Part 1: 60 Marks
Assessment of suitability of the construction or housebuilder firm
(1800 words)
Select one (1) company from the table below which is a UK PLC that is quoted on the UK Stock Exchange. You must then obtain the most recently published “FULL ANNUAL REPORT” for the selected company. The annual report must be in the English language. You are required to assess the suitability of the chosen company, both as a building contractor and a potential investment, by preparing a report on the financial “health” of this company. This should be done by making use of financial ratios as revealed or implied by the most recent FULL annual report and its financial statements. Your report should be clear and succinct as if prepared for your boss (with no accounting knowledge) who is a very busy person with limited time to read it before an important meeting. All relevant information in the annual report should be used as necessary.Select one (1) company from this table
Crest Nicholson Plc
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Part 2: 40 Marks
Development decision making (1200 words)
You are required to propose a choice of two (2) housing schemes on the site for MF4BE to pick from. Decide on the total number of residential dwellings proposed for this site and the housing mix and types (e.g. 1 bedroom, 2 bedrooms etc). Note: a minimum of FOUR (4) house types is required for both proposed schemes.
a. Undertake breakeven analyses (charts included) based on only the development of houses in both of the proposed schemes. Based on the breakeven analyses, advise MF4BE on which of the two schemes is the best. Market information can be gleaned from a variety of databases e.g. “Rightmove” that will provide reasonable comparables. Cost information can be obtained from sources such as the Building Cost Information Service (BCIS) or Spon’s. (18 marks)
b. With the use of the information from (a) above, advise MF4BE on the viability of the two proposed schemes by carrying out capital budgeting using the Return of Capital Employed (ROCE), Payback Period (PP), Net Present Value (NPV) and Internal Rate of Return (IRR). Discuss which of these appraisal methods IS the most suitable for this task and advise which of the two proposed schemes is the best. Make appropriate assumptions regarding the timing of the construction and sale of the units.
(22 marks)
