You and a partner are thinking of developing an innovative product and bringing it to market in the next year or so.  Prepare an analytical report to a prospective financier to persuade them

that the product will create economic value sufficient to provide an acceptable rate of return on funds invested.

Criteria:

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The assignment must be completed in pairs for all modes of students.

Economics (350 words) – 8 Marks Total
Address the following in your discussions, based on your learning of economic principles:
1.    What innovative product will you produce? Justify your choice demonstrating a current consumer need/want/demand that can create economic value for the investors. (1 mark)
2.    Who are your main target markets/segmentation? (1 mark)
3.    What factors will determine your choice of suppliers for relevant inputs? (2 marks)
4.    Discuss one factor that will ensure that you can compete against the current market participants. You will need to identify your main competitor. (2 marks)
5.    Discuss one relevant macroeconomic factor that may impact the success of your venture. (2 marks)

Accounting (350 words) – 8 Marks Total

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In relation to the new product address the following questions in your discussions, based on your learning of accounting principles:

1.    Explain the difference between equity and debt funding and then how each one impacts on profit. Further, within the Balance Sheet how would each one be classified?    (2 marks)
2.    How would an increase in capital (equity) appear in the Cash Flow Statement? Would it be different if the same funds were raised by debt?    (1 mark)

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3.    Would you use cash accounting or accrual accounting in regard to the new product? Why?    (2 marks)
4.    If the presentation is successful and the new product is launched, would you consider using alternative valuation bases in your reporting or would you continue to use the original cost?

Explain.    (1 mark)
5.    As the manager of the business which launches the new product, should you be more concerned with ensuring the organisation makes a profit or should you be more concerned with

maintaining healthy cash flows and less profit? Explain. (2 marks)

Finance (350 words) – 8 Marks Total

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Address the following in your discussions, based on your learning of finance principles:
1.    How much capital is required to fund this investment? Explain the composition. (0.5 mark)
2.    Will you be seeking equity or debt funding from the financier? (0.5 marks)
3.    If you are seeking equity or debt funding, how much will you require the financier to contribute and what would be his/her rate of return for investing in your firm? How will the return

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to the financier be distributed? (1 mark)
4.    Provide an outline of incremental cash flows associated with undertaking this investment project. Explain how and why you believe this investment will create value to your firm and

your financier. (4 marks)
5.    What are some business and financial risks which will impact the feasibility of your project, which will require careful monitoring? Discuss at least four. (2 marks)

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