Investors and Contractors Assests and Procurement

Question: Describe about the Investors and Contractors for Assests and Procurement. Answer: 1. The major investment in mining company can be in the infrastructure assets and procurement of mining sites. The investment requirement in the infrastructure assets by the mining companies is huge and they need heavy machinery to be able to mine the ores and minerals present in the mining site. Also the company has to forecast the quantity of different machinery, cutting tools and machines to transport the minerals extracted from the sites to plants where they can be refined and converted to usable products. There are many companies which help in providing the financing for providing the necessary infrastructure. Also huge investments are required while bidding for the mining projects. The mining companies can earn a huge amount of money from the potential mining sites and hence invests in procurement of mining sites. Also there are firms which invest in sites and make them ready for mining and then these sites are sold to the mining company. This helps in reduction of risk of the mining companies and also makes it easier for them to start the project. (Chew, 2012) Lastly, mining companies invests in human capital and the training is provided to each employee working on the site and provides safety equipment to them. 2. The most important activities carried out from CFOs office are: Decision making: The CFO of a company helps in managing the financial risk of the company. The CFOs office decides the various investments of the company in various projects and funds. It is responsible for finalizing a project based on the return and risk involved it. The CFOs office is also in charge of the capital structure the company has and has to take decisions regarding the change in capital structure by increasing or decreasing the equity and leveraging on the debt to equity ratio to maximize the returns for the company. The CFO must also have valid reasons while making changes in the structure and should be able to justify the changes when subjected to scrutiny by the shareholders of the company. Assessment of the company: The CFOs office is responsible for the assessing the performance of the company based on the performance in the last year and taking necessary steps to achieve its goals. They take inputs from various departments and then combine the entire data to produce reports and help CEO in assessment of the company. They also translate the financial metrics into understandable format for the shareholders. CFOs office need to take care that no wrong or incorrect information is passed to the shareholders which can affect the prices of the shares of the company. Planning and forecasting: The CFOs office is also responsible for the planning and forecasting the future production of the company and helps each department in setting their goals and targets. They need to consider the low performing assets and find ways to improve its efficiency. If the CFO finds an asset to be non performing and will not be of any use to the company in near future, he can also dispose them off. The CFO uses scenario analysis and forecasting models to plan for different situations and remove all the contingencies from the same. The CFO is responsible for planning the long term sustainable growth for the company. (Biery, 2015) Thus the role of CFO is very important in setting the goals and objectives for the company. 3. While managing the funds of a public listed company, the managers should consider the impact their decisions will have on the investment made by the shareholders. The managers need to be more careful while dealing with funds of a public listed company as the money is not owned by them but the people and it is their responsibility to provide value to the investment made by the public. If the company takes care of its customers and is able to deal with the specifications required by them in time at appropriate cost then the company can make loyal customers which can provide more business to the company and earn more profits for the shareholders. Also while taking a decision, the manager of public listed company should take in to account the value their decision is going to add to the shareholders and if their decisions are going to impact the stakeholders. They should inform all the decision taken by them to the shareholders and try to add benefit to the shareholder and stakeholder at large. 4. Antipodes Mineral resources (AMR) is not only accountable to the owners of the firm but also to all the stakeholders involved with the company which includes customers, suppliers, employees and shareholders. AMR should take in to consideration all the stakeholders before taking any decision and the decision should be such that it is favorable to all of them. The company should generate profits for the owners of the company but it should also treat its employees with care as it is because of the continuous effort by the employees the company has been able to generate the profit. The company should treat its suppliers with care as it can provide competitive advantage over the competitors and the supplier will ensure that the company will have all the necessary supplies in time and at the best possible price and this can be beneficial for both of them. If the company takes care of its customers and is able to deal with the specifications required by them in time at appropriate cost then the company can make loyal customers which can provide more business to the company and earn more profits for the shareholders. Also the mining company should take care that the pollution created by the company does not affect the people living in those areas. Thus, Antipodes Mineral resources is not only accountable to the owners but to all the people affected by it. (Jensen, 2001) a. The cash flow on the project is given below Year Cash flow 0 -3000000 1 700000 2 700000 3 700000 4 700000 5 -1300000 6 700000 7 700000 8 700000 9 700000 10 900000 We need to find the NPV (Net present value) of the project. Net present value is defined as the present value of the future cash flow. It is obtained by discounting the future cash flow to present. It is given by NPV = Thus NPV = 136462.99 Thus NPV of the project is positive. So the company can go ahead with the project. C. Payback period is the time after which the revenue generated is equal to the investment. Thus in this case, payback period is in between 7 and 8 years. Pay back period = 7 + (100000/700000) = 7.14 years. (Investopedia, 2011) Discounted Payback period is the time after which the present value revenue generated is equal to the investment made. Year Cash flow Present Value Cumulative Value 0 -3000000 -3000000 -3000000 1 700000 636363.6364 -2363636 2 700000 578512.3967 -1785124 3 700000 525920.3606 -1259204 4 700000 478109.4188 -781094 5 -1300000 -807197.72 -1588292 6 700000 395131.751 -1193160 7 700000 359210.6828 -833949 8 700000 326555.1661 -507394 9 700000 296868.3329 -210526 10 900000 346988.9605 136463 Thus in this case, Discounted Payback period = 9 + (210526/ 346998.96) = 9.606 years The discounted pay back period is very high and the investors would prefer to invest in a project where the discounted pay back period is lower and could consider other options. References Chew, A. (2012). Investing in mining related infrastructure - what investors and contractors should know. Retrieved on September 16, 2016 from https://www.corrs.com.au/thinking/insights/investing-in-mining-related-infrastructure-what-investors-contractors-should-know/ Jensen, M. (2001). Value maximization, stakeholder theory, and the corporate objective function. Retrieved on September 16, 2016 from https://onlinelibrary.wiley.com/doi/10.1111/j.1745-6622.2001.tb00434.x/full Investopedia. (2011). Net Present Value NPV. Retrieved on September 16, 2016 from https://www.investopedia.com/terms/n/npv.asp Investopedia. (2011). Payback Period. Retrieved on September 16, 2016 from https://www.investopedia.com/terms/p/paybackperiod.asp Biery, M. E. (2015). 4 Key Functions of a Chief Financial Officer. Retrieved September 7, 2016 from https://www.entrepreneur.com/article/242001