Financial Analytics for Managerial Decisions

Financial Analytics for Managerial Decisions

Teaching Period – 6, 2022

Assessment – 3


Course Code:  BUSM 4741 Course Description: Financial Analytics for Managerial Decisions Date Due: 8/12/2022 11:59 pm (Melbourne) Total number of pages (incl. this cover sheet): 18
 You should download the Case Study in the given time frame and start working on it. On completion, submit your responses in all forms via Canvas by the due date and time. Late penalties apply.
 Read the case very carefully first, then answer the questions.
 There are SIX main questions altogether (a few with subparts) in the three parts A, B, and C in this Case Study. Attempt ALL questions and ALL subparts of these questions.
 This assessment comprises 50% of the total marks allocated in this course.  This assessment is being marked out of 50 points. To obtain a pass in this course, you must achieve at least 50% OVERALL from all the course assessments.
 This is an individual assessment, and it must be your OWN work.  Plagiarism will attract a heavy penalty and will be reported to the University for investigation of misconduct.  Please note plagiarism/academic misconduct in this assignment includes sharing your work with anyone, as well as using someone else’s work. That applies to all components of the assessment: Documents, Spreadsheets, and Presentations that you prepare in the process.
 On completion, submit your work using the Canvas submission button (integrated with Turnitin) for Assessment 3.
 Do not copy and paste the Case/questions from the Case Study into your document. That will increase your similarity score.
 You must upload: Word/PDF Document with copied and pasted workings from your Excel Workbook.Excel workbook showing your workings properly laid out.Video presentations or provide links to them along with your presentation slides/other communication aids.

Disclaimer: The information contained in this case is provided on an “as is” basis and does not purport to reflect actual commercial operations.

Part A

(15 marks in total)

Melney Florist Cafe

It is November 2022.


Mr. Andrew Young grew up in a suburb of Melney which is a large Australian provincial city. When he was in the final years of secondary school, he obtained a part time job working in a large convenience store which also sold cut flowers. Whilst Andrew found the part time job tedious at times, he really loved selling the flowers and became skilled in making up bunches of flowers that looked very attractive. Part of the reason that Andrew enjoyed this was because he realised that the flowers made people happy! His interest in flowers was encouraged by the manager of the shop, who realised that Andrew’s approach with the flowers was a considerable help in making the shop a thriving business.

However, eventually Andrew left this part time job. He went to a university in Melbourne and studied for a Bachelor in Business. After graduating he won a graduate position in a large government agency headquartered in Melney, eventually taking on roles with more responsibility as he gained experience. By the standards of his workplace, he is seen as a most competent member of the staff who has achieved considerable success. However, when Andrew thought about his career, very often his thoughts would go back to the job in the convenience store where he gained so much satisfaction from making people happy with a lovely bunch of flowers.

Then, in December 2021, he visited his aunt who lives in Melbourne. His aunt had recently moved into a high-rise apartment block with shops at the bottom of the building. The buildings in the area where his aunt lives are all higher than 10 stories with some considerably higher. Each building is either an apartment building or an office block. At lunch times on weekdays, the streets in this area are busy with people from the offices walking around, going to a café, sitting in the sun or doing some shopping.

What really impressed Andrew, however, was that one of the shops at the ground level of his aunt’s apartment block is a florist café. This little shop serves drinks and snacks but also sells flowers. He visited this café several times during his stay with his aunt and saw that, even after the Covid lockdowns, it was a thriving business. He started to think about running a similar business in his home city.

Thus, since late 2021, Andrew has been working towards opening a florist café close to his home. He has made most significant progress. He has taken a short course in floristry[1],  has become a qualified barista[2],  and has also attended a course for people wanting to move into a small business. This latter course was very much about making sure the business would be well managed from a financial perspective.  One of the messages Andrew has taken to heart is that a business must have adequate cash to operate successfully, and that often new businesses fail, not because they are making a loss, but because they do not have enough cash to pay their staff on time and to pay for bills as they become due.

This far, Andrew has financed the preparation for his new business himself, but he recently legally set up a company, Melney Florist Café Pty Ltd. Andrew is the sole shareholder in this company. He also registered the trading name of the business, Melney Florist Café. As well he has opened a bank account for his new business.

Some general background information

Holidays in Australia

In Australia, in all states and territories, there is a long school holiday In January. Australian school children begin their school year in early February.

Most Australian workers have annual holidays as part of their employment contracts. Many of these workers of opt to take at least some of their holidays in January, and indeed some businesses actually close down for two or more weeks in late December /early January.

Income Taxation in Australia

In Australia there is both personal income tax and corporate income tax. Thus, individual people must pay income tax on money they receive as wages and a company must pay corporate income tax on its profit. The Australian Tax Office (ATO) administers taxation in Australia.

Information about the proposed operation of Melney Florist Café

Location of Melney Florist Café

As mentioned earlier in this document, the ideal situation for the business operation Andrew is envisaging is an area that is both residential and has some commercial buildings. Andrew has found such a location, quite close to his home, in the suburb of Green Valley.

This area is located two kilometres from the central business area of Melney, with good transport links to various parts of wider suburban area. Until about six years ago, there was an area in Green Valley that was zoned as industrial. There were many very small businesses, businesses such as car servicing and minor electrical works, located in this area. However, this land has now been rezoned for mixed use of both office blocks and medium rise apartment buildings. This rezoning has been very popular and there are now many office blocks in use and several apartment buildings have been completed.

There are several coffee shops serving the workers and residents of this newly developed area, as well as a pharmacy, a post office, a clothes alteration service and a medical clinic. However, there is not a florist operating in the precinct, and certainly there are no florist cafes in the area. Thus, Andrew has concentrated his search for a location for his business to this rezoned area within Green Valley.

To run the business, Melney Florist Café needs appropriate premises, with a back area for preparation of the flowers for sale and a front area where café will be set up.  Suitable premises have now been found in Green Valley. The rent per month for these premises will be $1,600, payable three months in advance, with the first payment being made in December 2022. As an example of how payments will be made, the rent of $4,800 for April – June 2023 must be paid by March 31, 2023.

Activities of Melney Florist Café              

There are two activities proposed for the business.

The first activity will be making up and delivering large flower arrangements for office reception areas of commercial premises and foyers of apartment buildings.  A selection of flowers is purchased wholesale and then the flowers are arranged into large displays. Each large flower arrangement is delivered to the office or apartment block. Customers are invoiced at the month end the arrangement is provided, with payment due by bank transfer of funds by the end of the next month. Thus, if an apartment building management purchases an arrangement delivered in March 2023, the payment by bank transfer to Melney Florist Café must be made by the end of April 2023. Andrew has already had discussions with office managers and with apartment building managers and he has already set up contracts with several offices and apartment buildings for 2023.  Whilst new customers for this service will be accepted, Andrew does not intend to actively seek out new customers as he will be putting his effort into building up the second activity, i.e. running the florist cafe.

Other activities, running the florist café, will involve selling beverages and snacks to the office workers who work in the surrounding office blocks and to residents of the apartment buildings. However, as well as selling the usual items for a café, the Melney Florist Cafe also will be selling simple small posies of flowers. These posies are made up in the same way as large flower arrangements but are very much smaller.

All sales in the florist cafe, i.e. sales of beverages, snacks and small flower posies will be made using cash. The corporate clients for Large Flower arrangements will pay via credit cards. To have this service provided, Melney Florist Café will need to pay EasyPay, the credit card service provider, a flat merchant’s fee of $125 per month starting from Jan 2023. The arrangement is such that the EasyPay will transfer the full amount of credit card sales net of its merchant’s fee, into Melney Florist Cafe’s bank account at 11pm each night.

Setting up the café area

The Melney café area will be particularly attractive, as, as well as having some tables for people to sit at, there will be displays of flower posies.

Tea, coffee and soft drinks will be available for take-away service or alternatively the customer can sit at a table. The shop will have a most pleasant ambience, with some small tables inside the shop, and two tables on the pavement.  In order to be allowed to have tables on the pavement, Melney Florist Café must buy a permit from Melney City Council. The cost of the permit for 2023 is $50 per month, payable half yearly in advance. Thus, for the 2023 year, Melney will need pay $300 for this permit in December 2022 for the months January 2020 to June 2020, and another payment in June 2023.

Days and hours of operation

The café will operate on Mondays to Fridays only. It will not open on public holidays. Hours of opening will be 7.30am to 3.30pm. Whilst these are the hours that the café will be open to customers, there will be a need for preparation time before 7.30am and cleaning time after 3.30pm.

Based on the 2023 calendar and the dates of public holidays recognised in Melney, the following table sets out the number of days of operation of the coffee shop for each month in 2023.

Table A1 – number of trading days for each month in 2023

No. of trading days142022182321212320222116

Café customer purchasing behaviour

Andrew has spent significant time undertaking planning for the Melney Florist Café. His research has convinced him that, on average, there will be 240 customers per day attending the café. It is expected that patronage will be even both over a week and over the calendar year. The purchasing patterns are expected to be:

  • Each customer buys just one beverage.
  • 30% of customers buy a snack.
  • 2.5% of customers buy a posy of flowers

For the beverages, it is assumed that:

  • 70% of customers buy a cup of coffee
  • 20% buy a cup of tea
  • 10% buy a soft drink.

As mentioned earlier, with respect to the large flower arrangements for offices and for the foyers of apartment buildings, Andrew has already procured some contracts.  It is expected that 25 large flower arrangements will be assembled and delivered in January 2023 and for the remaining months of 2023, there will be 45 large flower arrangements assembled and delivered each month.

Staffing of Melney Florist Café

The work that needs to be done in the café involves setting up for the day, making coffee and tea, serving the customers, making up the flower posies and corporate flower arrangements, and cleaning up for the day.

Andrew intends to work in the café himself, from 7 am to 5pm every day.  As well he will employ part time labour to work with him, with three people employed each day, each person working for five hours. There is no problem in finding suitable staff to take on these work shifts. The rate payable per hour is $25.

Payment of staff

In Australia, all people in receipt of labour income must pay income tax on what they earn. The employer must withhold some of the wages and, rather than pay this money to the worker, must send the withheld amounts to the Australian Tax Office (ATO) by a specified date.

Melney Florist Café has been advised by the ATO that it must withhold tax of 20% for each staff member. This money must be forwarded to the ATO by the end of the next calendar month. Each staff member will be paid the remainder of their wages in cash on the final working day of each month. Thus, as an example, if a particular staff member works a five-hour shift on each day Melney Florist Café is open in February 2023, the person would earn $2,500, (20 x 5 x $25). The person will receive 80% of this amount in cash i.e. $2,000 on Tuesday 28 February (the final working day of February), and Melney Florist Café will then forward $500 to the ATO on behalf of the worker before 31 March, 2023.

Andrew, the owner of Melney Florist Café, will initially not be taking a salary or drawings from the business. He wants to build up his business, and ensure he had funds to cope with any emergency. He is fortunate in that his domestic situation allows him not to be paid for his labour for the first half of 2023. However, his accounting advisor has explained to him that, no matter how much cash he takes from the business, whether as salary or drawings, his labour must be recognised in the preparation of the projected income statement and thus in the calculation of the projected profit. In determining the profit for 2023, the labour expense to be recognised for Andrew will be $87,500, assuming that Andrew works 50 hours per week in the business for 50 weeks of the year and that the appropriate cost of his labour is $35 per hour.

Andrew is hoping that the business will be going well enough by the end of June 2023 that he can take drawings of $12,000 per month for the months July 2023 to December 2023. He plans to live on his existing savings till then and will need regular income after that. This amount is still less than his planned annual salary. He hopes to do better in 2024 and properly enjoy his lifestyle.

Costing of products

Significant work has been done in understanding the variable cost of each item sold. The selling price and the variable cost for each of the six items sold by the Melney Florist Café is set out in Table A2 below.

Table A2 – Pricing and costing of beverages, snacks, posies and flower arrangements

ItemSelling price per itemVariable cost per item
Cup of coffee$4.80$2.60
Cup of tea$4.80$1.50
Soft drink$4.80$2.40
Small flower posy$25.00$12.00
Large flower arrangement$120.00$55.00

The variable costs include the costs to the business of café consumables (items such as coffee beans, loose leaf tea, soft drinks, milk, sugar, take-away cups, stirrers and paper napkins) and florist consumables (items such as flowers for the posies and flower arrangements, florist supplies such as ribbons and paper, and delivery costs for the large flower arrangements). Please note that these variable costs do not include any labour costs. Labour costs for the Melney Florist Café are fixed costs.

It can be assumed that all variable costs are paid for in the month when the item is sold. For example, if 100 flower posies are sold in April, $1,200 will be spent in April for the variable costs associated with making these posies (i.e. 100 x $12 – the variable cost of a flower posy).

Also, please note that there is effectively no inventory for this business. All flowers purchased in a week are used up in the week. The number of snacks purchased by the business for sale for a day are sold within the day. The turnover of soft drinks is such that there is negligible inventory.

The espresso coffee machine

It is essential for a café serving coffee to have a reliable espresso coffee machine suitable for the number of customers being served. Andrew has established that there are two approaches for the supply of the coffee machine for Melney Florist Café.

The first approach is to buy a coffee machine. A suitable machine for Melney Florist Cafe would cost $7,500. Andrew has been advised that the depreciation schedule would straight line over 5 years. As well as the cash needed to buy the machine, there needs to be regular servicing of the machine. The servicing would be quarterly at a cost of $250 per service. If Melney Florist Cafe was to take this option, then $7,500 would need to be paid for the machine in January 2023, and the $250 for servicing in each of March, June, September, and December.

The second approach is to lease a machine. The cost of this operational lease would be $2,800 for the 2023 year, payable fully in advance during the first month of the lease. Thus, the full cost of leasing the machine for 2023 would be $2,800 with this amount being paid in January 2023. The leasing arrangement includes all servicing of the machine. As well, included in the leasing contract, is a replacement policy. If the machine fails to work appropriately, the machine will be replaced that night and so there will be a machine in place for the next working day.

Andrew has decided to adopt the leasing arrangement for Melney Florist Cafe for 2023.

Other capital items.

Apart from the coffee machine, there are six capital items that Melney Florist Café must have in place before the shop opens in mid-January 2023. There needs to be two refrigerators. One, known as a floral refrigerator, will be located in the back area. This refrigerator is for the storage of loose fresh flowers and completed arrangements and posies. The second refrigerator will be located in the café area and is for the storage of soft drinks for sale and also for items needed in the café that require refrigeration. 

The other four capital items needed are a

  1. dishwasher,
  2. tables and chairs,
  3. a set of crockery, cutlery and kitchen implements and
  4. a combined computer /cash register/printer.

The table below sets out the cost to the capital items that must be purchased for the Melney Florist Cafe, together with the price and the depreciation time period.  All these items will be purchased at the beginning of January 2023, with payment that month.

Table A3: Capital items costs and depreciation schedule

ItemCost as at January 2023Depreciation schedule
Floral refrigerator$2,500Straight line 10 years
Cafe refrigerator$2,400Straight line 10 years
Dishwasher$4,800Straight line 8 years.
Furniture$9,000Straight line 8 years
Combined computer/cash register/printer$5,100Straight line 3 years
Crockery / cutlery / small kitchen implements$1,800Straight line 3 years

Other expenses

There are several other items of expenditure for Melney Florist Café.

In the first week of January there will be a very simple fit out of the Melney Florist Café premises. The walls will be painted, and some electrical and carpentry work carried out. The cost of this work will be $3,000 with a $1,000 deposit being paid in December 2022, $1000 being paid in January 2023 the remainder to be paid in February 2023. From an accounting perspective, this amount of $3,000 is considered an operating expense.

The cost of electricity for 2023 for Melney Florist Café is expected to be $3,000 with this expenditure occurring evenly over the year. Melney Florist Café will receive the bill for electricity at the beginning the month after the electricity is used and must pay within 14 days. Thus, for electricity used in February 2023, the bill will be received in early March and payment made by the end of March.

As Melney Florist Café will not be in its premises until 1 Jan 2023, the first bill received will be in February for the January electricity usage.

Andrew has been considering how to promote the business. He intends to use targeted online advertising which, his research has shown, is likely to be very effective pricewise for this type of business. This promotion will cost $60 per month (i.e. $720 for the year), payable in the month when the promotion takes place. However, to get the business known early in the 2023 year he intends to spend an additional $500 in January on paper flyers. He will distribute these manually himself to surroundings businesses and apartments, with an initial effort in January and then using the remaining flyers in early February when school has returned, and office workers have returned from holidays.

Andrew understands necessity of having appropriate insurance for his business. He has obtained a quote of $4,500 for comprehensive insurance for the business for 2023. The payment arrangements are 12 monthly payments in advance. Thus, the first payment of $375 must be made in December 2022.

As well as all the expenditure set out above, Andrew is budgeting $500 per month for all other expenses. It can be assumed that this expenditure is paid on the day the expense is incurred.

Financing the business

Andrew’s parents are lending him $8,000 to help start his business and will make this money available in the last week of December 2022. They are not charging interest, but Andrew has agreed to pay them back $4,000 in June 2023 and the remainder in December 2023. As well. Andrew has arranged a short-term loan from a small business lender. This lender will transfer $5,000 to Melney Florist Café   on December 1, with a final transfer of $10,000 on December 31, 2022.

As part of the loan agreement with the small business lender, Melney Florist Café will have an interest expense of $1200 in 2023.  Melney Florist Café must pay $100 interest on the last day of each month from January to Dec 2023. It also must make a repayment of $5,000 on the capital borrowed on 30th June, 30th September and 31 December 2023.

Corporate Income Tax

If Melney Florist Café makes a profit in 2023 it will have a corporate income tax expense. However, it will not need to forward any cash to the ATO for corporate income tax until June 2024.  The effective tax rate that will be levied on Melney Florist Café is 25%.

Rising costs

Assuming Melney Florist Café will continue operations into 2024, some regular expenditure for the 2024 year will need to be paid in 2023. It can be assumed that an inflation rate of 2.4% will apply for any such expenditure.

Projected income statement

Please see Appendix 1 for the projected income statement for Melney Florist Cafe for the year 1 January 2023 to 31 December 2023.

Also please see Appendix 2 for a grid you can use as a starting point for the cash budget.

Part A

Two questions (with subparts) to be answered:


(While the questions are to be solved using MS-Excel, they must also be presented properly in a Word/Pdf document)

  • Prepare the monthly cash budget for Melney Florist Cafe for the period 01/01/2023 to 31/12/2023. Clearly specify the Opening Cash Balance on 1/1/2023. Please present your answers in two decimal places.

You may use the layout presented in Appendix 2 to prepare the cash budget. Please note that you must add more entries and other necessary details to complete the cash budget.

                                                                                                                                                         (8 marks)

  • You might like to use Appendix 1: Projected Income Statement for this question.

Assuming the relationship between the number of customers, the number of each type of beverage sold, the number of snacks sold, and the number of small flower posies sold remains as set out in the section Café customer purchasing behaviour (page 5), together with assuming that the number of large flower arrangements sold for the year stays fixed at 520 arrangements:

  • What is the break-even average number of customers per day for Melney Florist Cafe for the year January 2023 – December 2023?     

(3 marks)

  • If Andrew aims to draw his full estimated wages for the year, how many customers per day would be needed for the year to make a profit after taxation of $90,000 for the 2023 calendar year?                                                                             

(2 marks)

  • Andrew decided in planning for the 2023 calendar year to have an operating lease agreement for the espresso coffee machine rather than buy one.

An alternative is to buy an espresso machine. Refer to the section The espresso coffee machine (page 7) for more specific details about this option.

If the alternative arrangement for the espresso machine were to be put in place, that is Andrew decides to buy it, recalculate the break-even number of customers per day for the café with this option               

       (2 marks)

(8 + 3 + 2 + 2 = 15 marks)

Note: for calculations, please show workings in your answer.

Appendix 1:

Projected Income statement
Melney Florist Café
from 1 January 2023 to 31 December 2023
 Café Revenue – Beverages and snacks $         373,068.00
 Café Revenue – Small Flower Posies $           36,150.00
 Large Flower Arrangements Revenue $           62,400.00
Total Revenue $  471,618.00
Variable costs 
 Beverages And Snacks-$        188,558.40
 Small Flower Posies-$           17,352.00
 Large Flower Arrangements-$           28,600.00
Total Variable costs-$  234,510.40
Fixed costs 
 Labour Expense – Hired Staff including tax withheld-$           90,375.00
 Labour Expense – Business Owner Andrew-$           87,500.00
 Coffee Machine Rental Expense-$             2,800.00
 Rental Expense for Café Premises-$           19,200.00
 Refurbishment Expense-$             3,000.00
 Electricity Expense-$             3,000.00
 Credit Card Easybuy Usage Expense-$             1,500.00
 Other Expenses-$             6,000.00
 Permit – City Council-$                600.00
 Insurance Expense-$             4,500.00
 Promotion And Advertising-$             1,220.00
 Depreciation Expense-$             4,515.00
Total fixed costs-$  224,210.00
Operational profit (EBIT) $     12,897.60
Interest expense-$       1,200.00
Earnings before tax $    11,697.60
Taxation expense-$       2,924.40
Earnings after tax  $       8,773.20

Appendix 2:

Partially filled cash budget. You may use this proforma to complete the cash budget for Melney Florist Café for the 12-month period 1 January 2023 to 31 December 2023.

 Before Jan 2023JanFebMarAprMayJunJulAugSepOctNovDecTotal
Cash received from:              
Sale of Coffee              
Sale of Tea              
Sale of Soft Drink              
Sale of Snacks              
Sale of Small Flower              
Sale of Large Flowers              
Cash Paid              
Rent of premises              
Council permit              
Rent of espresso machine              

Part B

(13 marks in total)

Oz Carriers Ltd

It is 30 November 2022

Oz Carriers Ltd, trading as OCL, is a listed company providing a variety of freight services across Australia. One of the specialist services it provides is Stellar Delivery which deliver flower arrangements in capital cities and large provincial towns.

OCL is now in the process of setting up a fleet of four vans suitable for transporting flowers in Melney.  Based on past experience it is recognised that getting a fleet of vans ready for this Stellar Delivery service is a two-step process. The first step is to select the van type and the second step is to set up each van appropriately with a top-of-the range air-conditioning  system and  with  fittings to ensure the flower arrangements stay fresh in the van,  It has already spent $10,000 on a preliminary review of the vans available, and a further $4,000 investigating the procurement of the items necessary to convert each van into a specialist vehicle, suitable to transport flowers. Whatever the decision, all four vans in the fleet will be of the same type.

As a result of the investigations, OCL has narrowed down the choice of type of van to just two types. One van type is sold under the brand name of Venus and the other’s brand name is Pluto. Both of these models have their pros and cons. While Venus is cheaper to buy, it has higher maintenance cost and is less fuel efficient. The cons of Venus are pros for Pluto but has shorter life. Besides that, as set out above, both types of vans must be fitted out appropriately, and there are differences in the cost of this fitting out process for each type of van.

Once each van is ready for service, it must be registered with the Vehicle Registration Authority before it can be driven on the roads. This registration process is an annual one. OCL has a policy of insuring all its vehicles and, likewise, this insurance must be paid before the vans are put into service. OCL will also enter an annual maintenance contract with the successful supplier.  This maintenance cost must be paid at the beginning of each year.

Estimations of the various costs and the details about other relevant items are provided in Table B1:

Table B1

Relevant estimations

 Venus VansPluto Vans
Life cycle (years)65
Cost of one van $                        37,500 $                     40,000
Cost of air conditioning per van $                           3,000 $                        3,300
Initial fit out costs, per van $                           1,500 $                        1,600
Initial annual registration for each van $                           2,250 $                        2,500
Additional Net Working Capital – for the fleet of4 vans $                           3,250 $                        2,500
Total fuel cost for fleet for year 1 $                        46,500 $                     43,250
Insurance cost for fleet for year 1 $                        20,000 $                     18,000
Maintenance cost for fleet for year 1 $                        12,000 $                     10,000
Estimated salvage value of fleet at the end of the project $                           8,500 $                        8,950

Additional Information:

  • As stated in Table B1, the initial maintenance cost for the fleet if Venus vans are selected is $12,000. This cost is expected to rise in line with inflation rate every year. However, for Pluto vans, the initial annual maintenance cost stays constant over the expected life that these vans will be in service.
  • All other annual operational costs (except the maintenance cost as explained above) are expected to increase at the expected inflation rate of 2.5% in the next few years for both the types of vans.
  • The capital costs of both fleets must be depreciated to reduce the value to zero using the straight-line method.
  • The net working capital invested for either of the fleet selection may be assumed as recoverable in the last year of service at termination.
  • Whatever option is decided upon, the vans will be purchased, fitted out and be made ready for service by January 1, 2023.
  • As a result of purchasing the new fleet of vans, OCL expects that, in Jan 2023, it will be able to sell the existing three vans it presently uses for this service for $9,000.
  • The revenue derived from Stellar Service will be the same, no matter what van type is chosen for the fleet. Likewise, the labour required to provide the service is the same for each van type.
  • The applicable taxation rate is 25%

Capital Structure Data – Oz Carrier Ltd.

OCL has three types of debt which it uses on an ongoing basis:

  • Bonds, 
  • Mortgage, and
  • Overdraft 

The bonds each have a face value of $1,000 and will mature on 31st May 2025. These bonds have a coupon rate of 5%, with coupons paid quarterly, on 28th February 31st May, 31st August and 30th November of each year. A coupon payment was made this morning, i.e. the morning of 30th November, 2022.  There are 150,000 bonds on issue. These bonds are selling today at $1,030 per bond.

The mortgage is for $40 million at a rate of 5% per annum compounded fortnightly.

The overdraft facility is for $3.5million at a rate of 13% per annum compounded daily.

OCL’s shares are trading today (30 November 2022) at $10 per share, and the company has just paid its yearly dividend of $1.10. Its dividends have been growing consistently at 2.5% per annum for the past 5 years. OCL has 11.2 million shares on issue.

Financial advisors advise that the risk of this capital investment can be considered as equal to the present risk of the company as it is structured now.

Part B

Two questions to be answered:

(While these questions are solved using MS-Excel, they must also be presented properly in a word/Pdf document)


  1. With the given information about Oz Carriers Ltd (OCL), estimate the suitable Weighted Average Cost of Capital (WACC) to evaluate the investment options.

(5 marks)

  • Using the WACC you have established, (round it to the nearest whole number), undertake an NPV analysis of the two alternatives for OCL regarding the vans to be procured.

(8 marks)

(5 + 8 = 13 marks)

Note: for calculations, please show workings in your answers.

Part C

(22 marks in total)

Video Presentations

Part C is designed to allow you to showcase the depth of understanding of the accounting and finance concepts or tools that you have developed or employed while resolving the questions asked in the Case Study.

A good video presentation will typically underpin the basic theory or the associated concepts in the analyses, describe the process of the key steps/workings that you have adopted in developing those tools/outcomes, outline any assumptions that have been made, articulate well, discuss numerical outcomes and finally spell out clearly the recommendations in line with the findings and provide justifications.

It is important to use appropriate software (Studio, PowerPoint, or other tools), provide clear tables/diagrams and other content if any, use correct terminology and express the ideas and information coherently. Correct RMIT Harvard referencing style must be used.

You must read the rubrics carefully and frame your responses around their requirements.

As a recommendation, you must carefully deliberate on the contents and if possible, prepare a script before recording your videos. The presentation quality is as important as the analyses, recommendations, and other content to achieve the best grades.

Upload your video presentations or provide shareable links to them along with your presentation slides/other communication aids. It is strongly recommended that you use the Canvas Studio tool to record and upload your presentations. You may use other applications too provided you comply with the requirements. You must present yourself in the videos. Canvas-based Studio allows you to do both i.e., run a presentation and record yourself at the same time.

The preference is that you produce two short videos, one relating to the work undertaken for Part A and another for Part B. This approach will keep the file size manageable and minimize logistic issues around uploading / downloading or other unknowns.

Together, the two videos must be of a total of between 10 and 12 minutes. Ideally, you should divide your time proportionately between the two videos. Both the parts have comparable weights.

Part C

Two categories of questions (with subparts) to be answered:

  • Questions for analysing Part A (Melney Cafe)

Consider the analysis you have done in Part A questions, and use your video to:

  • Discuss both the concept behind and the process of developing the Cash Budget and the CVP analysis using your work on the Case Study on Melney Cafe as example to illustrate these ideas. Ensure that you summarise the key aspects/ findings in your analyses.

(5 marks)

  • Based on your findings, discuss/make recommendations to Andrew. These recommendations need to include:
  1. any improvements to the business plan based on the proposed Cash Budgets.

(2 marks)

  • any improvements towards the viability of the business through the CVP analysis that you have conducted.

(1 mark)

  • Questions for analysing Part B (OCL)

Consider the analysis you have done in Part B, questions 1 and 2, and use your video to:

  • Discuss both the concept behind and the process of NPV analysis using your work in the Case Study on OCL as an example to illustrate these ideas. Ensure that you summarise the key assumptions/aspects/findings/limitations in your presentation.

(3 marks)

  • Provide a recommendation to OCL as to which of the two purchase options should be chosen. Briefly explain your reasons for this recommendation.

(2 mark)

  • Depreciation is a non-cash expense, and NPV is focussed on Cash flow analysis. Should depreciation be a part of NPV analysis in any form? Explain

                                                                                                                                                                                                                                                                             (2 marks)

Further, 7 marks are allocated to the overall quality of the presentation. Please read the rubrics for details about all the criteria.

(5 + 2 + 1 + 3 + 2 + 2 + 7 = 22 Marks)

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