company’s recommended discount rate of 12% in any discounted methods of appraisal.
Advise the board on the wisdom of financing the new product with a long term loan. In your answer you should make clear the advantages and disadvantages of using long term debt as a source of finance.
Advise the Trenton family whether to accept the cash offer for their shares.
WORD LIMIT: 3,000 words excluding calculations.