PES6201 FINANCIAL ESSENTIALS FOR EDUCATION MANAGERS
Individual Assignment
September 2024
Company Background: EduTech Innovations Ltd., a private university in Malaysia, is considering a significant investment to enhance its educational offerings. The university's management is keen on integrating the latest teaching equipment to provide an advanced learning environment for its students. This investment involves the purchase of state-of-the-art interactive whiteboards, virtual reality (VR) headsets, and advanced simulation software for its engineering and medical faculties.
Capital Requirement and Financial Projections: The estimated capital requirement for this technological upgrade is approximately RM1,000,000. This amount is allocated to acquiring the latest teaching equipment (RM800,000) and covering the installation and training costs (RM200,000).
Projections suggest that the new equipment will contribute to an annual net cash inflow of approximately RM220,000 by attracting more students and enhancing the university's reputation. The equipment is expected to have a useful lifespan of 8 years, with a residual value of 10% of the original cost.
To finance this investment, the university's Chief Financial Officer (CFO) proposes a funding structure that combines equity and debt. Specifically, 60% of the capital is to be raised through equity at a cost of 15%, while the remaining 40% will be financed through debt at a cost of 7%. This balanced approach is aimed at minimizing the overall cost of capital while ensuring the successful implementation of the project.
Required:
1. Calculate the weighted average cost of capital (WACC) for EduTech Innovations
Ltd. (to the nearest whole percent). (10 marks)
2. Prepare a net present value (NPV) analysis for the proposed investment. (30 marks)
3. Identify and discuss any FOUR (4) additional factors, besides NPV analysis, that the university’s management should consider when making this investment decision. (30 marks)
4. Based on the NPV analysis in (2) and the factors discussed in (3), what recommendation would you provide regarding the investment? (30 marks)
General Guideline
Expectations
This is an individual assignment which expects you to work independently by seeking out, extracting and analyzing relevant information from various sources. You will be expected to write and present a well-structured, cohesive and clear report using appropriate writing style. and language based on the guideline given on the report content.
Presentation of Assignment
· The report format is formal. You should prepare a clear, well-structured report complying with the assignment requirements with proper English writing style. and language.
· The pages of the report should be numbered sequentially (e.g., 1, 2, 3 or page 1 of 12, page 2 of 12, page 3 of 12, etc.).
· The assignment must be typed using Microsoft Word using font size 12 with 1.5-line spacing. The assignment should be saved as a PDF document and to be submitted via canvas link provided.
· A list of references should be attached to the end of the report.
· Turnitin report should be attached with the assignment. ( Submission for Turnitin should be done only for Q3 & Q4)
· The Similarity Index should not exceed 20%.
· Q3 answers should not exceed 2 pages
· Q4 answers should be within 1 page