Finance Assignment: Capital Budgeting, CSR, and Ethical Analysis

This finance assignment addresses corporate social responsibility (CSR) and ethical codes of conduct, using Westpac as a case study to assess its performance and commitment to stakeholders. The assignment then delves into capital budgeting, calculating the capital outlay for a new plant, estimating sales, variable costs, and fixed costs over five years to determine profits and free cash flows. A net present value (NPV) analysis and internal rate of return (IRR) are computed to evaluate the investment's feasibility. The analysis concludes by comparing the project's NPV to an outright sale scenario and assessing the project's overall financial viability based on the calculated metrics and the importance of present value in decision-making. The assignment references relevant academic sources to support the analysis.

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Principle of finance

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PART 1
Corporate social responsibility
Corporate social responsibility is the responsibility is a type of private business self-regulation
that helps in examining the performance of the company apart from the financial aspect. The
corporate social responsibility of Westpac displays how that bank has taken a toll on the
performance for the year 2019. The report indicates that Westpac is able to create long term
value for people. The key insight suggests that, financial assistance has been issued to almost
52025 customers. Almost 36000 employees have been working and a $5 billion has been paid of
which 50% roles are taken up by women. If the perspective of shareholders is analyzed,
dividends of $6 billion have been provided. Cash return on equity has also been declared of
10.75%. Overall Westpac bank is commitment towards delivering high quality customer services
and the simplifying the product offerings (Westpac, 2019).
Ethical code of conduct
Ethical code of conduct is a framework which is required to be followed by companies to state
that the professional behavior of the company is equally important than just being financially
sound. The ethics in the money related framework is one of the most repeating points in era of
business. For a lot of authors and for the sake of public opinion, one of the key components that
started the emergency was the simultaneousness of unethical practices from the key players in
the system.
What separates the investigation of ethics in the money related segment is the manner by how
financial institutions is necessary for the development of free-showcase economy and which is
established on a relationship of trust that legitimizes the administrative force, the constant

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intensity and open intervention of the public when market fails. Thus it can be said that ethical
practices could save the company from being lost in vain (Hardy, 2016).
PART 2
Calculation of capital outlay Amount ($) Amount ($)
Cost of new plant $ 9,900,000.00
Shipping and installation costs $ 100,000.00
Add: Working capital $ 100,000.00 $ 10,100,000.00
Total Initial cash outlay $ 10,100,000.00
Estimated Sales
Years 1 2 3 4 5 Total
Selling price
per unit 280 280 280 280 180
Variable cost
per unit 140 140 140 140 140
No of units sold 70000 100000 140000 70000 60000
Sales
$
19,600,000
.00
$
28,000,00
0.00
$
39,200,00
0.00
$
19,600,00
0.00
$
10,800,00
0.00
$
117,200,0
00.00
variable costs
$
9,800,000.
00
$
14,000,00
0.00
$
19,600,00
0.00
$
9,800,000
.00
$
8,400,000
.00
$
61,600,00
0.00
Contribution
$
9,800,000.
00
$
14,000,00
0.00
$
19,600,00
0.00
$
9,800,000
.00
$
2,400,000
.00
$
55,600,00
0.00
less: Fixed costs
$
300,000.00
$
300,000.0
0
$
300,000.0
0
$
300,000.0
0
$
300,000.0
0
$
1,500,000.
00
Profits before
depreciaiton
$
9,500,000.
00
$
13,700,00
0.00
$
19,300,00
0.00
$
9,500,000
.00
$
2,100,000
.00
$
54,100,00
0.00
less:
Depreciation
$
1,980,000.
00
$
1,980,000
.00
$
1,980,000.
00
$
1,980,000
.00
$
1,980,000
.00
$
9,900,000.
00
Profits after
depreciation
$
7,520,000.
00
$
11,720,00
0.00
$
17,320,00
0.00
$
7,520,000
.00
$
120,000.0
0
$
44,200,00
0.00
Less taxation @
30%
$
2,256,000.
$
3,516,000
$
5,196,000.
$
2,256,000
$
36,000.00
$
13,260,00

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00 .00 00 .00 0.00
Profits after
taxation
$
5,264,000.
00
$
8,204,000
.00
$
12,124,00
0.00
$
5,264,000
.00
$
84,000.00
$
30,940,00
0.00
Additional
working capital
$
(1,960,000.
00)
$
(2,800,00
0.00)
$
(3,920,000
.00)
$
(1,960,00
0.00)
$
11,720,00
0.00
$
1,080,000.
00
Free cash flows $
5,284,000.
00
$
7,384,000
.00
$
10,184,00
0.00
$
5,284,000
.00
$
13,784,00
0.00
$
40,840,00
0.00
Net Present value Rate of Return
@15%
Net Present value
0 $ (10,100,000.00) 1.0000 $ (10,100,000.00)
1 $ 5,284,000.00 0.8696 $ 4,594,782.61
2 $ 7,384,000.00 0.7561 $ 5,583,364.84
3 $ 10,184,000.00 0.6575 $ 6,696,145.31
4 $ 5,284,000.00 0.5718 $ 3,021,144.15
5 $ 13,784,000.00 0.4972 $ 6,853,084.12
Net Present Value $ 16,648,521.03
IRR Annual Cash Flows
0 $ (10,100,000.00)
1 $ 5,284,000.00
2 $ 7,384,000.00
3 $ 10,184,000.00
4 $ 5,284,000.00
5 $ 13,784,000.00
IRR 64%
If the plant is outright sold for $2000000 cash than the project is not feasible, this is due to the
fact that the net present value of the proposal is $16648521 only and in comparison to the
outright sale it is lower. Though the internal rate of return is higher than the cost of capital, yet

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the cash money is higher in outright sale. If the project is accepted it is a disadvantage as the
present value matters the most and it is low if the company adopts the net present value
methodology (Zativita and Chumaidiyah, 2019).

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References
Westpac, (2019) Sustainability Report [Online] Available from
https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/ic/
Westpac_Group_2019_Sustainability_Performance_Report.pdf [Accessed on 9th April 2020].
Hardy, M.C., 2016. Drafting an effective ethical code of conduct for professional societies: A
practical guide. Administrative Sciences, 6(4), p.16.
Zativita, F.I. and Chumaidiyah, E., 2019, May. Feasibility analysis of Rumah Tempe Zanada
establishment in Bandung using net present value, internal rate of return, and payback period.
In IOP Conference Series: Materials Science and Engineering (Vol. 505, No. 1, p. 012007). IOP
Publishing.