Question

Golden Joy Investment is engaged in mining in a deprived farming community in the Western North Region of Ghana. The company invested heavily in their concession and eventually has started recouping their investment. The community, led by their Chiefs and Elders, have written a petition to the company for support for two key infrastructural needs. Imagine you have been employed as financial consultant in an established firm of your choice:
(a) How will the mining company be able to determine, and maximise or satisfice stakeholders' expectation?

(b)What will be the objective of each stakeholder identified?
Veroni Ventures a key distributor of Voltic Water and other assorted products is considering investing Ghc335,600 in a project at Kasoa with a five year life. The project will result in an increase in the company's turnover of Ghc350,000 at additional fixed cost of Ghc110,000 and a variable costs ofGHS150,000.
At the end of the project in five years’ time, the assets will be sold for Ghc35,000.The company's required rate of return is 10%. Assuming you are the financial director of such company:
(c) How will you determine the Net Present Value of the project of Veroni’s Ventures?
EV
(d)Calculate the sensitivity of the investment decision in (a) to the estimates of
i. Variable Costs AP
ii. Discount Rate EV
Total

Answer 1

(a) Stakeholders are those person which are directly or indirectly get affected with the operation of the entity. So, basically an entity have shareholders, customers, and society as there stakeholders.

Since, Gold Joy is engaged in mining in a farming deprived community. So, it needs to improve its  coexistance there , it have to pay attention to there requirement from this project i.e. what  community expects from this project. Company can maximise the stakeholders expection by:-

(i) Developing the overall infrastructure of the community which will turn out to be benificial for all

(ii) Developing Employment oppurtunity

(iii) Creating any other activity which could me done instead of farming depending upon the natural resources available in the community.

(iv) Improving the employbility of the people in the society

(b) Objective of each Stakeholders identified

The customer:- Good Quality product at competative prices and be flexible with the demand and location of requirement.

The Shareholders:- Increase in earning, upward growth rate,transparency with the operation

The community/society needs can be :-

(i) To have better infrastructure which would add value to the society

(ii) Increase in employment

(iii) Betterment in there living strata

(iv) Development of land so that they could start farming and improve their livelihood

C
Computaion of NPV (assuming constant cashflow over the five years)
                  
Year 1    2 3 4 5
Sales   350000   350000   350000   350000   350000
V.C. 150000   150000   150000   150000   150000
F.C. 110000   110000   110000   110000   110000
Cash Flow   90000   90000   90000   90000   90000
Sale of assets   0 0 0 0 35000
Net CF 90000   90000   90000   90000   125000
DF@10% 0.909091   0.826446   0.751315   0.683013   0.620921
DNCF   81818.18   74380.17   67618.33   61471.21   77615.17
                  
Net Inflow   362903.1              
Net outflow   335600              
NPV   27303.06              
                  
Since the NPV is positive investment should be made  

D

Sensitivity = % change in output/ % change in input

Since there is no change in sales and discounting factor in the project it will remain same