MSc/PgDip Finance And Accounting Assessment:
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MSc/PgDip Finance and Accounting:
2022/23 ASSIGNMENT REMIT – DOCUMENT UPLOAD
Programme Title MSc/PgDip Finance and Accounting
Module Title Corporate Finance for Managers
Module Code 1886
ASSIGNMENT TITLE Financial Management Report
Level Level 7
Weighting 100%
Lecturers Asif Sadiq
W/C Hand Out Date 13/02/2023
Due Date By 17:00 on 18/05/2023
Feedback Post Date 15/06/2023
ASSIGNMENT FORMAT FILE UPLOAD (DOCUMENT)
Essay/Report Format Formal Report
Assignment Word Count 3500 words
Submission Format e-Submission Individual
ASSIGNMENT TASK:
Task 1: Ganzaa Corporation
(a) Ganzaa Corporation is an established company, selling high quality products. The company sales
and profit growth have been strong over the past few years. The directors of company have been
investigating various plans for further growth. Ganzaa Corporation Statement of profit or loss for the
year ended 31 October 2022 and Statement of Financial Position as at that date are summarised
below:
Statement of Financial Position as at 31 October 2022
£ £
Non-current assets 45,000,000
Current assets:
Inventory
Accounts receivable
Cash
20,000,000
5,000,000
5,000,000 30,000,000
Total assets 75,000,000
Equity and liabilities:
Issued share capital (par value
50c)
Share premium reserve
Profit and loss reserve
4,000,000
4,000,000
31,000,000
39,000,000
Total equity 39,000,000
Non-current liabilities:
10% debenture
Bank loan (12%)
8,000,000
4,000,000 12,000,000
Current liabilities:
Accounts payable
24,000,000 24,000,000
Total equity and liabilities 75,000,000
Statement of profit or loss for the year ended 31 October 2022
£
Revenue 120,000,000
Cost of sales and expenses (105,000,000)
Operating profit 15,000,000
Interest (1,300,000)
Profit before tax 13,700,000
Tax (at 30%) (4,100,000)
Profit after tax 9,600,000
Dividends (3,800,000)
Retained earnings 5,800,000
Notes to the accounts:
(1) Depreciation of non-current assets is on straight-line basis and is currently £5.0million per annum.
(2) Cost of sales and expenses are made up as follows:
Variable cost of sales £75,000,000
Fixed operating cost £25,000,000
Depreciation £5,000,000
Total £1,05,000,000
MSc/PgDip Finance and Accounting Assessment.
It has now been decided to expand into a new market. The non-current asset investment is expected
to cost £10million, £4million of this is to be financed by retained earnings using the existing cash
resource. The other £6million is to be financed with a 1 for 8 rights issue. The rights shares will be
priced at a 25% discount on the current share price of £8.
The expansion is expected to increase sales by 30%, and the increased sales are expected to have the
same contribution to sales (C/S) ratio as the existing sales. Fixed operating costs are expected to
increase by £4million and depreciation on the new investment is £2million per annum. Inventory,
accounts payable and receivable are all expected to increase in proportion to sales revenue.
The following information is available regarding industry average key financial indicators for 2022:
Return on capital employed 18%
Return on equity 15.8%
Operating profit margin 10%
Current ratio 1.25:1
Acid test ratio 1.1:1
Gearing 33%
Interest cover 6.0
Dividend cover 3.0
PE ratio 6.0
Dividend yield 8%
Required:
(i) Prepare a report for the directors of Ganzaa Corporation, discussing the overall performance of the
company for the year ended 31 October 2022. (15 marks)
(ii) Prepare a forecast statement of profit & loss for Ganzaa Corporation for the year ending 31
October 2023. (5 marks)
(b) Stakeholders and Objectives
(i) Managers and owners of business may not have the same objectives. Justify this statement,
illustrating your answer with examples of possible conflicts of interest. (10 marks)
(ii) Critically discuss the argument that maximisation of shareholder wealth should be the only
objective of a company. (10 marks)
Task 2: Ross Hill Enterprise
Ross Hill Enterprise is a listed firm. The Board of Directors is planning to expand its operations. This
will require a new investment of £15 million. One of the proposals made to the Board by Finance
Manager is that the funds could be raised by issuing 9% loan notes redeemable in ten years’ time. The
latest information available is for the financial year ending 31st December 2022, and is as follows:
Income Statement for the 12 months to 31st December 2022 (£)
Profit before interest and tax 10,500,000
Interest (750,000)
Profit before tax 9,750,000
Tax (2,925,000)
Profit for the year 6,825,000
Statement of financial position as at 31st December 2022 (in £000s)
Non-current assets 30,000
Current assets 30,000
Total assets 60,000
Equity and liabilities
Ordinary shares: par value £1 7,500,000
Retained earnings 33,750,000
9% preference shares: par value £1 3,750,000
10% loan notes 7,500,000
Current liabilities 7,500,000
Total equity and liabilities 60,000,000
MSc/PgDip Finance and Accounting Assessment.
The ex-dividend share price is at present £4.50 per share. An ordinary dividend of £0.35 per share was
paid in the current month and dividends are expected to increase by 4% per year for the foreseeable
future. The current ex-dividend price of the preference shares is £0.762 each. The loan notes are
secured on the existing non-current assets of the company and are redeemable at par in eight years’
time. They have a current ex-interest market price of £105 per £100 loan note.
Ross Hill Enterprise pays corporation tax at an annual rate of 30% on profits. If the planned expansion
does go ahead, it is expected that the profit before interest, and tax will increase by 12% in the first
year. The company has no overdraft and does not plan to incur one to date.
Required:
(a) Calculate Weighted Average Cost of Capital for Ross Hill Enterprise. (10 marks)
(b) Critically analyse the effects of WACC and Cost of Capital arising from the company investment.
You should make a clear reference to capital structure theories. (20 marks)
Task 3: Predict Enterprise Solution:
a) Predict Enterprise Solution is a distributor of imported goods to retail shops. The company
specialises in supplying decorations, art works and high value furnishings products. The company has
an opportunity to invest in a mutually exclusive advanced equipment from a choice of two listed
below.
Equipment 1 will generate expected net profit of £70,000 in the first three years, starting from 2024.
£60,000 profit is expected to be generated in the next two years. The net profit in 2029 is expected to
decrease by £10,000.
Equipment 2 will generate an expected net profit of £45,000 in the first year commencing from 2024.
The net profit is expected to increase by £40,000 each year for the next two years. In 2027, the
expected net profit to be generated is £80,000, with a forecasted increase of £15,000 in the following
year. In 2029, the expected net profit is £90,000. The cost of capital is 18%.
Additional Information:
(a) The initial cash investment of both advanced equipment will be £130,000. The purchase would
take place on 1st January 2024. It is assumed that all other cash flows will be received on 31st
December each year.
(b) Both advanced equipment would have a life expectancy of 6 years. Equipment 1 has no residual
value, but equipment 2 has a residual value of £11,000. The company uses a straight-line method of
depreciation.
Required:
(i) Based on Discounted Cash Flow Techniques (DCF) and Accounting Rate of Return approach to
project appraisal, advise senior management which of the mutually exclusive advanced equipment is
suitable for investment to maximise shareholder wealth. (20 Marks)
(ii) Critically analyse the limitations of DCF techniques. Discuss why risk and uncertainty should be
considered in the investment appraisal process. Support your analysis with current academic articles.
(10 marks)
TASK GUIDANCE:
MSc/PgDip Finance and Accounting Assessment.
● Focus on attention to detail, quality of work and overall academic standards.
● For additional guidance on this assignment, please access the assignment vodcast available on Canvas.
MARKING CRITERIA:
This assignment fundamentally focuses on the followings criteria:
● Critically analyse the impact of corporate finance practices within organisations
● Critically analyse the effects of WACC and Cost of Capital arising from the company investment.
● Demonstrate the understanding of effective approaches to project appraisal.
● Critically analyse the limitations of DCF techniques. Discuss why risk and uncertainty should be
considered in the investment appraisal process.
● Critically discuss the argument that maximisation of shareholder wealth should be the only objective of
a company.
● Application of Discounted Cash Flow Techniques (DCF) and Accounting Rate of Return approach to
project appraisal on mutually exclusive equipment to maximise shareholder wealth.
● Demonstrating the evidence of extensive reading and provide appropriate in-text citations.
● Critical evaluation of companies’ overall financial performance, effective use of relevant literature to
support the key arguments.
E-SUBMISSION GUIDANCE:
● This assignment will require you to submit your work by uploading a document in Word or PDF format
to Canvas. Please follow this online guide on document submissions and contact the DICE team on
[email protected] if you need any further support.
LEARNING OUTCOMES:
● Critically analyse the impact of corporate finance practices within organisations.
● Present a critical understanding of effective approaches to project appraisal.
● Evaluate cost of capital, sources of finance, capital structure and dividend policy.
● Analyse how financing decisions and corporate finance activities increase organisation value.
SKILLS OUTCOMES:
● The skills outcomes to be developed by completing this assignment can be found here.
GENERAL ASSIGNMENT GUIDANCE:
Teamwork and ITS
Assessment
Should this assignment require you to work as part of a team, you will
receive an individual grade based upon your performance as well as
personalised feedback. The module leader will explain how your individual
grade and feedback will be determined.
Importance of Word Count
and Presentation Timings
Assignment word counts and presentation timings should always be
observed. Ignoring a word count increases significantly the risk of your work
losing marks because it lacked focus and clarity. Students will be required to
state their word count on all submissions. A 10% leeway will be allowed – so
the maximum a student should submit will be the word count + 10%.
The word count will exclude:
o The title page
o The contents page
o Models, graphs, data tables and other exhibited figures or
images
o Lists of references
o Appendices (these should be kept to a minimum)
In addition, timings must be observed for assessed presentations for the
same reasons.
E-submission http://www.ucb.ac.uk/handbook/academic-matters/assessment-issues.aspx
Cut-off date for late work http://www.ucb.ac.uk/handbook/academic-matters/assessment-issues.aspx
Grading criteria http://www.ucb.ac.uk/handbook/academic-matters/assessments-fairnessand-marking.aspx
Plagiarism http://www.ucb.ac.uk/handbook/academic-matters/plagiarism.aspx
Extenuating Circumstances http://www.ucb.ac.uk/handbook/academic-matters/assessments-if-thingsgo-wrong.aspx
UCB Referencing Guide https://portal.ucb.ac.uk/download/referencing/referencing-guide.pdf
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