Financial Management Assignment 02 : Deira Trading Plc, Palm Properties Plc & Lux Cars

GENERAL INSTRUCTIONS

• APA 7^th edition referencing guidelines needs to be followed.
• Similarity between student’s work is strictly not accepted, any student found with similar work will be graded Zero and fail for the course. However, Plagiarism is an academic offence and will not be tolerated.
• Any revaluation request should come in 5 days of grade release. Any late request will not be obliged.(Form and other details shall be shared based on request)
• Revaluation cannot be requested for plagiarized assignments as the assignment stands as an academic misconduct.
• If a program participant submits the assignment late, but within 1 week after the submission date a 20%penalty will be applied
• Re-evaluation request is NOT applicable for any failed courses provided the mark range from 59 to 69.Any grade which is below the range is however not applicable for this request.
• Any rescheduling request can be fulfilled within one week after the actual date of the assessment. Anylate request will not be obliged.
• Assignment once submitted to exam board is final for marking.
• Second extension cannot be provided without supporting documentary evidence.
• Program participants are strongly advised to keep a copy of their work in case the submitted copy shouldgo astray.

PS. Kindly note to adhere to all the above instructions. Failing to read this, ATMS will not be responsible for anyactions taken.

Total Marks ___ / 90

PLAGIARISM

Plagiarism is defined as providing material from an uncredited source, or without the acknowledgement of the original author. For longer submissions and reports, students are required to provide an Assignment Cover Sheet, which states that submission is their original work, and has not been submitted for another assignment, either in that course, or another

Plagiarism may have many forms including but not limited to:

• Outright copying another author’s work without acknowledgement o Cut and paste without the correct citation and acknowledgement o Copying key words but changing the sentence structure without crediting the original source
• Copying the sentence structure but changing some words without crediting the original source
• Following the structure or organization of another author’s work, or order of presentation of ideas
• Submitting work that was created by an unacknowledged third party (i.e., writing service, or another student)
• Copying from published authorities without acknowledgement
• Failure to correctly use quotation marks when expressing another author’s idea o Incorrect or improper use of in-text citation and referencing o Missing or incorrectly presented bibliography or reference list o Pretending ownership of another author’s ideas o Making work available to another person for copying o Falsifying results

The plagiarism tolerance for MBA is 8 %.

In cases where the plagiarism percentage exceeds the tolerance, students are given a second chance to rework on their assignments and submit. However, if the percentage continues to exceed the tolerance percentage the student will be awarded one grade lower than the original grade achieved.

Assignment

Answer all the Questions. (Word Limit-2000-2500 words) 

Deira Trading Plc

All values in AED Millions

Income statement for the year ended 30th September 2025

739                  1,113               1,190               1275

Assume all current liabilities are trade payables.

Sector average ratios:

Return on capital employed                17%                                                                    Net profit

margin                                     19%

Current ratio                                                    1.6 Times

Debt/equity ratio (book value basis)  55%

Return on equity                                              20%

Question 1 Required:

1.1 Calculate the following ratios for 2 years (2024 and 2025) for Deira Trading Plc:

Gross Profit Margin

Net Profit Margin

Net Asset Turnover

Receivable Days

Payable Days

Return on Capital Employed

Debt / Equity Ratio

Return on Equity

(12 marks)

1.2 Comment on the financial performance of Deira Trading Plc between the years 2022 and 2025 using the ratios above and any other financial measure you feel appropriate.

(10 marks)

1.3 In 2023 the share price of Deira Trading was 40 AED per share. Today the share price is 55 AED per share. Critically evaluate if you believe the directors of Deira Trading Plc are maximising the wealth of shareholders. What other goals might the company consider.

(8 marks)

Question 1 Total 30 marks

Question 2

Palm Properties plc is looking to take on a new investment. The company will evaluate two mutually exclusive projects, whose details are given below. The company’s cost of capital is 8%.

5. Critically discuss the merits of each investment appraisal method, then discuss the result of the evaluations you have made of the two projects and advise the company which project should be undertaken

(9 marks)

Question 3 Total 30 marks

Question 3

Required:

Lux Cars is considering an investment into a fleet of luxury vehicles, it could lease or buy the assets outright.

The purchase price is AED 3,250,000 and the cars would be expected to be utilized for 5 years. If it buys the cars Lux Cars will need to fund it using capital that costs them 7% per year. Annual servicing for the cars will be 350,000 AED.

Alternatively, the lease payments will be AED 1,000,000 per year for 5 years with rentals payable at the start of each year. If leased the lessor will cover the service costs.

a. What are the respective present value costs of purchasing or leasing the cars?

(8 marks)

b. Consider the theoretical cost of Debt, Preference Shares and Ordinary Shares rank them from most expensive to cheapest.

(7 marks)

c. Recently one of your company directors has attended a finance conference, on their return the director has decided the company should fund all projects with external debt finance since this is lower cost when compared to equity.

Critically discuss the statement, outline if this is a realistic proposition?

(8 marks)

d. Discuss whether the company should raise finance (via any means) if it has a project available with a net present value of AED 10 million

(7 marks)

Answer

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