Financial and Commercial Management

Read the following extract from an article in FM World dated 28 October 2013
It involves a warehouse that I managed in my logistics days and for which we had taken on
maintenance responsibility from the landlord.
The external cladding needed sandblasting and re-painting every 5-7 years and this was due a couple
of years into my tenancy. I looked beyond the obvious and found an insulated cladding with a 20-22
year life between maintenance and, with the agreement of the landlord, had the existing material
replaced. The new stuff cost 500,000 against a re-paint cost of 200,000, but with a life expectancy
of around four re-paint cycles we were quids in.
- See more at: http://www.fm-world.co.uk/comment/blog/trick-or-treat-some-skeletons-from-thecloset/#sthash.2ORlnq3f.dpuf

Assignment One (25 Marks)

Using the following assumptions, calculate, in terms of Net Present Value, the relevant costs of the
two types of cladding. Calculate through four re-paint cycles as he suggests. 10 Marks
Calculate again for 50 years, 2 cycles of the new cladding. 5 Marks
Assumptions
a)
b)
c)
d)

On average, the current cladding needed sand-blasting and re-painting every 6 years.
The new cladding would last 24 years before needing to be renewed.
The existing cladding still had 2 years of life remaining.
One all-in discount rate of 3%

Show your calculations using an appropriate costing approach e.g. Discounted Cash Flow or similar.
What are the advantages and disadvantages of using Net Present Value Calculations in this case? 10
Marks

Deliverables
Assessment One
Two spreadsheet calculations. The spreadsheets themselves must be submitted. They should
be so formatted to allow the tutor to change variables (e.g. change discount rates etc.) and the
spreadsheet to automatically re-calculate the new result(s)
Advantages and Disadvantages a Bulleted list, not more than 2 sides of A4
Part Two (75 Marks)
This is an innovative form of cladding. What research would you undertake to satisfy any concerns
you might have about the company supplying the cladding? What would you be looking for; and
where would you look?
Briefly, if you decided to adopt this form of cladding, what implications might there be for budgeting
and how might you address these implications?

(i)
(ii)
(iii)
(iv)
(v)

What research would you undertake to satisfy any concerns you might have about the
company supplying the cladding?
What would you be looking for; and
where would you look?
Briefly, if you decided to adopt this form of cladding, what implications might there be
for budgeting and
how might you address these implications?

Deliverables
Part One

Two spreadsheet calculations. The spreadsheet itself must be submitted.

Advantages and Disadvantages a Bulleted list, not more than 2 sides of A4

Part Two

A Report of not more than 2,000 words (approximately 4 sides of A4)

Use the Harvard system of referencing.

All of the material for this Assignment can be found on the module web-site.