Finance

Order Description -Case study SIG plc is a leading distributor of specialist building products in Europe. SIG has enjoyed considerable success in recent years and is considering two investment opportunities in the near future, product investment in SIG Interiors and acquisition of an existing company. As the newly appointed financial controller of SIG plc, you are responsible to evaluate the SIG Interiors project using different investment appraisal techniques, such as NPV and IRR. The management team judges that the cash inflows of the projects as shown below are an accurate estimation of the profits in the next five years. The appropriate discount rate to use for the firm’s projects is 10 percentage points per annum. Period Project B Cash flow(£000) 0 (7000) 1 (1600) 2 (1800) 3 (2200) 4 (2300) 5 (2500) At the same time, the board of directors is considering the purchase of a Bristol company, a company that has developed a considerable market in building industry. The transaction value is proposed at £20million. The management team concerns the financing of the transaction and potential risks in the acquisition process because M&A activities fail to increase value for the shareholders of acquirers in many cases. Based on the information you have, you are to prepare a report to the board of directors outlining whether SIG plc should consider its further investment in SIG Interiors and the acquisition of the building company in Bristol. Specially, you are to evaluate investment appraisal techniques, appraise financing of the investment, critically analyse challenges in the acquisition process including risk and uncertainty of the acquisition, and discuss potential applications of the investment on firm performance. -Appendix: Calculate the net present value and IRR of the investment using discount rates of 10 and 20 percentage points as preparation for determining its IRR by linear interpolation. Ignore taxation and inflation.