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SummativeAssessment-Winter2019.pdf

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BPP Coursework Cover Sheet

Please use the table below as your cover sheet for the 1st page of the submission. The sheet should be before the cover/title page of your submission.

Programme MSc Management with Finance

Module name Corporate Financial Strategy

Schedule Term Winter 2019

Student Reference Number (SRN)

Report/Assignment Title

Date of Submission

(Please attach the confirmation of any extension received)

Declaration of Original Work:

I hereby declare that I have read and understood BPP’s regulations on plagiarism and that this is my original work, researched, undertaken, completed and submitted in accordance with the requirements of BPP School of Business and Technology.

The word count, excluding contents table, bibliography and appendices, is ___ words.

Student Reference Number: Date:

By submitting this coursework you agree to all rules and regulations of BPP regarding assessments

and awards for programmes. Please note, submission is your declaration you are fit to sit.

BPP University reserves the right to use all submitted work for educational purposes and may

request that work be published for a wider audience.

BPP School of Business and Technology

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Programme: MSc Management with Finance

Module: Corporate Financial

Strategy

Coursework Assessment Brief

Winter Term 2019

Submission deadline: 2nd January 2020 at 23:59 hrs

Submission mode: Turnitin online access

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1. General Assessment Guidance

• Your summative assessment for this module is made up of this coursework submission which

accounts for 80% of the marks

• The deadline for submission is 2nd January 2020 at 23:59 hrs Please note late submissions will

not be marked.

• You are required to submit all elements of your assessment via Turnitin online access. Only

submissions made via the specified mode will be accepted and hard copies or any other digital

form of submissions (like via email or pen drive etc.) will not be accepted.

• For coursework, the submission word limit is 3500 words. You must comply with the word count

guidelines. You may submit LESS than 3500 words but not more. Word Count guidelines can be

found on your programme home page and the coursework submission page.

• Do not put your name or contact details anywhere on your submission. You should only put

your student registration number (SRN) which will ensure your submission is recognised in the

marking process.

• A total of 100 marks are available for this module assessment, and you are required to achieve

minimum 50% to pass this module.

• You are required to use only Harvard Referencing System in your submission. Any content which

is already published by other author(s) and is not referenced will be considered as a case of

plagiarism.

You can find further information on Harvard Referencing in the online library on the VLE. You can

use the following link to access this information: http://bpp.libguides.com/Home/StudySupport

• BPP University has a strict policy regarding authenticity of assessments. In proven instances of

plagiarism or collusion, severe punishment will be imposed on offenders. You are advised to

read the rules and regulations regarding plagiarism and collusion in the GARs and MOPP which

are available on VLE in the Academic registry section.

• You should include a completed copy of the Assignment Cover sheet. Any submission without

this completed Assignment Cover sheet may be considered invalid and not marked.

http://bpp.libguides.com/Home/StudySupport

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2. Assessment Brief

A potential investor in BAE Systems has raised concerns that the company has entered the

top ten of companies with the highest level of pension scheme contributions relative to their

dividends declared in a year. The potential investor is concerned that this may suggest a

prioritising of the financial health of the pension scheme over maximising returns to investors.

Name

Rank

Contributions (£m)

Dividends paid (£m)

Contributions as a percentage of

dividends

Tesco 1 279 100 279%

International Airlines Group 2 881 512 172%

Royal Mail Group 3 272 231 118%

Royal Bank of Scotland 4 627 583 108%

Barclays 5 1,152 1,273 90%

BT 6 1,136 1,436 79%

Pearson 7 242 318 76%

BAE Systems 8 517 692 75%

Smiths Group 9 99 167 59%

Morrison Supermarkets 10 75 129 58%

Source: JLT Quarterly Reports (Jan 2019) The FTSE 100 and their Pension Disclosures

Write a report to potential investors making use of BAE System’s Annual Reports. Your

report should only cover BAE System’s London Stock Exchange Listing. The following

areas should be included: -

(a) Discount Rates & Capital Structure

i. Calculate BAE System’s Cost of Equity (Ke), Cost of Debt (Kd) and Weighted

Average Cost of Capital (WACC) for each year for the last 5 years. Show your

workings and state the sources for any of your assumptions.

15 marks

ii. Critically assess and discuss the capital structure that BAE Systems has and

the impact that these choices have made on its Ke, Kd, and WACC. If BAE

Systems has any debt funding, assess its ability to make the repayments

required using a range of appropriate ratios.

10 marks

(b) Dividend Policy:

i. What has the company paid out as dividends in each of the last 5 years? How

is it changing? 5 marks

ii. Critically assess whether these pay-outs are affordable using a variety of

measures. 5 marks

iii. Evaluate whether the dividends that have been paid are consistent with the

company’s stated dividend policy. Provide appropriate academic theory on

dividend policy where appropriate. 5 marks

Total 15 marks

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Value the equity shares of BAE Systems using both

• Static valuation multiples 10 marks

• An absolute valuation technique of your choice 10 marks

In both cases justify your choice of parameters used.

Total 20 marks

(d) Critically discuss where BAE Systems is in the Corporate Life Cycle discussed during

the module, by analysing its:

• Revenue & profit growth

• Financing (proportions of debt and equity funding)

• Free Cash Flow

• Dividend Pay-out ratio

Justify your answer with a range of comparisons of the company’s performance.

10 marks

(e) Using Rappaport’s Seven Value Drivers and together with a comparison against a

leading competitor, critically analyse how BAE System’s has contributed to

shareholder value over the last 5 years.

10 marks

Total (80 marks)

You should refer where possible, to appropriate academic theories.

If you use Excel for any calculations, paste a copy/copies of the appropriate worksheets

covering both the numbers AND formulas into your Appendix.

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3. Marking Guide

Assessment Marking Scheme (Student Version) The assignment is marked out of 80. The following table shows the mark allocation and the

particular approach required:

Assignment Part Mark Approach

(a) Discount Rates (i) (ii)

Up to 5 marks for correctly calculating at least 5 years’ of each of kd, ke, and WACC. You must reference the source of all information used. How has the balance of equity and debt funding in the company changed? How has this affected the financial risk (measured through gearing and/or interest cover) in the company, and investors’ expected returns? How affordable are the interest payments compared to the company’s profits and cash flows? Why ? An excellent answer will calculate kd, ke, and WACC for each year, and critically evaluate why the figures change, and the impact of those changes.

(b) Dividend Policy 5

What has the company paid out to Shareholders, per share and in total, each year over the last 5 years, and how has the amount changed? You should provide a commentary on the figures. Affordability of the dividends can be measured through the dividend payout ratio, and through the impact on the company’s cash flow. Critically compare and evaluate the company’s stated dividend policy with the ways in which the company has returned cash to shareholders over the last 5 years i.e. it’s stated policy vs it’s actions.

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An excellent answer will compare the dividend policy against a range of academic theories, and in the context of the company’s financial position and its ability to pay dividends. It is NOT sufficient to just state the dividends that the company has paid.

10 marks

Value the company’s share price using a range of comparative multiples (e.g. Price Earnings multiple, Dividend Yield, EV/EBITDA). You should justify your multiple by comparing it against the multiple of a similar company or market index. Up to 5 marks for correct choice of an appropriate multiple; up to 5 marks for the valuation calculation AND an absolute valuation measure (e.g. Discounted Cash Flow, Gordon’s Growth Model). You should justify the choice of parameters in your valuation model. Up to 5 marks for the valuation methodology, and up to 5 marks for justification of the appropriate parameters in the valuation model An excellent answer will also compare the different valuations against the market price and suggest possible reasons for the differences.

(d) Corporate Life Cycle

Relate where the company is in the Launch-Growth-Maturity-Decline Lifecycle on a variety of measures of its financial position An excellent answer will also compare the company’s position against one of its peers. Maximum 8 marks if no peer comparison

(e) Shareholder Value

You should critically analyse the Total Shareholder Return of the company and assess its performance on each of the seven Rapaport Value Drivers over at least the last 5 years. It

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is not sufficient to list Rappaport’s drivers; you must apply them to BAE Systems. An excellent answer will also compare performance on each of the Value Drivers against the company’s peer group. Maximum 8 marks if no peer comparison

Total 80 marks

Appendix A - General Level 7 Grading Criteria

Criteria Pass Grades Fail Grades

High

Distinction

85-100%

Distinction

70-84%

Merit

60-69%

Pass

50-59%

Fail

30-49%

Low Fail

0-29%

The work

displays:

The work

displays:

The work

displays:

The work

displays:

The work

displays:

The work

displays:

Knowledge &

Understanding

(a) Systematic

Understandin

(b) Emerging

Thought

(a) Strong

evidence of a

comprehensive

and systematic

understanding

of an extensive

range of

appropriate

issues,

concepts,

theories and

research

(a) Clear

evidence of a

comprehensive

and systematic

understanding

of a

considerable

variety of

issues,

concepts,

theories and

research

(a) Clear

evidence of a

comprehensive

and systematic

understanding

of all major -

and some

minor - issues,

concepts,

theories and

research

(a) Evidence of

a systematic

understanding,

which may

contain some

gaps, of all

major - and

some minor -

issues,

concepts,

theories and

research

(a) Evidence of

understanding

of an

appropriate

range of

issues,

concepts,

theories and

research but

has significant

gaps or

misunderstandi

ngs.

(a) Evidence of

a limited

understanding

of issues,

concepts,

theories and

research either

major and/or

minor.

(b) Sustained

excellence in

the application

of thoughts and

practices at the

forefront of the

discipline

(b) Precise and

well-judged

application of

thoughts and

practices at the

forefront of the

discipline

(b) Some clear

evidence of the

application of

thoughts and

practices at the

forefront of the

discipline

(b) Clear

evidence of an

understanding

of thoughts and

practices at the

forefront of the

discipline.

(b) Unclear or

imprecise

understanding

of thoughts and

practices at the

forefront of the

discipline.

(b) Significant

gaps in the

understanding

of the debates

at the forefront

of the

discipline.

Argument

(a)

Analysis,

Synthesis

Evaluation

(a) Consistently

precise,

accurate and

reasoned

analysis,

synthesis

and/or

evaluation;

addressing

(a)

Consistently

precise,

accurate and

reasoned

analysis,

synthesis

and/or

evaluation

(a) Precision,

accuracy and

clear reasoning

throughout the

analysis,

synthesis

and/or

evaluation

addressing all

(a) Broad

levels of

precision,

accuracy and

reasoning in

analysis,

synthesis

and/or

evaluation, and

(a) Errors

which affect

the consistency

of the analysis,

synthesis or

evaluation

and/or key

gaps in the

(a) A lack of

precision,

accuracy or

reasoning in

analysis,

synthesis or

evaluation with

significant gaps

Sensitivity: Internal

Criteria Pass Grades Fail Grades

High

Distinction

85-100%

Distinction

70-84%

Merit

60-69%

Pass

50-59%

Fail

30-49%

Low Fail

0-29%

The work

displays:

The work

displays:

The work

displays:

The work

displays:

The work

displays:

The work

displays:

(b)

Numerical

Analysis

(c)

Argument

ation

(d)

Independe

Research

issues with

insight or

originality

addressing all

issues, some

with creativity

issues

appropriately

addresses all

key issues

issues

addressed

in the issues

addressed

(b) Numeric

analysis that is

complete and

free from errors

with application

of methods that

may be

insightful or

original

(b) Numeric

analysis that is

complete and

mostly free

from errors

with fluent and

appropriate

application of

methods.

(b) Numeric

analysis that is

complete and

mostly free

from errors

with relevant

and effective

application of

methods.

(b) Numeric

analysis that is

mostly

complete and

free from

significant or

critical errors

with

appropriate

application of

methods.

(b) Numeric

analysis that is

mostly

complete but

contains errors

with significant

effect, or

methods that

are applied

inappropriately

(b) Numeric

analysis that is

incomplete or

contains errors

which have

critical effect,

or methods

that are applied

inappropriately

strong and

consistent

argument

making a

convincing

whole with

evidence of

originality.

Impressive

dexterity in the

use of

information

gathered to

support the

argument.

strong and

consistent

argument that

convincingly

addresses issues

including

uncertainties and

conflicts.

Excellent use of

information

gathered which

to support and

further the

argument

an argument

that is

generally

convincing with

a good internal

consistency

and addresses

most issues.

Very good use

of information

gathered to

support the

argument.

an overall

convincing

argument but

may have

weaknesses,

gaps or

inconsistencies.

Clear use of

information

gathered but may

have some

weaknesses in

the integration

into the

argument.

a consistent

argument but

may have

weaknesses,

significant gaps

or be

unconvincing.

Clear use of

information

gathered but

may not be

sufficient to

sustain the

argument.

consistency or

structure in the

argument.

Serious

weaknesses in

the integration

of evidence

and/or no

awareness of

the limitations

or weaknesses

of the

research.

Argument

(continue

(d)

Independe

Research

(d) Evidence of

an innovative

or original use

of extensive

personal

research which

has been

thoroughly

critically

evaluated both

conceptually

and

methodologicall

(d) Substantial

research and

evidence of an

innovative use

of a wide range

of personal

research with

clear and

consistent

critical

evaluation both

conceptually

and

methodological

(d) Clear

evidence of

considerable

personal

research and

the use of a

diverse range

of appropriate

sources but

may contain

problems with

consistency in

the conceptual

and

methodological

critical

evaluation

(d) Appropriate

use of a wide

range of

personal

research which

is critically

evaluated for

key conceptual

and

methodological

issues

although this

may not be

consistent

throughout

(d) Evidence of

a range of

personal

research but

evidence of

methodological

or conceptual

evaluation may

be limited,

inconsistent or

inappropriate

(d) Over

reliance on

very restricted

range of

personal or

secondary

research much

of which may

not be

evaluated and

may not be

directly related

to the question

or area

Presentat

ion

(a)

Structure

(b)

Referenci

(a) Excellent

structure and

presentation

(a) Excellent

structure and

presentation

(a) Good

structure and

presentation

(a) Adequate

structure and

presentation

(a) Adequate

structure and

presentation

(a) Poor

structure and

presentation

(b) Precise, full

and appropriate

references and

notes.

(b) Precise, full

and

appropriate

references and

notes.

(b) Full and

appropriate

references and

notes with

minor or

(b) Good

references and

notes with

minor or

insignificant

(b) Competent

references and

notes but may

contain

inconsistencies

(b) Poor

references and

notes with

multiple

inconsistencies

Sensitivity: Internal

Criteria Pass Grades Fail Grades

High

Distinction

85-100%

Distinction

70-84%

Merit

60-69%

Pass

50-59%

Fail

30-49%

Low Fail

0-29%

The work

displays:

The work

displays:

The work

displays:

The work

displays:

The work

displays:

The work

displays:

Language

insignificant

errors

errors or

omissions

, errors or

omissions

, errors or

omissions

of language

expressing

highly nuanced

thought with

clarity and

precision to a

level

appropriate for

submission for

publication.

of language

expressing

complex

thought with

clarity,

accuracy and

precision which

furthers and

enhances the

argument

precise use of

language

allowing a

complex

argument to be

easily

understood

and followed

clear use of

language

sufficient for

arguments to

be readily

understood

and followed

understandable

use of

language but

significant

errors in

expression

affecting

overall clarity

errors in the

use of

language

which makes

meaning

unclear or

imprecise

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