Description: Your assignment involves preparing a written report where you will present an analysis of financial information relating to a capital investment project described in the attached case study and provid e recommendations that will assist the firm in its decision making . Length: 1000 words maximum - this requirement refers to the written analysis section of the assignment only and is a “maximum”. Students will not be penalised for using fewer words and making their report more succinct. If you submit over - length work there will be an automatic 10% penalty of available marks. Title pages, calculations section, reference lists and appendices are NOT included in the word count. Assessment Criteria: Please see the assessment rubric at the end of the assignment for information on the assessment cri teria which will be applied when marking the assignment. Percentage Weighting: This assignment is worth10% of the final mark for the unit. Due Date: Friday, 23 September , 201 6 by 3 pm. Submission Information: Assignments are to be submitted through t he assignment dropbox on the unit’s MyLO site. The re will be no paper submission . You may only submit your assignment to the dropbox once. A signed assignment coversheet should be downloaded from the assignment folder on MyLO and must be attached to the dropbox. Assignments without a coversheet will not be marked. The date stamp on the electronic submission will determine if your assignment has been submitted on time. Late work will be penalised unless you have been granted an extension by the unit coord inator. This is an individual assignment . Under no circumstances should you share your workings or any part of your assignment with other students – this constitutes academic misconduct and actions will be taken. All similarity reports on Turnitin will be thoroughly checked for matching with external sources and with other BFA 208 assignments. You are asked not to discuss the assignment with other students on MyLO. You may ask general questions on MyLO if there is something you need clarified but you shou ld not discuss any calculations or where you have found any relevant information with other students.

BFA208 Financial Management Semester 2, 201 6 Page 2 of 4 CASE STUDY Australian Motor Execs (AME) is set up as a proprietary company and is considering whether to enter the discount rental car market in Tasmania . This project would involve the purchase of 100 used, late model, mid - sized car at the average price of $12,500. In order to reduce their ins urance c osts, AM E will have a Lo Ja ck Stolen Vehicle Recovery System installed in each car at a cost of $1,000 per vehicle . The rental car operation projected by AME will have two locations : one near Hobart airport and the other near Launceston airport. At each location, AME owns an abandone d lot where it could store its vehicles. If AME does not undertake the project, the lots can be leased to an auto - repair company for $110,000 per year ( Total amount for both lots). The $20,000 annual maintenance cost (total for both lots ) will be paid by A ME whether the lots are leased or used for this project. In addition , if the project is undertaken, net working capital will increase by $70,000. For taxation purposes, the useful life of the cars is determined to be five years and they will be depreciated using the diminishing value method set out by the Income Tax Assessment Act. It is assumed that the car will first be used at the beginning of the next financial year: 1 July 2016. Each car is expected to generate $5,800 a year in revenue and have operati ng costs of $1,000 per year. Starting at the beginning of year 6 , one quarter of the fleet is expected to be replaced each year with a similar fleet of used cars. This is expected to result in a net ca sh outflow ( including acquisition costs of the replacem ent car and installation of a new vehicle recovery system on each car ) of $120,000 per year continuing indefinitely. This discount rental car business is expected to have minimum impact on AME’s regular car rental business in Tasmania, where the net cash f low is expected to fall by only $25,000 per year. AME’s tax rate is 30%. Based on this information, you are required to write a report to AME’s executive managers advising them as to the best course of action regarding this project. Your report should addr ess the following specific questions asked by AME’s management: 1. What is the initial cash flow for this discount used rental car project? 2. Which costs are relevant to the project evaluation? Which cost s are not? The managers ask you to justify your answer with an appropriate argument . 3. How are possible cannibalization and opportunity costs considered in this analysis? 4. Estimate the depreciation costs incurred for the next six years. 5. Estimate the net cash flow for each of the next six years . 6. Estimate the terminal value of this project at the end of year 6 (30 June 2022) in the event where AME was to sell the discount rental car business at that date ? We assume that the car fleet would be disposed at book value. 7. Usi ng the standard discount rate of 9% ( which represents AME’ s cost of capital), what is the Net Present Value (NPV) of this project assuming the business is sold at the end of year 6 ? 8. Considering the higher risk associated with this project, AME would like to know what the NPV would be if the discount rate was adjusted to 14% .

BFA208 Financial Management Semester 2, 201 6 Page 3 of 4 ASSIGNMENT INSTRUCTIONS Your assignment should be presented as a structured report with an introduction, a main body and a conclusion, but without inclusion of any calculations in th e main body . The main body of the report may include headings addressing the specific questions asked by AME’s managers . The final part of your assignment should include a general recommendation to managers regarding the best course of action regarding the intended project. If you believe that further information is required before making a firm recommendation, you need to specify what information would be required. Any assumption that you may rely upon for your analysis and recommendation should be clearly stated in the main body of your report. All calculations should be presented in appendices to the report. Calculations may be prepared in an Excel document, however your submission must be in the form of a single Word document including the report itself and the appendices . Appropr iate references to appendices should be included in the main body of your report . All external sources used to support your argument should be appropriately acknowledged in the main body of your report using the Harvard style (Au thor - date) of referencing. This includes textbook sources but not the case study itself. A list of the full citations should be included at the end of the main body of your report.