Financial management

ACC2830 – Financial Project Management
Coursework 2
Coursework structure
This coursework assessment consists of 5 tasks:
Task Mark allocation
Task 1 – business case review 5
Task 2 – investment appraisal 10
Task 3 – risk assessment: critical path and PERT
analysis
15
Task 4 – budget variance analysis 15
Task 5 – capital and revenue expenditure 5
Total marks 50 marks
All the information required to complete this coursework is in the case study. You need to
download the Excel dataset from MyUniHub, Assessment and Feedback folder to complete
this coursework.
Coursework feedback
The feedback process takes place continuously during the weekly computer labs. 45 minutes
of the computer labs is allocated for coursework feedback each week.
Coursework feedback also takes place during lecture time in learning week 16 and 17.
Alternatively, you can seek feedback from the module leader during office hours. No
appointments are required.
Coursework deadline and submission
The deadline for coursework submission is on 11.59pm, Sunday, 05/04/2020, please submit
your Excel work via the submission link on MyUniHub.
Case study
There are two simulated projects provided in the following pages, you are required to select
ONE project only for your coursework portfolio.
Case Study One
Project A –
Construction Project
ACC2830 – Financial Project Management
Case Study One
Background
Company A is a UK based company operating in the financial investment and consultancy
field. The company recently bought a piece of land and wishes to construct a five storey
office building block with the view to relocate its staff to occupy two floors, and rent out the
remaining three floors to local businesses as office space.
Task 1 – Project planning
Review the sample business case template used by the project managers, comment on the
usefulness of the information required from the business case document in helping
management board in selecting appropriate projects.
Task 2 – Project appraisal
Year 0 Year 1 – 5 Year 6 – 17 Year 18 – 20
Initial investment £2,500,000
Estimated cash outflow
Financial costs
Other cash outflow (£850,000) (£1,200,000) (£1,560,000)
Estimated cash inflow £2,000,000 £2,500,000 £2,850,000
Residual value (year 20) £450,000
Company A plans to take out a 5 year loan of between £1m to £2m to fund the initial
investment cost. The remaining will be funded by its retained earnings. Select a loan amount
within this range and calculate the loan interest cost using an appropriate interest rate
(between 3% and 5%). Assume there is no opportunity cost for using retained earnings to
fund the project.
Assume the repayment of the principal loan in five equal instalments at the end of each year,
with interest being paid at the end of each year on the reducing balance.
Company A requires a minimum return of 8% on projects and a maximum payback period of
5 years.
Calculate the Net Present Value and Payback Period of the project. Comment on your result.
Task 3 – Risk assessment
Number of months
Tasks Task
code
Predecessor Pessimistic Most
likely
Optimistic
Planning consultancy A 6 3 2
Produce building plan B A 6 3 1
Apply for planning
permission
C B 5 3 1
Quantity Survey D C 6 3 1
Construction work E D 14 9 7
Wiring work F D 12 6 4
Purchases new computer
equipment and furniture
G F 6 3 2
Software installation H F 6 3 2
Relocation I G 7 4 2
Hospitality and Events J E, G, H, I 3 1 1
Using the information in the table:
 Identify the Critical Path of the project using Critical Path Analysis method,
 Use PERT to estimate the probability of the project completion within the targeted 25
months.
Task 4 – Controlling and monitoring costs
At the beginning of the project, the project management team has estimated the planned costs
to be £4,219,492 based on the quotes received during the tendering process. The project
budget should include a contingency rate on the total budgeted project cost. The budget is
split as follows:
Activities Budget
(£)
Supplier
Project manager salary 208,000 Sarah Siggers and Paul Smith
Mechanical and Electrical
Engineering Services
120,000 Wilton Groups Ltd
Quantity Survey fees 130,000 Merry & Brown UK Ltd
Planning consultancy fees 12,000 Urban Planning & Design
Building work 3,580,000 Thompson Building Services Ltd
Hardware and software 15,000 ET Plc
Equipment and Furniture 48,000 LG Interiors Group
Relocation 95,000 Thompson Building Services Ltd,
Commercial Removals Ltd
Hospitality and Events 7,150 Partwells Events Ltd
Total Budget 4,215,150
The time-phased budget is provided in the Excel dataset. Select an appropriate contingency
rate to complete the budget in Excel and justify your selection of the contingency rate.
The executive board wishes to know the actual costs of the project comparing to the budgeted
amount. Prepare a summary analysis using Excel that compares the budgeted amount against
the actual spending, showing the favourable/adverse variances against each cost line. (The
actual spending is provided in the Excel dataset)
Task 5 – Revenue and capital spending
At the completion of the project, the executive wishes to know: (i) the total amount of project
expenses that should be recognised on the Statement of Profit and Loss in the financial year
ended 31 March 2018 and 31 March 2019 respectively, and (ii) the total amount of financial
costs to be capitalised on the Statement of Financial Position at the project completion.
Provide the above figures to the executive board and explain the cost treatment.