financial analysisIn July 1984, the British Government decided to privatize Jaguar plc. Jaguar sold over 50 % of its cars in the United States, but its production was confined to Britain, so it was subject to considerable exchange rate exposure. Your task is to take into account the exposure in pricing the shares of Jaguar and value how much the firm is worth under several exchange rate scenarios. Below is a list of questions you must address in your case analysis. For each answer, be sure to attach spreadsheets showing how you obtained the answer and describe any relevant calculations in your write-up. Be sure to be as clear and concise as possible. 1) (10) Discuss about Jaguars exchange rate exposures. (5) To which currencies is Jaguar exposed? (1) What are the sources of these exposures? (4) 2) (40) How much is Jaguar worth in sterling at the beginning of 1984? (10) In order to focus on the issues related to risk management we provide a spreadsheet that with a framework for the valuation and the projected free cash flow for 1984 (see Jaguar.xls and the assumptions used in the next page). To finish the valuation you should make your own assumptions for 1985 and beyond. In particular, you should determine what are reasonable forecasts for the value of the $/ rate.(20) Furthermore, thoughts must be given to how these exchange rates will affect the prices and quantity of Jaguar cars sold in the U.S.(10) 3) (20) You are a security analyst responsible for following Jaguars stock after it floats. (Assume the company had 100 million shares outstanding.) What is your estimate of Jaguars stock price given a 10% drop in the real value of the dollar?(5) What is Jaguars market value exposure (and delta) with respect to the real dollar/sterling exchange rate? (5)What is Jaguars free cash flow exposure (and delta) for the years 1985 to 1989 with respect to the real dollar/sterling exchange rate? (5) Discuss the economic reasons for the size of this exposure. (5) 4) (10) Discuss how Jaguar could manage this exposure using forward contracts.(5) What type of positions would they take and for how long?(5) 5) (20) Consider the exposure (delta) of Jaguar to the $/ rate for a U.S. investor rather than a U.K.investor (10). Is the exposure to the dollar-based owners the same as that of the pound-based investors above? Why or why not? (10)

Financial AnalysisOrder Instructions:
Ahmed Al Balushi has conducted financial analysis of the two proposed expansion projects of Beach Hotels Group, Project 1 – Commercial Centre and Project 2 – New Cottages. At this stage it would only be possible to fund one of the two proposed projects as inflation in the GCC region is a problem and the costs of capital is comparatively high at 14%. Ahmed presents the following figures for your consideration. Details of cash inflows have only been presented for 6 years as he considers that financial information after this date is likely to be highly inaccurate, especially as the GCC economies has been unstable in recent times. Predictions are based on an average occupancy rate of 75% for the cottages for the first 3 years, rising to 85% in years 4, 5 and 6. (30 marks)
Ahmed has decided that the investments will only be considered if they meet the following criteria:
Payback 3 Years Average Rate of Return 35% Net Present Value RO. 200,000
a) From the information presented in the case study, identify the reasons why Ahmed has chosen such a short Payback period and high Average Rate of Return. (4 marks)
b) Using the information provided, calculate the Payback, Average Rate of Return and Net Present Value, for both the projects and state whether the options satisfy Ahmed’s criteria for investment (9 marks); from the calculations and additional financial and non-financial information provided in the case study, select an expansion option and justify your choice (7 marks). (16 marks)
c) Critically reflect on the techniques used by Mr Ahmed for investment appraisal. (10 marks)
Q3. An enthusiastic marketing manager suggests to his managing director that 30 percent increase in sales can be achieved by a 20% reduction in selling price. The managing director wants to know the consequences of the proposal before approving it. (20 marks)
Particulars
Amount (OMR)
Present selling price per unit
7.5
Present volume of sales
200,000 units
Total variable cost
1,050,000
Total fixed cost
360,000
Details
Project 1
Commercial Centre
Project 2
New Cottages
Initial cost
840,000
440,000
Cash flows:
Year 1
160,000
110,000
Year 2
228,000
130,000
Year 3
340,000
200,000
Year 4
360,000
220,000
Year 5
400,000
230,000
Year 6
420,000
260,000
Financial Analysis for Managers (ECM05EKM) – Spring – 16 – IA–QP
ECM05EKM (QP) Page 3 of 4
Assuming you are the finance manager of the company, from the information given above:
a) Compute the profit for present and proposed plans. (6 marks)
b) Examine the consequences of proposed plan assuming that 30% increase in sales is realised. Evaluate the usefulness of Break Even Analysis in taking business decisions. (10 marks)
c) At what volume of sales can the present profits be sustained, after effecting the price reduction? (4 marks)
Marking
For a mark of >69%
? Show a thorough understanding of the purpose of the activity.
? Display knowledge of the major principles, theories, methodologies, and practices involved and an ability to apply them effectively.
? Provide evidence of wide reading, including academic journals.
? Demonstrate an ability to select critical points, evaluate them and communicate the conclusions effectively.
? Provide approaches that are creative, practicable, and supported.
? Provide a sound, supported critique of your own work.
? Provide sound and supported discussions