Question 1

“Anuvia Plants Nutrients Corporation

Zellwood-based Anuvia Plants Nutrients Corporation completed one of the largest fundraising rounds seen in Central Florida this year, raising US$53.8 million from JP Morgan Securities LLP, according to SEC filings. The company makes plant nutrients used on farms, lawns and golf courses

Venture capital is critical for startups and early stage-companies. It funds companies as they scale up while also providing business expertise and industry connections.”

Source : Orlando Business Journal (2019)

Anuvia Plants Nutrients Corporation manufactures and supplies fertilizers. The company offers fertilizers for turf and agricultural industries. The company is in its early stage, and the Chief Executive Officer is keen to explore funding sources for expansion and growth.

a. Critically discuss TWO benefits and TWO threats associated with venture capital as a funding source.

b. Identify another critical source of finance for startups and early stage-companies, and critically discuss TWO benefits and TWO threats associated with this funding source

c. As the business grows into maturity and establish itself, the company may seek public listing. Critically discuss an external source of long-term financing that is appropriate for a public listed company.

Question 2

The Chief Executive Officer (CEO) needs to seek further funding in Anuvia Plants Nutrients Corporation’s expansion plan, by presenting the company’s financial performance and standing to potential investors. Presented below are the summarized accounts for Anuvia Plants Nutrients Corporation.

The opening balances of total assets. Liabilities and equities at the beginning of the year are also provided:

a. In addition to the financial statements presented above, key financial ratios indicating the profitability, efficiency and liquidity of the company for the past year has been compiled, together with their respective industry averages for benchmarking.

Calculate the ratio values for Anuvia Plants Nutrients Corporation for the year ended 31 Dec 2019 as follows:

b. Interpret the following ratios of for Anuvia Plants Nutrients for the year ended 31 Dec 2019. 

i. Operating Profit Margin

ii. Return on Capital Employed

iii. Quick/Acid test ratio

iv. Times interest earned 

v. Debt to Equity ratio 

c. Explain FIVE general limitations of financial ratio analysis to the CEO.

Question 3

The global business landscape has changed radically since the financial crisis of 2008-2009. However, despite their volatility and differing economic fortunes, emerging markets are critical to the growth of Multinational Corporations (MNCs). MNCs can best make use of the opportunities available in emerging markets, and free-trade zones have played a part in offering MNCs a virtually tax-fee base from which to assemble manufactured goods.

Anuvia Plants Nutrients Corporation’s long term strategy is to establish itself as a MNC with a global presence after public listing.

(a) Discuss FIVE characteristics of a manufacturing multinational corporation.

(b) Critically evaluate THREE effects a manufacturing multinational corporation has on a hosting developing economy.

Question 4

The CEO of Anuvia Plants Nutrients Corporation would like to present the valuation of the business to potential investors. She has made the following estimates concerning the annual returns on the company’s assets under possible economic conditions:

a. Using the above annual returns distribution for the assets, calculate the 

i. Expected rate of return

ii. Standard deviation

iii. Interpret your result for the standard deviation

b. The directors of the company were recently paid a dividend of $5 for each unquoted share held. 

The projected growth rate for dividends is 5% for the foreseeable future. Assuming the expected rate of return in (a)(i) is the investors’ required rate of return, using the dividend discount method, calculate the value for each share price.

c.    The CEO was recently informed of an alternative approach to business valuation, using the Capital Asset Pricing Model (CAPM). She was informed the required return of investors could be determined with the following information: 

• 6-monthUS Treasury Bill rate is 2.38% 

• The average S&P 500 index return is 6.68% 

• Equivalent industry beta is 0.89

i. Calculate the required rate of return of investors using the CAPM model. 

ii. Using the required rate of return form (c ) (i), calculate the value of each share.

c. Discuss THREE advantage of using CAPM valuation over Dividend Discount valuation.