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You are employed by a house building company that is list on the FTSE250

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Scenario: You are employed by a house building company that is list on the FTSE250 and you have been 1 answer below » Scenario: You are employed by a house building company that is list on the FTSE250 and you have been asked to prepare a report by the Finance Director that will be presented to the main board for the funding of a new development. The company is proposing the purchase of a plot of land for £17,500,000 with planning permission for 500 houses, 5 shops, 2 office blocks, a school and a local centre. The cost for the buildings will be £45,000,000 spread over a 7 year period. The cost of preparing the site, roads, utilities and final landscaping will be 10% of the purchase price, of which 5% will View complete question » Scenario: You are employed by a house building company that is list on the FTSE250 and you have been asked to prepare a report by the Finance Director that will be presented to the main board for the funding of a new development. The company is proposing the purchase of a plot of land for £17,500,000 with planning permission for 500 houses, 5 shops, 2 office blocks, a school and a local centre. The cost for the buildings will be £45,000,000 spread over a 7 year period. The cost of preparing the site, roads, utilities and final landscaping will be 10% of the purchase price, of which 5% will need to be spent before any building can take place. The proposed sale of the houses will be: Year Number of Properties sold Budgeted income Budgeted Expenditure Now 17,500,000 1 50 12,500,000 6,000,000 2 75 15,750,000 8,500,000 3 90 20,000,000 15,000,000 4 80 + 5 shops 22,500,000 17,500,000 5 80 + 2 office blocks 25,000,000 17,500,000 6 75 16,000,000 10,000,000 7 40 12,000,000 8,000,000 8 10 3,000,000 The company will also require plant and machinery costing £750,000 and at the end of the project the plant and machinery will have no value. Compare and contrast the ways this development could be funded for a sole trader, partnership or a limited company Examine the suitability of each type of funding for the company requirements Recommend the funding the Finance Director should present to the board, with reasons for your choice. Calculate the cost of funding each option chosen Document Preview: Assume the following:
Any new shares issued will require a dividend of 2.75%
Convertible loan stock will carry a coupon of 3.5%
Loan stock will require a rate of 4% with repayment after 15 years Attachments: Financial-inf….docx View less » Oct 09 2015 10:46 PM


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