Financial Management Assignment 02 : Deira Trading Plc, Palm Properties Plc & Lux Cars

GENERAL INSTRUCTIONS

• APA 7th edition referencing guidelines needs to be followed.
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• Revaluation cannot be requested for plagiarized assignments as the assignment stands as an academic misconduct. If a program participant submits the assignment late, but within 1 week after the submission date a 20%penalty will be appliedRe-evaluation request is NOT applicable for any failed courses provided the mark range from 59 to 69.Any grade which is below the range is however not applicable for this request.
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  Assignment once submitted to exam board is final for marking.
• Second extension cannot be provided without supporting documentary evidence.
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• PS. Kindly note to adhere to all the above instructions. Failing to read this, ATMS will not be responsible for anyactions taken.

Assignment

Answer all the Questions. (Word Limit-2000-2500 words)
Deira Trading Plc
All values in AED Millions

Income statement for the year ended 30th September 2025

Question 1 Required:

1.1 Calculate the following ratios for 2 years (2024 and 2025) for Deira Trading Plc:

Gross Profit Margin
Net Profit Margin
Net Asset Turnover
Receivable Days
Payable Days
Return on Capital Employed
Debt / Equity Ratio

Return on Equity

(12 marks)

1.2 Comment on the financial performance of Deira Trading Plc between the years 2022 and 2025 using the ratios above and any other financial measure you feel appropriate. (10 marks)

1.3 In 2023 the share price of Deira Trading was 40 AED per share. Today the share price is 55 AED per share. Critically evaluate if you believe the directors of Deira Trading Plc are maximising the wealth of shareholders. What other goals might the company consider. (8 marks)

Question 1 Total 30 marks

Question 2

Palm Properties plc is looking to take on a new investment. The company will evaluate two mutually exclusive projects, whose details are given below. The company’s cost of capital is 8%.

5. Critically discuss the merits of each investment appraisal method, then discuss the result of the evaluations you have made of the two projects and advise the company which project should be undertaken (9 marks)

Question 3

Required:

Lux Cars is considering an investment into a fleet of luxury vehicles, it could lease or buy the assets outright.

The purchase price is AED 3,250,000 and the cars would be expected to be utilized for 5 years. If it buys the cars Lux Cars will need to fund it using capital that costs them 7% per year. Annual servicing for the cars will be 350,000 AED.

Alternatively, the lease payments will be AED 1,000,000 per year for 5 years with rentals payable at the start of each year. If leased the lessor will cover the service costs.

1. What are the respective present value costs of purchasing or leasing the cars? (8 marks)
2. Consider the theoretical cost of Debt, Preference Shares and Ordinary Shares rank them from most expensive to cheapest. (7 marks)
3. Recently one of your company directors has attended a finance conference, on their return the director has decided the company should fund all projects with external debt finance since this is lower cost when compared to equity. Critically discuss the statement, outline if this is a realistic proposition? (8 marks)
4. Discuss whether the company should raise finance (via any means) if it has a project available with a net present value of AED 10 million (7 marks)