5003ACC

Marathon Auto Engineering PLC is an independent automobile producer that generates various trucks for industrial use. The company owns and operates two automobile manufacturing plants in the UK. At the moment, Vehicles produced at these plants have petrol or diesel engines. Marathon Auto Engineering PLC purchases most of its engines from a country in Eastern Asia, which is known to have a long-standing border dispute with one of its neighbours.

There has been no interruption in engine supplies from this country over the past ten years, but several analysts have recently expressed concerns that the border dispute between the supplying country and its neighbour is likely to turn into an armed conflict in the near future.

As part of its expansion plan, Marathon Auto Engineering PLC is considering constructing a new automobile manufacturing plant. However, there are differing views among the directors on which type of engines this new plant would use in the trucks. Some of the directors believe that the new plant should also use the same petrol or diesel engines as this might allow the company to negotiate a lower price for its engine supplies. Others, however, believe that it is worthwhile to invest in a new manufacturing plant that will produce electric engines to be used in the trucks.

You have been asked by the managing director of the company, Mr Elijah Tatason, to analyse and produce a report based on the following information:

Prepare a report in suitable format for submission to the board of directors of Marathon Auto Engineering PLC, containing the following:

a) Your calculation of the net present value (NPV) and Internal Rate of Return (IRR) of each of the two options.

NB: You are positively encouraged to use Excel for your calculations. Paste your Excel workings into the Word file. There is no need to show the Excel formulae used.

b) A discussion of the benefits and disadvantages to Marathon Auto Engineering PLC, of investing in a new auto manufacturing Plant that produces electric engines-based trucks.

NB: You will need to research on the subject and cite/reference your sources properly. Use of academic/professional literature and credible Internet sources are strongly encouraged.

c) Give your recommendation on which of the two options should be chosen, with justification(s).