Advanced financial management | Accounting homework help

1. What are the theories, models and implementation in financial management and how the theories will help in practice?

2. Malaysian Airlines Bhd (MAS) is considering a proposal to buy two new passenger aircrafts in order to increase their service capacity. The aircrafts that are being considered are from model Airbus MH370. The price for each aircraft is RM279, 000,000. Generally, it takes two years for Airbus to construct each MH370 aircraft ordered.

The buying process requires MAS to pay down payment, which is 35% of the total aircraft price upon placing the order. The remaining 65% will be paid once the construction process has completed, before the delivery could take place. This is scheduled to be two years from the date where the order is placed. Below is the general information for one Airbus MH370 aircraft:

MAS Airlines Bhd.

Accounting & Financial Department

Aircraft Model – Airbus MH370

COSTS TOTAL AMOUNT REMARKS

Maintenance cost RM5,760,000 per year

All costs are projected to increase by 2% per annum throughout the project’s life.

Salary:

 Pilot RM240,000 per year

 Air crews RM240,000 per year

Fuel cost RM16,000,000 per year

Insurance RM9,600,000 per year

Aircrafts will be depreciated using simplified straight line depreciation method down to zero.

Each aircraft has 10 years economic life.

Each aircraft is expected to be able to increase MAS’s revenues by RM72, 900,000 during the first year of its operation. The revenue then is projected to increase by 4% per annum throughout the project’s life. Since the aircrafts is the latest model in its class, the company will need to train their pilots and air crews on the aircrafts’ operational aspect. The training which will cost the company RM250, 000 will be conducted in Airbus Training Facility in France only if the aircrafts are purchased.

MAS will finance RM300, 000,000 from the total aircraft price through a loan from one of the local banks at 8.4% per annum. At the end of the project’s life, each of the aircrafts is expected to be sold as used aircraft at prices tabulated as below:

Probabilities

0.20

0.30

0.35

0.15

Aircraft Price (RM)

218,000,240

219,000,420

218,240,240

219,840,460

Two months ago, MAS hired Wong Business Consulting Services Sdn. Bhd. to advise them on the proposal to buy the aircrafts. The consultation cost was RM44, 000 and had already being paid. If the two aircrafts are purchased, MAS will need to rent two hangars owned by Malaysia Airport Bhd. (MAB) for the purpose of aircraft maintenance and repairs. The rental costs for each hangar is RM200, 000 a year. The hangar rental costs will be revised every two years. Based on the discussions with MAB, the hangar rental costs are likely to increase by 2% every time the revision is made.

The corporate tax rate is 24% while the company’s required rate of return is 14%.

A. Based on the information given,

(i) calculate the project’s total initial outlay.

(ii) calculate the annual project cash flows.

(iii) calculate the project’s terminal cash flow.

(iv) how terminal value growth assumptions affect a project’s overall value with the interactive tool: What is your cost of capital?

B. Calculate net present value (NPV) and profitability index (PI) for the project.

C. Calculate the internal rate of return (IRR) for the project.

D. Should MAS proceed with the project? Explain your answer.

E. Assume there is a delay in the aircrafts’ construction process and the delivery could only take place after three years (instead of two years) after the order is placed. Could this project still be a viable project for MAS? Explain your answer.

F. Will Pandemic COVID-19 increase the Cost of Capital in the MAS Airlines Bhd and why? Explain by your strategies.

Premium Custom Essays
Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Professional and Experienced Academic Writers

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.

Essays

Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.

Admissions

Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.

Reviews

Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.

Reviews

Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.