ACC00716 - Business Case Study: DuoLever Ltd. Financial Analysis

This assignment is a case study focusing on DuoLever Ltd., a personal care products company grappling with investment choices related to environmental sustainability and financial performance. The analysis evaluates two primary options: incorporating the generation of reprocessed sachet plastic or acquiring a copyright license. The solution includes a spreadsheet financial evaluation, calculating annual cash flows and Net Present Value (NPV) to assess the profitability and risk associated with each alternative. A memo is provided to the CEO, outlining the rationale behind the chosen processes and the assumptions made, highlighting the importance of monetary flows and the time value of money. The findings reveal that while both options are feasible, the copyright system alternative is more profitable due to its higher NPV and annual monetary flow. The analysis also identifies potential risks and recommends further considerations before making a final investment decision, emphasizing the importance of product quality and market factors. The document is a submission for ACC00716 Finance course.

Running head: BUSINESS CASE STUDIES 2
Business Case Studies 2
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

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BUSINESS CASE STUDIES 2
Table of Contents
a. Spreadsheet financial evaluation of the proposed choices:....................................................2
b. Memo:....................................................................................................................................3
References:.................................................................................................................................6

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a. Spreadsheet financial evaluation of the proposed choices:

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b. Memo:
Memorandum
To: The CEO of DuoLever Ltd.
From: The Manager
Date: 18.05.2019
Subject: Evaluation of the proposed choices
The "memorandum" is constructed with the purpose to give a well defined overview
of the "two" choices proposed, that are obtainable for the administration of "DuoLever Ltd".
It is since, the company is in a plight of whether to involve generation of reprocessed "sachet
plastic" to their list of trades or should they avail certificate for utilising the copyright system.
Hence, both "financial" and "non-financial" attributes have been considered for assessing the
"two" proposed choices obtainable for the company.
1. Clarification and rationale of the chosen processes:
The chosen processes to assess the suitability of "two" alternatives involve "annual
cash flows" and "Net Present Value (NPV)". If a company has enough "profit" on "paper",
this would not help in retaining staffs working or distributors supplying goods while the
company fails to pay them within the scheduled time (Howieson et al. 2015). However,
failing to fulfil orders could lead to gossips relating the company and the consumers might
search for a new distributor. Hence, monetary flows are vital in the form of venturing into
notable "investment" commitments. "NPV" is selected as it considers the "time value of
money". Additionally, both previous and later monetary flows are judged over the life span of

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the "project", while emphasising on "profitability" and "risk". Lastly, it helps in increasing
the worth of the company (Pratt 2016).
2. Inputs and assumptions made:
With regards to the first alternative, that involves incorporating generation of
reprocessed "sachet plastic", it is noticed that "DuoLever Ltd." has to "invest" "$20 million"
for buying "plant and equipment" anticipated to have a life span of "five" years with no
residue worth after the fulfilment of the "project". The speculations made in this alternative
involve raise in sales "revenue" by "4%" from the "second" year it would be augmented by
extra "revenue" hike due to the advantage reprocessed packaging. In order to finance "plant
and equipment", the company would opt for a "five" year debt, which would give an outcome
of yearly interest expenditure of "$1.4 million" to be repaid at the end of every year (Macve
2015).
With respect to the second alternative, there is no need for investing in "plant and
equipment", as this is connected to "licensed" utilisation of "patented" system. That is why;
the company would not have to carry the load of investment at the beginning stage of the
project (Mullinova 2016). Hence, "DuoLever Ltd" only has to sustain the raw material
"supply costs" and yearly generic, selling and management expenditures for this alternative.
3. Summary of findings:
The above charts majorly assist in depicting the yearly monetary flows "NPV" of both
the alternatives. It could be noticed that the yearly monetary flows for the first alternative are
considered to be lesser in contrast to the yearly monetary flows for the "second" alternative. It
is majorly owing the non-existence of "depreciation" cost, "finance cost" and lesser yearly
generics, selling and management expenditures in the "second" alternative. Because the

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company does not have to buy "plant and equipment", if they opt for the "second alternative",
there would be no costs regarding "depreciation" and "finance cost" via publishing of "debt"
(Dutta and Patatoukas 2016). By evaluating "NPV", it could be stated that the "second
alternative" has greater NPV "$608,003,202 " in contrast to "NPV" of the "first alternative"
"$589,001,380 ". A positive and greater "NPV" is always advantageous for a company, as it
helps in raising the worth of the company. Therefore, in the form of both "NPV" and yearly
monetary flow, investment in the "second alternative" is considered to be suitable.
3. Recommendations and follow-up measures:
With respect to "NPV" and yearly monetary flows, both alternatives are feasible for
investment from the point of view of "DuoLever Ltd" due to their positive worth. Moreover,
if only "one" alternative has to be chosen, the "second alternative" is more "profitable" in
contrast to the "first alternative" as it has greater "NPV" and annual monetary flow
(Narayanaswamy 2017). Furthermore, there are specific other alternatives which needs to be
emphasised upon by the administration of "DuoLever Ltd" before finalising its decision.
"One" of the notable risks incorporated with the investment decision while choosing the
"second alternative" is the quality of goods to be utilised by "Clean World Ltd". It is because
if the goods delivered are not of higher quality, there would be a decline in anticipated
advantages in "sales revenue".

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References:
Dutta, S. and Patatoukas, P.N., 2016. Identifying conditional conservatism in financial
accounting data: theory and evidence. The Accounting Review, 92(4), pp.191-216.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial
accounting. Pearson Higher Education AU.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.
Mullinova, S., 2016. Use of the principles of IFRS (IAS) 39" Financial instruments:
recognition and assessment" for bank financial accounting. Modern European Researches,
(1), pp.60-64.
Narayanaswamy, R., 2017. Financial accounting: a managerial perspective. PHI Learning
Pvt. Ltd..
Pratt, J., 2016. Financial accounting in an economic context. John Wiley & Sons.