You are required to attempt the case study "Nova Tractor Corporation" which accounts for 25% of the assessment for this unit. The objective of this assignment is to allow you to apply the theories, principles and techniques that you have learned in class to analyse a business situation. The information presented in the case is generally sufficient for you to develop an understanding of the situation. It is important to demonstrate your knowledge of financial concepts and tools in analysing the case. The assignment may be completed in a group of two or three persons. Please ensure that all names and student numbers of your group appear in the Assignment cover sheet. Submission information 1. A hard copy of the Assignment is to be submitted to your tutor at the beginning of your tutorial in Week 10, Thursday, 7 May 2015. 2. An electronic copy of the Assignment is to be submitted online via the Turnitin Assignment on Blackboard before 7:00 pm, 7 May 2015. Late submission will attract a penalty as per University guidelines. Grading: Your assignment will be graded on the standard of presentation, good understanding and logical arguments in analysing the problems, and accuracy in deriving the solutions. Extensions: Requests for extensions must be made in writing before the due date. Requests for extensions on the grounds that you have other assignments due at the same time are very unlikely to be granted. Requests for extensions after the due date must be accompanied by a medical certificate. Length: There are no specific word limits; however, the report including the Appendices should not be more than 20 pages. Answers are expected to be literate and coherent. Presentation: Work should be typed in 1.5 line spacing with reasonably wide margins for comments. 2 Referencing: You must include in-text referencing where appropriate and all assignments should have a bibliography. All referencing should be in accordance with the University Referencing Guide, which is available from the ECU Bookshop or online from the ECU Library homepage. Academic Misconduct and Plagiarism Edith Cowan University regards academic misconduct of any form as unacceptable. If some form of academic misconduct has been committed then an appropriate penalty will be applied as outlined in Statute 22 and Rule 40 of the ECU Handbook. Please note that Turnitin will check your submitted Assignment for improper citation or potential plagiarism by comparing against the academic database and other students' work. If your Turnitin report has a similarity index of more than 40%, everyone in your group will be reported to the Head of School for alleged academic misconduct. Learning outcome/s and Graduate Attributes Completing this assignment will help you achieve the following learning outcome/s and ECU Graduate Attributes: Learning outcomes  Demonstrate an understanding of the principles of financial systems and the time value concept in valuing financial assets.  Apply the valuation and corporate concepts to make decisions that maximise value in such areas as project evaluation, choice of capital structure, dividend policy and takeovers. Graduate Attributes  Ability to communicate – clarity of written and spoken expression, including in public forum, and through appropriate use of technology.  Critical appraisal skills – planning, organising, problem solving and decision making. 3 CASE STUDY Nova Tractor Corporation Please read the Case Study: "Nova Tractor Corporation" before starting this assignment. Your task as a financial analyst is to prepare a project evaluation report to Mr. Murray and executive committee of Nova Tractor Corporation indicating whether the firm should invest in one of the two chip crushers (LCC and HCC) and the 5-year project. Your report should include the answers to the following Questions 1 to 5. It is important to list your assumptions in applying the project evaluation methods, and show clearly the workings in deriving your results. Your assignment will be graded on presentation, understanding of the issues and logical explanation, and accuracy of calculations in solving the problems. The mark allocations for individual questions (including 20 marks for presentation) will total to 125 marks and will be scaled by a factor of 0.2 to produce a mark consistent with 25% weighting in the unit assessment. QUESTIONS 1. Prepare the cash flow table (which incorporates taxes and includes initial investment, operating and terminal cash flows) for each chip crusher using the information given in the case. Which of the following items should be included as incremental cash flows in the table? Give reasons for individual items and list clearly your assumptions in deriving the figures. a) Yearly interest expense on the fixed-term loan for each machine; b) Working capital investment which is 10% of annual scrap revenue; c) Annual operating costs (i.e. overheads, salaries and marketing) for each machine; d) The $80,000 that was spent to rehabilitate the plan; e) Net income of $120,000 per year from the sales of unprocessed scrap; f) Rental income of $36,000 per year. [40 marks] 2. Which chip crusher (HCC or LCC) would you recommend Nova to purchase based on the payback period (PP), internal rate of return (IRR), net present value (NPV) and NPV to infinity methods? [Assume the company is able to invest in both chip crushers on the same terms indefinitely.] [17 marks]