5BUS1186 Finance for Global Business
| Module Title: | Finance for Global Business | Module Code: | 5BUS1186 |
| Assignment Format & Maximum Word count | An INDIVIDUAL Report, maximum 2,000 words | Assignment Weighting: | 100% |
| Coursework Submission: | Time: 5pm Date: tbd Method: Studynet (online) | Coursework return Date returned to students: | (latest) |
| Module leader | Piotr Konwicki | First marker | Piotr Konwicki |
| Internal Moderator | Approved ☠Date: | Module Board name | Sem B UG Economics |
| External Examiner | Approved ☠Date: | Module Board date |
| Assessment Criteria |
| Learning Outcomes: Knowledge and Understanding tested in this assignment: |
| • Evaluate alternative sources of finance in relation to the objectives of business • Examine the returns to the providers of finance • Discuss sources of and management of risk in relation to a business operating internationally |
| Learning Outcomes: Skills and Attributes tested in this assignment: |
| • Critically apply investment appraisal techniques • Calculate the costs of capital for a business |
| Feedback /Marking criteria for this Assignment |
| Performance will be assessed using HBS Grading Criteria and Mark scheme. Guidance for improvement will be given in writing on the Assessment Feedback Form or on the StudyNet Feedback Form within 4 weeks of submission. For each day or part day up to five days after the published deadline, coursework relating to modules submitted late will have the numeric grade reduced by 10 grade points until or unless the numeric grade reaches 40. If a submission is more than 5 working days after the published deadline, a grade of zero will be awarded. Where the numeric grade awarded for the assessment is less than 40, no lateness penalty will be applied; |
Detailed Brief for Individual/Group Assessment
Assignment Title: Investment Appraisal: ThunderScooter Ltd
Description of the assignment:
ThunderScooter (“TS”) is an UK-based manufacturer of electric scooters. The company currently sells all its products in the UK. The annual turnover of the company was GBP 15 million last year and TS expects a steady 5% growth from the UK sales, although the net profit margin is only 5%. Recently TS participated in a trade-mission to South Asia and was surprised with a positive response of potential buyers.
Upon return, TS received an inquiry from an Indian trading company which, if signed, would double the turnover of the firm next year. It is expected that further orders may arrive, which together will comprise
2/3 of the total firm’s turnover. The profitability of overseas orders would the same as the UK ones at the current spot exchange rate.
All the costs of the company are in Sterling, while the Indian buyer insisted on signing contracts denominated in Indian rupee - TS would have to accept this provision to obtain the contract.
TS considers two possibilities to expand its manufacturing capacity. The following forecasts have been predicted and you have been asked to critically evaluate both independent projects over a 5-year period.
Forecasted net cashflow information about the projects (GBP ‘000):
| Time | Project 1 | Project 2 |
0 | (1,750) | (4,275) |
1 | 854 | 1,685 |
2 | 450 | 967 |
3 | 350 | 735 |
4 | 675 | 920 |
5 | 812 | 512 |
Ignore inflation.
The company currently uses a cost of capital of 4 per cent per year for all investments but is considering using a cost of capital which reflects the capital structure of the company (the Weighted Average Cost of Capital).
Beta of similar companies is 1.45. The current equity market risk premium is 7.5%, and the risk-free rate is 3.5%. The company’s before-tax cost of debt is 7% and its marginal tax rate is 30%. The stock sells at book value.
Assets Liabilities & Equity
| Cash | 250 | Long-Term Debt | 6,423 |
| Accounts Rec. | 850 | Equity | 1,387 |
| Inventories | 2,277 | ||
| Net Fixed Assets | 4,433 | ||
| Total Assets | 7,810 | Total Liab. & Equity | 7,810 |
TS will have to raise funds for the new manufacturing facility and is considering whether to do this through either a share issue or the increased borrowing.
Required
Prepare a report covering the following:
a) Using the figures provided and based on the given cost of capital of 4%, you are required to apply a range of methods to carry out the investment appraisal of the proposal and, based on these results, discuss whether the company should go ahead with the proposal. (30 marks)
b) Calculate cost of capital using the CAPM and consider the impact on the proposal, together with an evaluation of the WACC as an appropriate discount rate for this investment. Your analysis MUST include applying the WACC you calculate in the investment appraisal (20 marks)
c) Advise the company on the financing options available with respect to using debt and/or equity, finance raised in the UK. Your discussions should consider the implications for the company and the possible impacts on the cost of capital of using theory where appropriate.
(20 marks)
d) Consider the potential impact of signing the contract with an Indian buyer on the overall risk profile of the company. Please offer a discussion and a tangible set of recommendations on how TS can protect itself from the potential negative impact of the contract on its entire operations, including a general discussion on viability of protection mechanisms. (20 marks)
| plus 10 marks for coherence of the report, presentation and referencing Instructions Make sure that you state any assumptions you have made. You should minimise textbook descriptions of the methods that you choose to use. Include all workings related to the application of investment appraisal methods etc in an appendix. The report body should include only the final results of these calculations. All information must be appropriately sourced and referenced using the Harvard referencing system, both in-text and in the references list. Please ensure that all information used is from an appropriate source. Inappropriate sources of information, such as Wikipedia, tutor2you, Investopedia, descriptive websites etc., may result in a loss of marks. The word-processed report should be 2,000 words (excluding references, appendices and tables) plus or minus 10 per cent. Reports outside this length may incur a penalty Include your student number as well as the word count, on the front page of your report but do not include your name. Please note that any suspected instances of plagiarism and/or collusion will be reported for investigation and action through the University’s academic conduct process. Any specific instructions: Please submit on Studynet Mark scheme: | |||
| Indicative marks | Weighting | ||
| Section a – Investment appraisal Structure of the model, calculations and application of the techniques (10) Evaluation of the results including critique of the assumptions and techniques with respect to appropriate theory where necessary (15) Recommendations with justification (5) | 30 | ||
| Section c – WACC Calculations (10) Evaluation of WACC (10) | 20 | ||
| Section d- Evaluation of funding Evaluation of alternative funding sources (10) Impact of funding choices on the current cost of capital, making reference to appropriate theory (5) Implications of funding choices for the company (5) | 20 | ||
| Section d- risk profile Identification and evaluation of additional risks (10) Recommendations with justification (10) | 20 | ||
| Overall coherence, presentation and referencing | 10 | ||
| Total | 100 | ||
5BUS1186 Coursework Brief 2021
Student Support and Guidance
• For further help, contact your module leader in their drop-in hours or by email.
• Use the Grading Criteria and Mark Scheme to help improve your work.
• Go to CASE workshops, use the CASE website and drop-in hours www.studynet.herts.ac.uk/go/CASE/
• Academic English for Business support is available through daily drop-ins from the CASE office. See the CASE workshop timetable on the CASE main website page for details.
• Make full use of Library search to identify relevant academic material and the ‘Subject Toolkit for Business’ which contains links to other Information Databases and the Information Management contact details. (http://www.studynet1.herts.ac.uk/ptl/common/LIS.nsf/lis/4DAF5390094771C2802575ED004212BF)
• Some tutors allow students to test their work using Turnitin. Guidance on submission to Turnitin via StudyNet can be found by using the following link. http://www.studynet1.herts.ac.uk/ptl/common/asu.nsf/resource+library/TURNITIN+FOR+STUDENTS
+2016+USER+GUIDE.pdf/$FILE/TURNITIN+FOR+STUDENTS+2016+USER+GUIDE.pdf
5BUS1186 Coursework Brief 2021