Corporate Finance

This assessment requires you to apply corporate finance tools, financial analysis, ratio interpretation, time value of money, and capital budgeting, to evaluate two investment opportunities for NovaGen Motors Ltd. You will prepare a CFO Briefing Document for the Board of Directors. The Board does not need an explanation of your job role or a description of NovaGen’s business model; instead, they expect a concise, analytical evaluation that supports a capital allocation decision. Your task is to: 1. Analyse NovaGens financial position. Use the provided statements and ratios to assess liquidity, leverage, profitability, and financing capacity. 2. Evaluate two investment projects. Apply capital budgeting techniques (NPV, IRR, Payback Period) and interpret financial viability and risk. 3. Recommend a financing strategy. Based on the firm’s financial condition, propose how the chosen project should be funded (e.g., debt, equity, retained earnings). 4. Make a strategic recommendation. Provide a clear, justified conclusion on which project the company should pursue. Case Study: NovaGen Motors Ltd. NovaGen Motors Ltd. is assessing two alternative investment opportunities: Provided Financial Data Latest Year Key Financial Information Item Amount (?m) Current Assets Total Assets 723 4,200 Current Liabilities Total Liabilities 401.67 2,600 Shareholders Equity 1,600 Annual Revenue 3,000 Net Profit 240 Cash & Cash Equivalents 250 Total Debt 1,200 Key Ratios Current Ratio = 1.8 Debt-to-Equity Ratio = 0.75 Net Profit Margin = 8% ROE = 15% Investment Project Data Details Project A: New Production Facility (Europe) Project B: Automation & Efficiency Upgrades Initial Investment ?1,200 million ?600 million Project Life 5 years 4 years Discount Rate 10% 10% Expected Annual Cash Inflows Year 1 ?250m ?180m Year 2 ?300m ?200m Year 3 ?350m ?210m Year 4 ?400m ?220m Year 5 ?450m Residual (Salvage) Value ?150m (Year 5) ?50m (Year 4) Risk Level High (new markets & operations) Moderate (internal improvement) Use this data to compute: Net Present Value (NPV) Internal Rate of Return (IRR) Payback Period Assume: Cash inflows occur at end of year Taxes and depreciation are ignored, unless you explicitly add assumptions Section 1: Financial Position & Funding Capacity (Approx. 200 words, 15%) Focus on: Liquidity, profitability, leverage (based on ratios provided) Whether NovaGen can self-finance either project Constraints: cash reserves, debt limits, capital structure Do NOT include explanations of the CFO role or a description of the firms general business model. Stay strictly analytical. Section 2: Ratio Interpretation & Financial Analysis (Approx. 250 words, 30%) Interpret the provided ratios: Liquidity (Current Ratio) Profitability (Net Profit Margin, ROE) Leverage (Debt-to-Equity Ratio) Ability to take on new financing Section 3: Investment Evaluation (Approx. 350 words, 30%) Use capital budgeting tools: NPV IRR Payback Period Discuss: Which project creates the most value Risk profiles Sensitivity to discount rate Strategic implications (capacity, competitiveness, operational resilience) Section 4: CFO Recommendation & Financing Strategy (Approx. 200 words, 25%) Provide: A clear recommendation (A or B) Justification grounded in finance theory A suitable financing method (retained earnings / debt / equity / combination) Short remark on capital structure implications STRUCTURE OF THE ASSIGNMENT: COVER PAGE (not included in the word count): write your Matriculation number, title of the assignment, module name, lecturers name, date TABLE OF CONTENTS (not included in the word count) EXECUTIVE SUMMARY (not included in the word count) and INTRODUCTION* BODY OF THE ASSIGNMENT* Sections 1-4 above. CONCLUSION* (not included in the word count) BIBLIOGRAPHY PAGE (not included in the word count) *All sources must be cited as in-text citations in Harvard style. The online library and Study, Research & Writing Skills documents are accessible here. Harvard citations for in-text and bibliography page can be generated with Citethisforme website: