Tasmanian Motor Rental (TMR) is set up as a proprietary company in car rental industry and is…

Semester 1, 2019
BFA107 – FINANCIAL MANAGEMENT College of Business and Economic
BFA107 FINANCIAL MANAGEMENT
Semester 2, 2018
Assessment 2: Written assignment
Assessment: 15%
Description:
Your assignment involves preparing a written report where you will present an analysis of financial
information relating to a capital investment project described in the attached case study and provide
recommendations that will assist the firm in its decision making.
Length:
1,500 words maximum – this requirement refers to the written analysis section of the assignment only and is
a “maximum”. Students will not be penalised for using fewer words and making their report more succinct.
If you submit over-length work, there will be an automatic 10% penalty of the total possible marks for this
assessment. Title pages, calculations section, reference lists and appendices are included in the word count.
Assessment criteria:
Please see the assessment rubric uploaded on MyLo under assessment 2 folder for information on the
assessment criteria which will be applied when marking the assignment.
Percentage weighting: This assignment is worth 15%the final mark for the unit
Due date: Saturday, 18 May 2019 by 5pm
Submission instructions:
Assignment are to be submitted through the assignment submission folder on the unit’s MyLo site. There
will be no paper submission. You may only submit your assignment once. A signed assignment coversheet
should be downloaded from the assignment folder on MyLo and must be submitted. Assignments without a
coversheet will not be marked. The date stamp on the electronic submission will determine if your assignment
has been submitted on time. Late work will be penalised unless you have been granted an extension by the
unit coordinator.
This is an individual assignment. Under no circumstances should you share your workings or any part of your
assignment with other students – this constitutes academic misconduct and actions will be taken. All
similarity report on Turnitin will be thoroughly checked for matching with external sources and with other
BFA107 assignments. You are asked not to discuss the assignment with other students on MyLo. You may
ask general questions on MyLo if there is something you need clarified but you should not discuss any
calculations or where you have found any relevant information with other students.
Submitted electronic files must be named as follows:
? For Hobart students: HD_Student’s ID_Last name (Ex: HB_123456_Smith)
? For Launceston students: LC_Student’s ID_Last name
? For Cradle Coast students: CC_Student’s ID_Last name
? For Distance students: DS_Student’s ID_Last name
Semester 1, 2019
CASE STUDY
Tasmanian Motor Rental (TMR) is set up as a proprietary company in car rental industry and is considering
whether to enter the discount rental car market in Tasmania. This project would involve the purchase of 100
used late model, mid-sized cars at the average price of $15,000. In order to reduce their insurance costs, TMR
will have a LoJack Stolen Vehicle Recovery System installed in each car at a cost of $1,500 per vehicle. The
rental car operation projected by TMR will have two locations: one near Hobart airport and the other near
Launceston airport. At each location, TMR owns an abandoned lot and building where it could store
its vehicles. If TMR does not undertake the project, the lots can be leased to an auto-repair company for
$90,000 per year (Total amount for both lots). The $25,000 annual maintenance cost (total for both lots)
will be paid by TMR whether the lots are leased or used for this project. This discount rental car business is
expected to result in a fall in its regular car rental business by $20,000 per year.
For taxation purposes, the useful life of the cars is determined to be five years and they will be depreciated
using the straight-line depreciation method over 5 years with no residual values at the end. It is assumed that
the cars will first be used at the beginning of the next financial year: 1 July 2019.
Before starting this new operation, TMR will need to redevelop and renovate the buildings at each airport
locations. This is expected to cost $215,000 for both locations. Assume that TMR is not able to claim any
annual tax deduction for the capital expenditure to the renovation of the building until the business is sold.
TMR has also budgeted marking costs what will be spent prior the start of operation, during the first two
years of operation. The estimated costs are $30,000 per year. These costs are fully tax deductible in the year
they are incurred. In addition, if the project is undertaken, a total new injection of $150,000 in net working
capital will be required. There will be no additional working capital required from the commencement of the
operation until the end of the project. The initial networking capital will be recovered in full by the end of
year 5.





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