Financial Report

FACULTY OF BUSINESS AND SOCIETY

Assessment Cover Sheet Resit period 2019/20

Module Code:

AF4S31

Module Title: STRATEGIC FINANCIAL

MANAGEMENT

Module Lecturer:

Assessment Title and Tasks: CAPITAL APPRAISAL AND WACC

Assessment No. 2 of 2 Essay

Date Set:

Submission Deadline:

Return Date:

Part A: Regulations and Support

Extenuating Circumstances If there are any exceptional circumstances that may have affected your ability to undertake or submit this assignment, make sure you contact the Advice Zone on your campus prior to your submission deadline.

Fit to sit policy: The University operates a fit to sit policy whereby you, in submitting or presenting yourself for an assessment, are declaring that you are fit to sit the assessment. You cannot subsequently claim that your performance in this assessment was affected by extenuating factors.

Plagiarism and Unfair Practice: When submitting this assessment, you will be asked to declare that it is your own work and that the sources of information and material you have used (including the internet) have been fully identified and properly acknowledged as required1. Additionally, the work presented should not have been submitted for any other assessment. You should also understand that the Faculty reserves the right to investigate allegations of plagiarism or unfair practice which, if proven, could result in a fail in this assessment and may affect your progress.

1 University Academic Misconduct Regulations

Details of Submission: Please note that the 5 working days late submission rule does not apply to resit assessments. If the assessment is submitted after the deadline then it will be classed as a failure unless extenuating circumstances are applied for and accepted (USW Advice Centre to be consulted).

Part B: Marking and Assessment

(to be completed by Module Lecturer) This assignment will be marked out of 100% This assignment is bonded. Assessment Task: An individual word-processed report, not exceeding 3,000 words based on the requirement, referenced in accordance with the Harvard system. Learning Outcomes to be assessed (as specified in the validated module descriptor https://icis.southwales.ac.uk): • To be able to critically assess, apply and evaluate the issues and techniques of

strategic financial management Grading Criteria:

Section Weighting Criteria (all sections)

1

A calculation of: a) the net present value of project Growth using a nominal (money terms) approach; and b) the payback period for project Growth. A detailed analysis showing how the NPV and payback period have been calculated should be included as an appendix to the report, together with any assumptions and related calculations.

30%

See the FBS marking criteria for postgraduate level assessments

2

Advice to the directors of Woodcote Range Co. on the viability of the proposed investment, and a summary of non- financial factors that the directors should consider before finalising their decision. Your advice should include an evaluation of the benefits and disadvantages of the two appraisal methods used.

30%

3

A discussion and critical evaluation of the theory that Financial Management involves determining an optimum capital structure. You should refer to relevant models and theories to support your work.

30%

Report structure, layout and referencing 10%

The weightings provided above give an indication of the relevant importance of each area of the assignment and may be used to help plan your allocation of time and the available word count.

Faculty of Business and Society Marking Criteria for Postgraduate Level Assessments

Grade Relevance Knowledge Analysis Argument and Structure Critical Evaluation Presentation Reference to Literature

D is

tin ct

io n

86 – 100%

The work examined is exemplary and provides clear evidence of a complete grasp of the knowledge, understanding and skills appropriate to the level of the qualification. There is also ample excellent evidence showing that all the learning outcomes and skills appropriate to that level are fully satisfied. The work is exemplary in all the categories shown above and demonstrates a particularly compelling evaluation, originality, and elegance of argument, interpretation or discourse.

76-85% The work examined is outstanding and demonstrates comprehensive knowledge, understanding and skills appropriate to the level of the qualification. There is also excellent evidence showing that all the learning outcomes and skills appropriate to that level are fully satisfied. The work is outstanding in the majority of the categories shown above or demonstrates particularly compelling evaluation and elegance of argument, interpretation or discourse.

70 – 75%

The work examined is excellent and is evidence of comprehensive knowledge, understanding and skills appropriate to the level of the qualification. There is also excellent evidence showing that all the learning outcomes and skills appropriate to that level are satisfied. The work will be excellent in the majority of the categories shown above or demonstrates particularly compelling evaluation and elegance of argument, interpretation or discourse.

M er

it

60 – 69%

Directly relevant to the requirements of the assessment

A substantial knowledge of relevant material, showing a clear grasp of themes, questions and issues therein

Comprehensive analysis - clear and orderly presentation

Well supported, focussed argument which is clear and logically structured.

Contains distinctive or independent thinking; and begins to formulate an independent position in relation to theory and/or practice.

Well written, with standard spelling and grammar, in a readable style with acceptable format

Critical appraisal of up-to- date and/or appropriate literature. Recognition of different perspectives. Very good use of a wide range of sophisticated source material.

P as

s

50 – 59%

A reasonable attempt to address the requirements of the assessment: may drift away from this in less focused passages

Adequate knowledge of a fair range of relevant material, with intermittent evidence of an appreciation of its significance

Reasonable analytical treatment which has a clear purpose

Generally coherent and logically structured, using an appropriate mode of argument.

It will contain some distinctive or independent thinking; may begin to formulate an independent position in relation to theory and/or practice.

Competently written, with only minor lapses from standard grammar, with acceptable format

Draws on a good variety of literature which includes recent texts and/or appropriate literature including a range of appropriate source material.

40 – 49% Some correlation with the requirements of the assessment but there is a significant degree of irrelevance

Basic understanding of the subject but addressing a limited range of material

Some analytical treatment, but may be prone to description, or to narrative, which lacks clear analytical purpose

Some attempt to construct a coherent argument but may suffer loss of focus and consistency.

Work which expresses a coherent position only in broad terms and in uncritical conformity to one or more standard views of the topic

A simple basic style but with significant deficiencies in expression or format that may pose obstacles for the reader

Evidence of use of appropriate literature. Frequently only uses a single source to support a point. Weak use of quotation.

Fa il

35 – 39% Relevance to the requirements of the assessment may be very intermittent, and may be reduced to its vaguest and least challenging terms

A limited understanding of a narrow range of material

Largely descriptive or narrative, with little evidence of analysis

A basic argument is evident, but there is a lack of clarity and coherence

Some evidence of a view starting to be formed but mainly derivative.

Numerous deficiencies in expression and presentation; the writer may achieve clarity (if at all) only by using a simplistic or repetitious style

Barely adequate use of literature. Over reliance on material provided by the tutor.

The evidence provided shows that the majority of the learning outcomes and skills appropriate to that Level are satisfied. 30 – 34%

The work examined provides insufficient evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence provided shows that some of the learning outcomes and skills appropriate to that Level are satisfied. The work will be weak in some of the indicators.

0-29% The work examined is unacceptable and provides little or no evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence shows that few if any of the learning outcomes and skills appropriate to that Level are satisfied. The work will be weak in the majority or all of the indicators.

1

AF4S13 STRATEGIC FINANCIAL MANAGEMENT RESIT ASSIGNMENT 2 ESSAY

INDIVIDUAL REPORT Assignment brief The directors of Woodcote Range Co., a listed company, are planning to meet market demand for its products by purchasing new machinery costing $3.5 million. The project name is ‘Growth’. The machinery would last for five years, at the end of which it would be replaced. The scrap value of the machinery is expected to be 5% of the initial cost. Capital allowances would be available on the cost of the machinery on a 25% reducing balance basis, with a balancing allowance or charge claimed in the final year of operation. This investment will increase production capacity by 10,000 units in the first year, increasing by a further 5% per year for years 2 to 5. Relevant financial information in current price terms is as follows:

- Selling price $450 per unit with inflation 3.5% per year. - Variable cost $275 per unit with inflation 4% per year.

Production departments take a share of existing overheads to the sum of $575,000 per annum and the project will generate incremental overheads of $300,000 per annum both quoted in current prices. Inflation of 6.0% per year applies to overheads. The machinery will also require the use of warehouse space which is currently being rented out and earning rental income of $120,000 per annum in current terms. The rental income is due to increase by 1.5% per annum. This income will be foregone if the project goes ahead. There will be working capital requirements of $500,000 at the outset. This amount will be released in full at the end of the project. Woodcote Range Co. pays tax on profits at the rate of 20% per year, one year in arrears. The company has a nominal (money terms) after-tax cost of capital of 15% per year.

2

Required You have been asked to produce a report for the directors of Woodcote Range Co. to include the following:

1. A calculation of: a) the net present value of project Growth using a nominal (money terms)

approach; and b) the payback period for project Growth.

A detailed analysis showing how the NPV and payback period have been calculated should be included as an appendix to the report, together with any assumptions and related calculations.

2. Advice to the directors of Woodcote Range Co. on the viability of the

proposed investment, and a summary of non-financial factors that the directors should consider before finalising their decision. Your advice should include an evaluation of the benefits and disadvantages of the two appraisal methods used.

3. A discussion and critical evaluation of the theory that Financial Management

involves determining an optimum capital structure. You should refer to relevant models and theories to support your work.

The work submitted should use a variety of sources. Marks are available for the presentation of your report including structure, style and the presentation of referencing. Assessment guidance The word limit for the report is 3,000 words (+/- 10%), excluding references, and the word count should be shown at the end of the document. The document must be your own work, but you are expected to demonstrate that you have utilised multiple literature sources from the academic, professional and technical literatures. Please note that sites such as Wikipedia and Investopedia, whilst useful as a starting point for your research, are not suitable sources for your assignment, so you need to widen your search to include other texts and sources. The use of literature must be referenced using the Harvard system. Failure to acknowledge the work of others is plagiarism and will result in a case of Academic Misconduct being filed by the assessor. A guide published by the library lists the most common types of references with examples. The guide is published at: https://advice.southwales.ac.uk/a2z/referencing-plagiarism-and- good-academic-practice/