Finance Assignment on Sion Plc: A Capital Expenditure Decision

Running head: FINANCE ASSIGNMENT
Finance Assignment
Name of the Student:
Name of the University:
Authors Note:

FINANCE ASSIGNMENT
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Table of Contents
Question 1: Sion Plc: A Capital Expenditure Decision.............................................................2
a) Stating and depicting the critical assumption of the project:.................................................2
b) Using sensitivity analysis and scenario analysis to improve capital budgeting analysis:.....5
Reference and Bibliography:......................................................................................................6

FINANCE ASSIGNMENT
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Question 1: Sion Plc: A Capital Expenditure Decision
a) Stating and depicting the critical assumption of the project:
Particulars Value
New Plant and Machinery 5,000,000
Plant life 4
Depreciation 5,000,000 / 4
Depreciation 1,250,000
Particulars 1 2 3 4
Revenue (+) 20,000 * 250 20,000 * 250 20,000 * 250 20,000 * 250
Revenue (+) £ 5,000,000 £ 5,000,000 £ 5,000,000 £ 5,000,000
Variable cost (-) 20,000 * 120 20,000 * 120 20,000 * 120 20,000 * 120
Variable cost (-) £ 2,400,000 £ 2,400,000 £ 2,400,000 £ 2,400,000
Fixed cost (-) £ 250,000 £ 250,000 £ 250,000 £ 250,000
Depreciation (-) £ 1,250,000 £ 1,250,000 £ 1,250,000 £ 1,250,000
Salvage value (+) £ - £ - £ - £ 900,000
Profit Before Tax £ 1,100,000 £ 1,100,000 £ 1,100,000 £ 2,000,000
Tax (-) £ 1,100,000 *
30%
£ 1,100,000
* 30%
£ 1,100,000
* 30%
£ 2,000,000
* 30%
Tax (-) £ 330,000 £ 330,000 £ 330,000 £ 600,000
Profit After Tax £ 770,000 £ 770,000 £ 770,000 £ 1,400,000