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Cost of Finance and Planning

Cost of Finance and Planning

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Costs of various finance decisions and financial planning steps
Costs of various finance decisions and financial planning steps

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Categories:Business/Law, Finance
Published by: Rashida Yvonne Campbell on Oct 17, 2010
Copyright:Attribution Non-commercial

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06/20/2013

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Page 1
 
CEE  HND BusinessCourse Title: Managing FinanceSemester: April July 2010Time: Morning BatchAssignment TitleCost of Finance&Financial Planning
 
Rashida Yvonne Campbell
 
 
Page 2
 
Contents Page
Assignment Description 3Deciding the location 4Cost of Issuing Shares 4Cost of Bank Loan 5Cost of Retained Earnings 7Cost of Competitor investment 8Recommendation 9Quartz Corporation 10Altitude Training Centre 11Task BFinancial Planning 13Capital Structure 14Dividend Decisions 15Investment Decisions 16Budgeting 17Working Capital 17Conclusion 18
 
 
Page 3
 
Task A:
Scenario
 ACB Training with an annual turnover £25million, is contemplating relocating to newpremises. Two possible sites are available with slightly different features and aspects. There-location will help them to be able to meet clients needs more effectively.
Location 1:
Investment required for the move = £10millionThe location is in the heart of the city centre and an estimated increase of 25% is expected if this option is chosen.
Location 2:
Investment required for the move = £8millionVery close to city centre and business will increase by 10% if this option is selected.ACB Training private limited company formed 10 years ago by 5 ex-lecturers. The 5 of themare the main shareholders but there is also a shareholder who was a local business personwho approached 2 of the owners to run a training course for her company.They have the following options to generate finance:
a)
 
The management is thinking of generating the required finance by issuing 1millionnew shares of £10 each.
 b)
 
O
ne of the banks with which ACB has long financial relations has sent a quote for theloan at interest rate 7% per annum for a maximum of 10 years.
 c)
 
The retained earnings account showed a balance of £25 million in the last yearsbalance sheet.
 d)
 
O
ne of the competitor companies has offered to help ACB but the investors areexpecting 80% share of the profit in the future venture.
 
Evaluate the costs of the sources of finance. Also mention how the option selected willreflect on companys financial statement.
Task B:
Write an essay on the importance of financial planning and how the needs of decisionsmakers can be met?

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