Financial Management Research Papers Analysis

This assignment requires you to critically analyze a provided set of research papers spanning various aspects of financial management. The papers cover topics such as business process management in SMEs, valuation methods, managing financial well-being in the context of Alzheimer's disease, real estate finance, sustainability in business practices, and more. You'll need to summarize each paper's key findings and arguments, identify common themes and trends across the papers, and potentially draw connections between different areas of financial management.

PROJECT INVESTMENT
ANALYSIS

TABLE OF CONTENTS
PART A......................................................................................................................................1
Calculate total cost of the development..................................................................................1
Preparing development plan...................................................................................................1
Prepare a cash flow schedule..................................................................................................2
Estimate the net income on completion of project.................................................................3
Calculate the following:.........................................................................................................4
Total development cost...........................................................................................................4
Project finance cost.................................................................................................................5
Cost escalation........................................................................................................................5
Calculate the initial project development yield on completion of the project........................6
PART B......................................................................................................................................6
Calculate the purchase price of purchasing facility................................................................6
Calculate developer’s profit or loss........................................................................................7
Generate an Annual net cash flow for John Wiley Pty Ltd for 10 years................................8
Determine NPV using 9% discounting rate with base year 2020..........................................8
Calculate Net present value of sale........................................................................................9
Calculate Profit and IRR........................................................................................................9
PART C....................................................................................................................................10
Compare option 1 and 2 and suggest the best suitable option..............................................10
PART D....................................................................................................................................11
Analyze the impact of changing the debt to equity ratio to 80:20 and 50:50.......................11
PART E....................................................................................................................................12
List all risks that influences the development proposal........................................................12
Identify three key risk areas.................................................................................................12
Carry out sensitivity and risk analysis on the above mention three areas............................13
PART F....................................................................................................................................13
List all assumptions at the front of report.............................................................................13
PART G....................................................................................................................................14
Executive summary..............................................................................................................14
Recommendations................................................................................................................14
Methodology.........................................................................................................................15

Letter to managing director..................................................................................................15
REFERENCES.........................................................................................................................17

PART A
Calculate total cost of the development
Proposal 1
Particulars Amount(In million)
Land acquisition costs 70
Demolition Estimate 0.8
Planning and Design cost 3.5
Landscaping and external work 0.5
Cost of design and construction 350
Cost of development 0.5
Total 425.3
Proposal 2
Particulars Amount(In million)
Land acquisition costs 70
Demolition Estimate 0.8
Planning and Design cost 4.5
Landscaping and external work 0.5
Cost of design and construction 375
Cost of development 0.5
Total 451.3
Preparing development plan
Activities Time duration
Market research 1 month
Data collection 2 month
Planning and design 6 months
Demolition 3 months
Construction 20 months
Landscaping and external work 6 month
1

Market research
Data collection
Planning and design
Demolition
Construction
Landscaping and external work
0
200
400
600
Development plan
Time duration
Prepare a cash flow schedule
Proposal 2
Particulars Amount
Cash inflow
Sales
Office lettable 27.5
Retail lettable 2.5
Flat 4.56
Total sales 34.56
Amount recoverable
Office lettable 0.25
Retail lettable 0.025
Total recoverable amount 0.275
Total cash inflow 34.84
Cash outflow
Agent commission 0.50985
Overhead costs 10.659
Contingency costs 17.765
Office lettable 8
Retail lettable 0.8
Total outgoings 8.8
Total cash outflow 37.73
Net cash flow -2.90
Proposal 1
Particulars Amount
Cash inflow
Sales
2

Office lettable 41.25
Retail lettable 2.5
Total sales 43.75
Amount recoverable
Office lettable 0.375
Retail lettable 0.025
Total recoverable amount 0.4
Total cash inflow 44.15
Cash outflow
Agent commission 0.811125
Overhead costs 11.439
Contingency costs 19.065
Office lettable 8
Retail lettable 0.8
Total outgoings 8.8
Total cash outflow 40.12
Net cash flow 4.03
Estimate the net income on completion of project
Proposal 2
Particulars Amount
Sales
Office lettable 27.5
Retail lettable 2.5
Flat 4.56
Total sales 34.56
Amount recoverable
Office lettable 0.25
Retail lettable 0.025
Total recoverable amount 0.275
Total income 34.84
Expenses
Office lettable 8
Retail lettable 0.8
Total outgoings 8.8
Agent commission 0.640742
Payment
40% of payment 28.84
60% of payment 44.52
Total payment 73.36
Total expenses 82.80074
Net loss -47.97
3

Proposal 1
Particulars Amount
Sales
Office lettable 41.25
Retail lettable 2.5
Total sales 43.75
Amount recoverable
Office lettable 0.375
Retail lettable 0.025
Total recoverable amount 0.4
Total income 44.15
Expenses
Office lettable 12
Retail lettable 0.8
Total outgoings 12.8
Agent commission 0.811125
Payment
40% of payment 28.84
60% of payment 44.52
Total payment 73.36
Total expenses 86.97113
Net loss -42.82
Calculate the following:
Total development cost
Proposal1
Particulars Amount(In million)
Land acquisition costs 70
Demolition Estimate 0.8
Planning and Design cost 3.5
Landscaping and external work 0.5
Cost of design and construction 350
Cost of development 0.5
Total 425.3
Proposal 2
Particulars Amount(In million)
Land acquisition costs 70
Demolition Estimate 0.8
Planning and Design cost 4.5
Landscaping and external work 0.5
Cost of design and construction 375
Cost of development 0.5
4

Total 451.3
Project finance cost
Proposal 1
Particulars 1 2 3
Demolition estimate 0.8 0.8 0.8
Planning and design 3.5 3.5 3.5
Landscaping and external work 0.5 0.5 0.5
Cost of design and construction 350 350 350
Development costs 0.5 0.5 0.5
Leasing and sales costs 4.375 0 0
Interest 42.636 42.636 42.636
Overhead costs 10.659 10.659 10.659
Contingency costs 17.765 17.765 17.765
Total cash outflow 430.735 426.36 426.36
Particulars 1 2 3
Demolition estimate 0.8 0.8 0.8
Planning and design 4.5 4.5 4.5
Landscaping and external work 0.5 0.5 0.5
Cost of design and construction 375 375 375
Development costs 0.5 0.5 0.5
Leasing and sales costs 5.5685 0 0
Interest 45.756 45.756 45.756
Overhead costs 11.439 11.439 11.439
Contingency costs 19.065 19.065 19.065
Total cash outflow 463.1285 457.56 457.56
Cost escalation
Proposal 2
Particulars Amount
Office 1.1
Retail 0.1
Flat 0.1824
Total 1.3824
Particulars Amount
Office 1.65
Retail 0.1
5

Total 1.75
Calculate the initial project development yield on completion of the project
Proposal 1
Particulars Amount
Rental income
Office 41.25
Retail 2.5
Total rental income 43.75
Ongoing costs
Office 12
Retail 0.8
Total ongoing costs 12.8
Initial development 30.95
Initial development yield 0.3095
Proposal 2
Particulars Amount
Rental income
Office 27.5
Retail 2.5
Flat 4.56
Total rental income 34.56
Ongoing costs
Office 8
Retail 0.8
Total ongoing costs 8.8
Initial development 25.76
Initial development yield 0.2576
PART B
Calculate the purchase price of purchasing facility
Proposal 1
Particulars Amount
Land acquisition costs 70
Demolition Estimate 0.8
Planning and Design cost 3.5
Landscaping and external work 0.5
Cost of design and construction 350
Cost of development 0.5
Total costs 425.3
6

Yield at5% 21.265
Purchase price 446.565
Proposal 2
Particulars Amount
Land acquisition costs 70
Demolition Estimate 0.8
Planning and Design cost 4.5
Landscaping and external work 0.5
Cost of design and construction 375
Cost of development 0.5
Total 451.3
Yield at 5% 22.565
Purchase price 473.865
Calculate developer’s profit or loss
Proposal 1
Particulars Amount
Rental income
Office 41.25
Retail 2.5
Total rental income 43.75
Developer's cost
Overhead's cost 10.659
Contingency costs 17.765
Total developer's cost 28.424
Profit/loss 15.326
Proposal 2
Particulars Amoun
t
Rental income
Office 27.5
Retail 2.5
Flat 4.56
Total rent 34.56
Developer's cost
7

Overhead's cost 11.439
Contingency costs 19.065
Total developer's
cost
30.504
Profit/loss 4.056
Generate an Annual net cash flow for John Wiley Pty Ltd for 10 years
Net Annual cash
flow
Particu
lars 1 2 3 4 5 6 7 8 9 10
Cash
flow
426.
36
447.
678
470.0
619
493.5
65
518.2
432
544.1
554
571.3
632
599.9
313
629.9
279
661.4
243
Particu
lars 1 2 3 4 5 6 7 8 9 10
Cash
flow
457.
56
480.
438
504.4
599
529.6
829
556.1
67
583.9
754
613.1
742
643.8
329
676.0
245
709.8
257
Determine NPV using 9% discounting rate with base year 2020
Proposal 1
Year Cash flow Pv@9% Present value
0 446.565
1 426.36 0.917431 391.156
2 447.678 0.84168 376.8016
3 470.0619 0.772183 362.974
4 493.565 0.708425 349.6539
5 518.2432 0.649931 336.8226
6 544.1554 0.596267 324.4621
7 571.3632 0.547034 312.5552
8 599.9313 0.501866 301.0853
9 629.9279 0.460428 290.0363
10 661.4243 0.422411 279.3928
Total 3324.94
NPV 2878.375
Proposal 2
Year Cash flow Pv@9% Present value
0 473.865
8

1 457.56 0.917431 419.7798
2 480.438 0.84168 404.3751
3 504.4599 0.772183 389.5356
4 529.6829 0.708425 375.2407
5 556.167 0.649931 361.4704
6 583.9754 0.596267 348.2054
7 613.1742 0.547034 335.4273
8 643.8329 0.501866 323.118
9 676.0245 0.460428 311.2605
10 709.8257 0.422411 299.8381
Total 3568.251
NPV 3094.386
Calculate Net present value of sale
Particulars Amount Pv@9%
Present value of
sale
Initial value of sale 883.92 883.92
cash flow of 10th year 900 0.422411 380.1697
NPV -503.75
Calculate Profit and IRR
Proposal 1
Year Average profit
0 446.565
1 426.36
2 447.678
3 470.0619
4 493.565
5 518.2432
6 544.1554
7 571.3632
8 599.9313
9 629.9279
10 661.4243
Total 5362.71
Average 536.271
ARR 120%
Proposal 2
Year Average profit
0 473.865
1 457.56
9

2 480.438
3 504.4599
4 529.6829
5 556.167
6 583.9754
7 613.1742
8 643.8329
9 676.0245
10 709.8257
Total 5755.141
Average 575.5141
ARR 121%
Proposal 1
Year Cash flow
0 -456.565
1 426.36
2 447.678
3 470.0619
4 493.565
5 518.2432
6 544.1554
7 571.3632
8 599.9313
9 629.9279
10 661.4243
IRR 98%
Proposal 2
Year Cash flow
0 -473.865
1 457.56
2 480.438
3 504.4599
4 529.6829
5 556.167
6 583.9754
7 613.1742
8 643.8329
9 676.0245
10 709.8257
IRR 101%
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PART C
Compare option 1 and 2 and suggest the best suitable option
The financial performance of both the projects such as investment option 1 and 2 has
evaluated by using investment appraisal tools and techniques. Net present value method has
used to test the feasibility of different options. Net present value method tests the economic
performance of an enterprise by determining the profit generated from the different
investments in the future within a short span of time (Covrig, McConaughy and Travers,
2016). The most suitable method used by an individual in measuring the future profitability
of different investments opportunities. Two of the investment options are tested on different
parameters such as net present value method, average rate of return and internal rate of
return. Average rate of return is used to measure the efficiency of the investment opportunity
that tests the efficiency of the firm by determining the profitability of the business concern.
Internal rate of return is the similar concept just like break even concept in which this rate
will test the performance of an entity (Tsai, 2016). An investment opportunity that surpasses
this rate will generates higher sales and the revenue for an individual. The results of the
different economic appraisal techniques, IRR, NPV and ARR are higher in proposal 2 as
compared to the other investment option no. 1. Higher test results of the macro-economic
tools are higher in option 2 that positively influences an individual (Roy, Rudra and Prasad,
2017). It can be suggested from the evaluation of all the investment options is proposal 2 that
generates higher sales and the revenue for the business enterprise.
PART D
Analyze the impact of changing the debt to equity ratio to 80:20 and 50:50
Debt and equity are two important components in an entity that helps in backing up
financial support of the business entity. A capital structure has created by including booth
debt and equity that makes the best suitable capital structure in improving the financial
performance of an entity that helps in getting the desired market objectives within a short
span of time (Gotze, Northcott and Schuster, 2016). Frequent changes in the debt to equity
ratio will create negative changes for the business that increases the burden of costs due
higher debt. 80: 20 ratio states that 80% debt in an entity with 20% equity that is not the
suitable option of the investment. This option increases interest costs as even in profit or loss
situations, an entity need to pay the interest costs to all the debentures holders, less portion of
equity is not enough to compensate the total amount of debt held by the enterprise owner.
Higher amount of debt decreases the strength of the business in meeting all the costs incurred
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by the business concern (Parker and Swanson, 2016). On the another hand, 50:50 debt to
equity ratio, is neutral decision in which there is stable position of the business in front of
booth internal as well as external stakeholders of the business concern that will not generate
enough revenue for the business.
PART E
List all risks that influences the development proposal
Risks is treated as one of the important aspects that needs to be consider by an entity
before selecting the most suitable project that enhances the overall productivity of the
business concern (Fletcher, 2016). Risks are to be identified by the firm at initial stage to
chive the desired market aim and targets within a short span of time. While selecting the
suitable investments proposals whose efficiency is to be tested by using macroeconomic tools
such as NPV and IRR method that tests the feasibility of the project (Nuswandari, 2016). A
particular is selected by the firm that generates higher and positive output in lesser time.
Three parameters is consider by the firm is time, quality and costs that increases the
productivity of the business concern in the future (Hira, 2016). Completing all the tasks in a
lesser time will helps an entity in taking sustainable competitive advantage over all the
competitors of the business concern. There are various risks incurred by City High-rise
complex while analyzing two of the development projects are mention below:
 Permission of the local an authority of Melbourne as the rules framed by the authority
will may increase the rates of land (Robke and et. al., 2016). Without the approval of
the authority the firm is not able to purchase the land as these acts as legal evidence in
case of any default committed by both the parties in a particular legal contract.
 Higher price of land is due to changes takes places in the legal fees and commission.
Legal fees involves legal agreements is required before purchasing a land as legal
contract will bind both the parties to contract. City high-rise faces the problem of
increasing the cost of land due to the external market changes takes places in the legal
rules of the Melbourne court due to real estate authority (Evans and Porter, 2010).
 Owner of the land charges higher commission from the business as their aim is to
generate higher profit by selling the land on the cost plus profit pricing. Contract rate
may get increases as this contract is inclusive of all the legal fees as well as
commission charged by the owner from the city High-rise complex.
12

Identify three key risk areas
There are various risks covered in the evaluation of all the development proposals is
mention below:
 Higher costs is one of the biggest issue faced by the City High-rise complex as higher
costs incurred by the firm may get indifferent while selecting an appropriate
investment plan (Ehrhardt and Brigham, 2016).
 Higher inflation rate is another problem that increases the sales price of the land
which is beneficial for the owner of a land and not beneficial for the enterprise owner
of City High-rise complex as they need to spent more amounts in selecting the best
suitable opportunity (Epstein and Buhovac, 2014). In development proposal, the
inflation rate is higher as there are two rates that affect the amount spent in the project
are 3% and 6%.
 Higher costs spent in a development proposal as according to the total area of the land
purchased by the firm.
Carry out sensitivity and risk analysis on the above mention three areas
After evaluating the risky factors covered in the two different investment
opportunities of the business concern. Risk analysis will be performed by the firm that helps
in safeguarding the position of an entity as compared to its competitors located in the external
business environment (Chong, 2014). Different risk parameters used by an entity by market
research through which an entity can generate enough information regarding the financial
performance of an enterprise. Through market research, an entity will get enough information
about different changes takes places in the external business environment.
PART F
List all assumptions at the front of report
There are various assumptions used in the current assignment are mention below:
 Fluctuating capital structure by changing the composition of a particular capital
structure such as debt and equity.
 Stable inflation rate
 Inherent risks occurred in each and every investment option out of the two investment
option such as proposal 1 and 2.
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PART G
Executive summary
Current assignment is all about evaluating the performance of an entity by considering
the financial aspects of an entity in selecting the best suitable investment opportunity out of
the two proposals (Davies and Drexler, 2010). City High-rise complex is an investment
company whose daily business activity is to make investments in different opportunities that
generates higher sales and the revenue in the future in strengthening the performance of the
business concern. Two proposal has evaluated in the current assignment is related to the
office development and another proposal is regarding apartment complex development (Dalt
and Coughlin, 2016). Different tools and technique is used to evaluate the monetary
performance of an enterprise by using economic appraisal techniques. NPV and Internal rate
of return helps in selecting the best suitable option of the two investment proposals that
generates higher revenue for the business enterprise. The current report also emphasises on
the capital structure option of considering 80:20 and 50:50 combination of both debt and
equity in creating a balance in the business in meeting all the objectives within a given span
of time. This assignment focuses on both expenditures and sales and the revenue generated
by the firm within a short span of time to improve the current performance of the business in
the future.
Recommendations
It can be suggested after evaluating the financial performance of an entity that in the
current assignment targets two different aspects in analyzing two different investment
projects. It helps in comparing different forms of financing by changing the overall structure
of the capital structure with two diverse options such as 80:20 and 50:50 proportion of both
debt and equity held in a business. By evaluating the two of the projects, proposal 2 has
selected as the best suitable project whose efficiency can get increases by using forecasting
tool to predict all the external market changes takes places in an entity. Linear regression tool
is used to predict the future return from the investments that helps an entity in ensuring its
survival as an investment company for longer time period in front of all its competitors exists
in the similar industry for more time period. Another aspect of the current aspects is about the
changes in the debt and equity ratio which can be improved by using adequate capital
structure theory. Modi-gliani miller approach of the capital structure theory has used to
increase the overall earnings of the business by decreasing the overall cost incurred in a
business entity.
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Methodology
An entity uses primary as well as secondary research methodology that helps an
individual in assessing a different investment options such as proposal 1 and 2 that helps in
getting a desired market objectives (Kaplanand Atkinson, 2015). Market research conducted
by an enterprise owner to search about different facts and figures about a particular research
that targets diverse investments opportunities. A Primary research methodology used by an
entity through questionnaires by taking consent and views of all the stakeholders about a
certain project that generates higher sales and the revenue within a short span of time.
Letter to managing director
To
The managing Director
Subject-Analyzing financial performance
This is to inform to the top management of the City High-rise complex company about the
financial performance of the firm by analyzing different investments opportunities.
Introduction
Two investment proposals 1 and 2 are evaluated by using NPV, ARR and IRR in testing the
feasibility of two of the projects. One proposal is related to office and retail lettable area and
another proposal is related to office, retail and flats lettable area.
Methodology
Macro-economic tools are used by an entity owner in measuring the overall performance of
two of the projects in facilitating the owner in selecting the most suitable option.
Results
Proposals two has higher values in NPV, ARR and IRR as compared to another proposal 1 to
influence the user in considering the suitable project.
Recommendations
It is recommended to the management to adopt MODI-GLIANI miller approach of capital
structure to stabilise the earnings of an entity by balancing the two components of debt and
equity.
15

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REFERENCES
Chong, S., 2014. Business process management for SMEs: an exploratory study of
implementation factors for the Australian wine industry. Journal of Information Systems
and Small Business. 1(1-2). pp.41-58.
Covrig, V., McConaughy, D. L. and Travers, M. A. K., 2016. Two methods to adjust
observed control premia for valuation purposes. Business Valuation Review. 35(1). pp.30-
37.
DaDalt, O. and Coughlin, J. F., 2016. Managing Financial Well-Being in the Shadow of
Alzheimer’s Disease. Public Policy & Aging Report. 26(1). Pp.36-38.
Davies, H. and Drexler, M. 2010. Financial Development, Capital Flows, and Capital
Controls. In The Financial Development Report 2010. Geneva and New York: World
Economic Forum. Pp. 31–47.
Ehrhardt, M. and Brigham, E., 2016. Corporate finance: A focused approach. Cengage
Learning.
Epstein, M. J. and Buhovac, A. R., 2014. Making sustainability work: Best practices in
managing and measuring corporate social, environmental, and economic impacts. Berrett-
Koehler Publishers.
Evans, M. and Porter, R., 2010. Real estate financial reporting and accounting. Journal of
Property Investment & Finance. 28(5). Pp. 105-111.
Fletcher, F., 2016. Solutions: Business Problem Solving. Routledge.
Gotze, U., Northcott, D. and Schuster, P., 2016.INVESTMENT APPRAISAL. SPRINGER-
VERLAG BERLIN AN.
Hira, T. K., 2016. Financial Sustainability and Personal Finance Education. Springer
International Publishing.
Kaplan, R. S. and Atkinson, A. A., 2015. Advanced management accounting. PHI Learning.
Nuswandari, C., 2016. PENGARUH RETURN ON ASSET, EARNING PER SHARE,
PRICE EARNING RATIO, DEBT TO EQUITY RATIO, PRICE TO BOOK VALUE
TERHADAP HARGA SAHAM PADA PERUSAHAAN INDEKS LQ 45 PERIODE
2010-2014. Students' Journal of Accounting and Banking. 5(1).
Parker, P. D. and Swanson, 2016. Management of pension discount rate and financial health.
Journal of Financial Economic Policy. 3(2). Pp.108-114.
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