Business Expansion Assignment | Homework For You

Question 1 RED OIL Co wants to raise $20 million in order to expand its business and wishes to evaluate one possibility, which is an issue of 8% loan notes. Extracts from the financial statements of RED OIL Co are as follows. $m Income 140·0 Cost of sales and other expenses 112·0 –––––– Profit before interest and tax 28·0 Finance charges (interest) 2·8 –––––– Profit before tax 25·2 Taxation 7·6 –––––– Profit after tax 17·6 –––––– $m $m Equity finance Ordinary shares ($1 nominal) 25·0 Reserves 118·5 143·5 ––––– Non-current liabilities 36·0 Current liabilities 38·3 –––––– Total equity and liabilities 217·8 It is expected that investing $20 million in the business will increase income by 5% over the first year.

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper


Approximately 40% of cost of sales and other expenses are fixed, the remainder of these costs are variable. Fixed costs will not be affected by the business expansion, while variable costs will increase in line with income. RED OIL Co pays corporation tax at a rate of 30%. The company has a policy of paying out 40% of profit after tax as dividends to shareholders. Current liabilities are expected to increase by 3% by the end of the first year following the business expansion.

Average values of other companies similar to RED OIL Co: Debt/equity ratio (book value basis) 30% Interest cover 10 times Operational gearing (contribution/PBIT) 2 times Return on equity: 15% Required: (a) Assess the impact of financing the business expansion by the loan note issue on financial position, financial risk and shareholder wealth after one year, using appropriate measures. (20 marks) (b) Discuss the circumstances under which the current weighted average cost of capital of a company could be used in investment appraisal and indicate briefly how its limitations as a discount rate could be overcome. (20 marks) Get Finance homework help today

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper
Calculate the price
Make an order in advance and get the best price
Pages (550 words)
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Upload your instructions
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with Homework Writing Services
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
Good job
Customer 456821, May 13th, 2022
A job well done. Quite an improvement.
Customer 463679, March 30th, 2023
Finance/Acc related
Excellent work.
Customer 460073, April 29th, 2022
Absolutely well written with all the instructions followed. Thank you for the good job done!
Customer 463869, March 23rd, 2023
Fav writer
Customer 454223, June 15th, 2020
Always edit in Grammarly.
Customer 462635, April 8th, 2022
Great work
Customer 463647, May 3rd, 2023
Business Studies
Great work again!
Customer 454345, May 10th, 2020
Always confirm foreign names using Google.
Customer 458101, April 3rd, 2022
very good job
Customer 456821, June 15th, 2022
Very nice content. I am glad you took the corrections to heart and made the changes. Commendable work.
Customer 463679, February 22nd, 2023
Project Management
I gave a lower rating on the service because, a notification from the support team went out but it did not come to my email address. Had I not looked earlier on the website, then I would have been penalized for not turning in my paper on time. On my profile, I have a phone# and I also have an email address. Please set up a system to text or email new messages or notifications from the writer or support team. This will ensure that the order is processed in a timely manner. With the new and upcoming technology, this seems like it should be an easy fix to have a tool built in the website to email or text notifications of changes to orders. This is no reflection to the support team. I see this as a system issue and not a support team issue.
Customer 463323, September 26th, 2022
Customer reviews in total
Current satisfaction rate
3 pages
Average paper length
Customers referred by a friend
15% OFF your first order
Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.
Claim my 15% OFF Order in Chat