The company believes it will be a successful project and will help to
distinguish it from its competitors. However, the company would like
you to evaluate the project using different methods and present a
proposal to the investment committee in order for them to approve it.
a) JD Sports Fashion Plc is considering financing the project with
60% debt. Using the Internal Rate of Return (IRR) and Net
Present Value (NPV), appraise the project.
Hint: calculate the free cash flow of the project and use CAPM
to compute the discount rate.
b) Evaluate the project using Adjusted Present Value (APV).
c) Assuming the market risk of the project is similar to the overall
market risk of the firm, revise the project’s NPV using the
Weighted Average Cost of Capital (WACC). Compare the answer
to part a).
Note: Assume the same level of debt is held until the end of the
project. Do not consider the repayment of the debt principal in any
of the above valuations in parts a) to c).
d) Compare the methods used and give a final recommendation to
the investment committee. Make sure you critically evaluate all
methods and discuss other risk factors that were not included in
[Total Q2: 50 marks]
The structure of the report is open to your own interpretation of the
project, but should include the following items as a minimum:
1) Executive summary (objectives and content)
2) Rationale for the project (describe the current situation)
3) Ratio analysis (financial and non-financial)
4) Project financials (investment valuation methods)
5) Project risks (minimum one each of financial and non-financial)
6) Critical discussion of the methods (if the company did not invest
in the project)
7) Final recommendation to the investment committee for the
chosen funding method and supporting reasons for the choice
Guidelines Please read all questions and information provided carefully. Answers
should be an appropriate length, keeping in mind the question
requirements and total word count allowance.
In addition, your assignment should demonstrate the following
A critical appreciation of relevant literature and its use to support your
argument, substantiate calculations, and address other aspects of the
Taking ownership of the content, being prepared to debate and argue
a personal position, and providing evidence of evaluative skills. A
submission made up of extracts from published sources which is
descriptive or simply theoretical regurgitation is not acceptable. Your
submission must have interpretation and consideration of the challenges
and issues of applying theory to practice.
Logical flow of ideas and treatment; appropriate selection of real-world
factors related to the companies under scrutiny.
Evidence of additional personal research, and the ability to analyse
material from a variety of appropriate, relevant perspectives.
Presentation, structure, appropriateness of methodology, breaking into
section headings/subheadings, tidiness.
Marks will be awarded for proper referencing and originality of work.
Also note that plagiarism is a serious offence and your submission will
be electronically checked.
Your report must be handed in electronically no later than the given
date of submission.
Pages 13 Double spaced(3575 words)
Style and sources APA7, 1 source
Bibliography / Reference page
Study level Master
Assignment type Essay
Subject Business and Economics