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Mock 2 Our Review

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Mock 2 Our Review

Post  Moderator1 on Sun Feb 27, 2011 11:20 pm

Few minutes please!

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Mock 2 Our Review

Post  Moderator1 on Sun Feb 27, 2011 11:36 pm


CIMA CASE STUDY
Free Mock 2
Review

We can analyse the mock exam as follows.

Belgium Government

By reading the issue, it seems there is no critical business issue in it, Yes there is no business issue in it. But this issue provides a great platform for all other related decisions. Because, now we have one customer, who contributes to 30% of the business, therefore we shall take that fact in to consideration in taking all other decisions around us. This is new information from the pre-seen as pre-seen there was no customer wise breakup given.

Meeting with the Government.

The purpose of this section is to confront you with some issues.

Claim

The claim for a project delayed, this is 20 million. May be we can try not paying this claim, if it was a different customer. But it’s a quite high risk for us to, fight with Belgium Government given their contribution so far and expected future business as given in the unseen.

Now you shall notice why that background information about the Belgium Government becomes quite important to manage individual issues.

Speed up project.

This is where BZCS needs to speed up a project as Belgium Government has requested. The cost of speeding up is 20 million. BZCS needs to accept the request irrespective of the loss in order to maintain the relationship with them.

General Point

A Candidate who might argue whether the relationship with Belgium Government is worth the above cost (Cost of Claim and speeding up a project) and this discussion would be awarded with marks. We need you to take a decision on this after looking at the overall picture of the relationship. Part of such costs needs to be paid anyway, irrespective of the government as well.

Coal power plant.

This is a profitable contract, NPV is 125 million. The problem is that BZCS is not having previous experience, therefore taking an additional risk as well. If BZCS fails to meet the quality & on time delivery, it would affect reputation of BZCS as well. This option looks financially attractive, hence Acceptability is achieved. Suitability is obvious as this can be a great strategic fit for BZCS. Learn the point that Feasibility (do we have resources to get the project implemented) is questionable.

How can we manage, Feasibility of the project ? The answer is nothing else but CCL.

Workshop on European Construction Industry

This section does not have any issue associated with it; this is for you to gain an understanding on critical success factors in industry. You can refer them when you are discussing issues and justifying recommendations.

Acquisition of CCL

CCL seems to be having excellent technical staff. Do we need to acquire it? A logical answer is yes.

Because if BZCS acquires CCL, then there will not have any problem with expertise to engage in Coal Power Plant contract by Belgium Government. This is how you should identify the links between issues; in a real world company all issues would be linked to each other and therefore a holistic view needs to be taken.

You need to do a business valuation; we have provided valuations based on few techniques. Refer our excel sheet, you need to discuss the relevance of each valuation in your discussion section, revise your Financial Strategy knowledge.

As far as valuation is concerned, PF valuation is 96 million, a suitable price would be €120 million which is slightly higher, with the assumption of Y5 cash flow continues to perpetuity. However if CCL wishes to sell at €180 which makes the acquisition too costly, BZCS needs to confront a counter offer of €120 million. A acquisition needs to be taken after looking at the future of business with the Belgium Government and future business prospects of this sector, as given in the unseen.

In your recommendations section do not forget to have an integration plan, a better frame work is to apply Druker's Golden rule (Use Financial Strategy knowledge). It covers many aspects. And say how to finance the acquisition, BZCS might have to obtain a loan. (Refer pre-seen on Financial Directors Comments)

Gaining insider information creates an Ethical Issues to be addressed appropriately in your report.

Asian Project

This is a straight forward ethical issue; your recommendation should be to stop using child labor.

We hope you got a clear understanding on the logic of this mock examination. Acquisition and Coal power plant are high priority issues. Claim, Speed Up project and Director Conflict are lower priority issues. If you justify their priority with a proper rationale, you will be rewarded; quite clearly there is no requirement to have the same priority order as of the examiner.

Please be back on the forum after the exams. We are a free service to help the students.

Good Luck!

Management,
CIMACASESTUDY

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Calculations

Post  Moderator1 on Sun Feb 27, 2011 11:54 pm

Find the attached calculations.
Attachments
workings.pdf You don't have permission to download attachments.(53 Kb) Downloaded 234 times

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Re: Mock 2 Our Review

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