Assignment (financial management)

Organic growth is growth attained through opening up new stores or shops in new areas and building the facilities from scratch, The organic growth also known as internal growth, it happens when a business increases its own output expand its own operation rather than relying on the external growth associated with takeover emerges. There are a lot of ways that firms can grow organically; they can increases their own production capacity by adding to the capital stock of machinery and factories and other types of equipment, also find a new market by emerging countries where the capital incomes are rising quite quickly such as India or south Africa. Crucially, the organic growth comes about Question 2 Whiteoak manufactures propellers for the shipbuilding industry. In 2010, the company began working on a new prototype of its tried-and tested propellers. The old model propellers required the use of parts that would wear out over time and require servicing. When the engineers in Whiteoak initiated the design of a new propellers in 2013, they explored a number of possible designs and spent over $150,000 in fabricating and testing a new design before perfecting the system that they are now are ready to place into production and begin marketing. To manufacture the new propellers, Whiteoak will have to spend $750,000 on new equipment plus$300,000 in advertising and promotion for the launch of the new product. This expenditure will take place during 2013. a) What is the relevant initial cost of the new propellers product investment? Total Initial Cost = Capital expenditure + Working capital - Disposal inflows (cash flows after tax) ITEM UNIT COST Capital expenditure $750,000 Working capital ( + ) $300,000 Disposal inflows ( - ) $ 0 Initial Cost $1,050,000 2- Whiteoak’s management expects to sell 1,500 of the new units per year for the next 15 years and these units will produce free cash flow for Whiteoak of $150,000 per year. Furthermore, the company’s management estimates that the equipment purchased initially will last for the full 15 years, at which time it will have no salvage value. If the company uses a 10 percent rateof return to evaluate its investments, what is the NPV of the new propellers investment? NPV = - I + + + + Whereby: CF = $150,000 r = 10% I = Initial Investment ($1,050,000) NVP= - 1,050,000 + + + + + + + + + + + + + + + NPV = -1,050,000 + 136,363.64 + 123,966.94 +112,697.22 + 102,452.02 + 93,138.20 + 84,671.09 + + 76,973.72 + 69,976.11 + 63,614.64 + 57,831.49 + 52,574.08 + 47,794.62 + 43,449.66 + 39,499.69 +35,908.81 NPV = -1,050,000 + 1,140,911.93NPV= 90,911.93 C- Just as Whiteoak’s management was about to launch the new investment, the company’s owner received a call from Yamane inquiring about the possible purchase of the product design patent. Yamane suggested that it would be interested in paying as much as $110,000 for the exclusive rights to the new technology. Whiteoak would have to sign over all its rights to the new design in return for the payment. How should this offer influence Whiteoak’s decision to initiate manufacturing the new windmill design? Generally, patents are inventors legal rights to stop others from using, manufacturing, selling, copying and importing their ideas without their consent and permission. In this scenario, it will be of a positive influence if Whiteoak should accept the offer. Selling patents to investors aid companies in the area of commercialization. Assuming Whiteoak is unable to sponsor the expenses of marketing its new invention, selling its patents will be a great way to market its new design through investors. In addition, selling patent rights to investors will serve as a significant source of revenue, thereby making it extremely valuable to Whiteoak. QUESTION 3 The definition of the ethics: Ethics is often defined as the philosophical study of morality insofar as the letter is concerned with how we should conduct ourselves or treat one another. Put very simply, ethics is the study of how we ought to act. There are many ways to approach this study, for example: Ethics that studies system of moral rightness and wrongness, frequently called “normative ethics” Applied ethics by examining some controversial actions and practices with references to these principles or norms. Meta-ethical approach when we pounder the very nature of ethics and its profound importance to the human condition. The Financial ethics is the expected standard of behavior for professionals in the field of finance; it can be conveniently divided into four parts: Finance theory. Financial markets. Financial services. Financial management. Finance ethics as an academic field is concerned with the moral issues that arise in each of these four areas and with the moral norms that apply to the activities that take place in them. Much of the activity of finance takes place in markets, in which currencies, commodities, and financial instruments, such as stock, bonds, futures, options, swaps, and derivatives are traded. The fundamental ethical requirement of financial markets is that they be? Fair? The most commonly adopted means for ensuring fairness in markets is government regulation, although a significant degree of industry- and firm-level self-regulation is also employed in finance. The participants in financial markets are most commonly individuals and institutional investors, such as banks, insurance companies, mutual funds, and pension funds. (1) The ethical issues in finance: Creative accounting: this is exploitation of loopholes in accounting figures in order to present misleading financial statements in a favourable way. Insider trading: this is dealing in, or trading on stock exchange, using a company’s private (not yet made public) information to your advantage. Hoarding: this is the purchasing and storage of a commodity with the intent of monopolizing it. Black market: this is the illegal trade and trafficking of scare and extremely valuable commodities; also known as shadow or underground economy Bribery and extortion: bribery is a specific offense, which concerns the practice of offering something, usually money. The financial scandal Toshiba is a Japanese multinational conglomerate headquartered in Tokyo, Japan. Its diversified products and services include information technology and communications equipment and systems, electronic components and materials, power systems, industrial and social infrastructure systems, consumer electronics, household appliances, medical equipment, office equipment, as well as lighting and logistics. (2) In 2008, a global financial crisis reduce the profitability of Toshiba, this led toshiba’s employees finding ways to overstate profits. They use techniques including booking future profits early, pushing back losses and charges and improperly valuing inventory, they originally were reported to have overstated profits from fiscal year 2008 to first of fiscal year 2014 by 151.8 billion yen, a later report mentions that profits may have been overstated by 2 billion dollars. There were three eras of fraud with three different CEOs from 2005 to 2009. Fraud started in 2008 this mean Atsutchi Nishida was the CEO, he also played a vital role after giving up being CEO, since he stated the company as an advisor. The next CEO, Norio sasaki pictured on the right and he was CEO from 2009 until 2013. He then became a vice chairman of the board of directors. the next CEO is Hisao Tanaka, pictured in the centre who is CEO between 2013-2015, that is mean that he was the CEO when Toshiba was caught being fraudulent by an independent investigation committee, where all the CEO were accused of pressuring managers to reach higher sales targets that were difficult to accomplish without fraud. On July 21st, 2015, Hisao Tanaka announced his resignation. All three place Toshiba in a very negative situation and view from the public. After the case floated, the shareholders effected, now they have a lack of trust in the company, so they have invested in this issue, not only affects investors in Toshiba but was in the entire Japanese system. At the time of the fraud, the stock prices decreased by 40% after the fraud became public knowledge. Toshiba was then removed from the index of the best Japanese companies and even worse, so Toshiba began to seal of its appearance. The shareholders sue the company for 2.45 million dollars in damages from the stocks decrease Shareholders were not only piece of the stockholder puzzle, employees as expected were negatively affected, where 34000 employees were let go to restructure their business. The company reduced its work force from 217000 to 183000 by March 2017. Some sections of the business and structural reform in December of 21015 it was reported by the AP that Toshiba would be cutting 7800 jobs specifically in the consumer electronics business. This number represents 30% of the consumer electronics business at Toshiba and 3% of the total organization. Multinational Corporation (MNC) is a business that has facilities and other assets in at least one country other than its home country. Such companies have offices and or factories in different countries and usually have a centralized head office where they coordinate global management. Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational corporate. Usually there are four categories of MNC 1- Multinational decentralized corporation with strong home country presence. 2- Global centralized corporation. 3- An international company. Transnational entreprise. References https://www.researchgate.net/publication/291758092_Ethics_in_Finance https://en.wikipedia.org/wiki/Toshiba