The questions require you to write a report, so present your answer in a report format. A report format has an introduction and a conclusion, ‘sandwiching’ the report’s main body. The report’s main body should have headings as this will help guide the markers through the discussion points that you make.This TMA requires you to take a ‘case study’ approach. This involves analysing the case study situation and identifying relevant course ideas and concepts that help explain the problem and the management accounting issues that arise.
Question 1
a) Analyse the current forms of finance available to the Fusion Group.
The main source is Unit 3, Sessions 1-3. I have attached Unit 3 (titled Unit 3 Book), there you can find all the sessions referred to for this Question.
Question 1 (a) requires you to analyse the current forms of finance available to the Fusion Group. You should approach this question by discussing the advantage and disadvantage of different financing options available for this type of business; short and long-term sources. You may want to comment that Fusion is currently undergoing a fundraising round to finance acquisitions/redevelopments in the property business segment. There is no need to consider appendices 8, 10 and 11 in analysing the projects’ finance requirements
b) Recommend improvements in how the Group finances its business operation.
In this question, you are required to provide recommendations on how the Group can improve the financing of its business operations. Your recommendations could be based on the analysis you provide in the
question (a).
c) Evaluate the three debt finance proposals outlined in Appendix Five and recommend which should be chosen.
Use Appendix 5 and Appendices 1 and 2 of the case study. Terminology is explained in Appendix 12 of the case study. The main source is Unit 3 Session 1, pages 14-16, Session 3, pages 35, 42-43, 50.,
This question is asking you to evaluate the debt finance proposals. Specifically, you should assess:
– how will the security interact or impact the existing debt finance within the company and the Group?
– current overall gearing
– loan to value (LTV) ratio
– revaluation of properties
– business operation.
– interest cover analysis
– interest rate risk
Based on your analysis, you should provide a recommendation, advising the Group which proposal would be the best fit.Show any and all working out.Question 2
a) Evaluate the proposal to move the manufacturing facility from China to Mexico (Appendix 6), using NPV analysis.
The main source is Unit 4, Session 1, 2 (NPV, Project Risk), Session 9 (Project Risk).
Unit 4 (titled Unit 4 Book), there you can find all the sessions referred to for this Question.You may find the following video useful.
The video may help you with developing an appropriate Excel spreadsheet for your answer: https://learn2.open.ac.uk/mod/oucontent/view.php?id=1648731This question is specifically asking you to evaluate the proposal to move the manufacturing facility from China to Mexico (Appendix 6), using NPV analysis. Make sure you explain the assumptions you make in computing your investment appraisal. You are also required to discuss the non-financial considerations that need to be factored into the decision-making process.
b) Discuss the foreign exchange risk associated with the project.The main source is Unit 3 Session 6
The Group is engaged in overseas trade as well as having subsidiaries based overseas. This question requires you to evaluate foreign exchange risk in detail and how it directly impacts the Group (see Appendix 9 for example, but you do not need to include any calculations as part of your answer). Furthermore, Part (b) of the question requires students to provide detailed analyses of the options that can be used to manage currency risk. You are expected to apply the relevant points covered in
Unit 3,
Session 6 and logically apply them to the case study.
c) Evaluate the decision to use the overall Group cost of capital for the NPV analysis.The main source material is Unit 3, Session 2/3 and Unit 4
Part (c) requires you to discuss and compare the Group’s cost of capital and a standard cost of capital for large projects. You may wish to discuss the implications of using the same cost of capital for projects with different risk.Note that questions require to evaluate and make recommendations. Both of these activities involve taking a critical stance when considering alternative recommendations and carrying out the evaluation. Being critical involves thinking about both the strengths/ advantages and weaknesses/ disadvantages of your own ideas and the ideas presented in the case study. So, make sure you critically evaluate and logically reflect on issues highlighted in the case study.Think of the material in your Units as ‘best practice’; you can use the relevant Unit’s concepts and ideas as evidence in your case study analysis to support your recommendations and evaluation.