MPA504 BUSINESS FINANCE Group Assessment

MPA504 BUSINESS FINANCE Group Assessment :

RATIONAL

This assessment task will assess the following learning outcome/s:

1. Explain the fundamentals of financial objectives and decision making in the contemporary business environment.
2. Apply the principles and methods of financial markets, capital management, and time value of money.
3. Employ financial mathematical techniques (e.g. capital budgeting) to evaluate projects and make well-reasoned investment decisions.
4. Critically examine theories and models used in the consideration of leverage, cost of capital, and capital structures and formulate and articulate logical arguments based on their application.

MPA504 BUSINESS FINANCE TASK

This assessment is worth of 15% of the total subject assessment and is marked out as 50 marks. There are TWO (2) parts in this assessment, and you are required to answer both the questions.

Each group consists of 3 – 4 students and all the students will receive the same mark for the assessment. Students are required to work in their groups and only one member of the group submit the assessment. Ensure that the cover page contain the names and student IDs of all members of the group in the first page and pages should be numbered.

FORMAT OF THE BUSINESS FINANCE ASSESSMENT

It is expected that you use Microsoft Word to type all your answers. Ensure that formulas are typed using MS Word Equation editor. For all numerical problems, please include detailed worked solutions. For Part 1, you are required to show your calculation in Microsoft Excel. You are required to copy and paste the excel spreadsheet into Microsoft Word. You may be asked to send the Microsoft Excel via email.

This task requires using APA referencing style as in the TIIS learning website and refer to the Subject Outline regarding plagiarism, contract cheating and/or other forms of academic fraud.

PART A: CAPITAL BUDGETING [30 MARKS]

You are working as a financial analyst at Bolton Pty Ltd. Your boss, the Chief Financial Officer sent you an email about the new consulting project from Goulburn Manufacturing Ltd. He classified the project as a risky project and required you to make a recommendation and respond to several questions to justify your risk analysis and capital budgeting.

Below is the excerpt of the email sent by Chief Financial Officer:

Goulburn Manufacturing Ltd manufactures a range of shoes for customers. Goulburn Manufacturing Ltd is well-known for speciality shoes in the local and global market. They have undertaken a comprehensive $50,000 market research project into identify that a market exists for new speciality shoes designed for diabetic patient. The new product line requires new equipment to be estimated at $10,000,000

Goulburn Manufacturing has made the following projections with the new technology:

• Consultant’s cost of $50,000
• Expected to sell for an average price of $200 per unit and expected to sell 20,000 units per year for the next five years
• Initial cost of the equipment is $10,000,000 and expected to depreciated at 20% straight line method
• The salvage value of the equipment in five years is $100,000
• Working capital required is $30,000
• Goulburn Manufacturing Ltd’s required rate of return is 10%
• Tax rate is 30%

1. Prepare the cash flow for the next five years using an Excel Spreadsheet. Calculate the following (20 marks)

1. After-tax cash flows
   1. Payback period
   1. Discounted Payback Period
   1. Net Present Value
   1. Profitability Index

• Make a recommendation to Goulburn Manufacturing Ltd if they should proceed with buying the machine or not. Explain the criteria to justify your decision. (5 marks)

PART B: REPORT (25 marks)

Requirement: In this part of the assessment, you are required to select one of the companies listed on Australian Stock Exchange for the 2021 financial year. You are encouraged to use the information provided on the firm’s website and their annual report to complete the analysis. Other information can be sourced at:

Yahoo Finance: https://au.finance.yahoo.com/ Australia Stock Exchange: https://www.asx.com.au/

Your group are required to write a report that include a brief executive summary, introduction, body and conclusion. Ensure that you show all your calculation on the annexure.

The report should be no more than 500 words and cover the following areas:

1. Critically analyse the key financial ratios for the selected firm.
   1. Current Ratio
   1. Working Capital Ratio
   1. Earnings per share
   1. Price-Earnings Ratio
   1. Return to Equity

• Categorise the firm’s current capital structure into debt and equity for year 2020 and year 2021. Compare the firm’s financial position over the two years.

• Compare the firm’s capital structure with at least one other firm operating within a similar industry.

• Critically evaluate the extent to which the firm has been successful in fulfilling the objective a finance manager, maximising the shareholders’ wealth in the past three years.

Trading as The Institute of International Studies

Address: L4, 22 Market Street, Sydney NSW 2000 Australia Tel: 61 2 8098 0702 E-mail: [email protected]

Website: www.tiis.edu.au

MARKING CRITERIA AND STANDARDS

Criteria	HD	D	Credit	Pass	Fail
Quantitativ e Questions – Accurately complete calculations	Applies correct principles and shows all the workings neatly and systematicall y. No errors in the calculations.	Applies correct principles and shows all the workings neatly and systematicall y. Contains few minor errors in the calculations.	Applies correct principles and shows all the workings neatly and systematicall y. Contains several minor errors in the calculations.	Applies understandin g of the principles and shows some of the workings. Contains some major errors in the calculations.	No understandin g of the principles and fails to show any workings or contains major errors.
Qualitative Questions – Ability to analyse the business elements and conduct research	Accurately describe relevant terms and discusses business element. Analyses of the elements demonstrate s deep understandin g of the concepts and principles.	Describes relevant terms and discusses business element. Analyses of the elements demonstrate s considerable understandin g of the concepts and principles.	Considerably describe relevant terms and discusses business element. Analysis demonstrate s lack of understandin g on the concepts and principles.	Accurately describe relevant terms and discusses business element. Analyses of the elements demonstrate s very limited understandin g of the concepts and principles.	No analysis relevant to the business element. Fails to demonstrate the understandin g on the concepts and principles.
Academic Writing Skills The report meets the academic standards, vocabulary and spelling, punctuatio n.	Accurate use of vocabulary, punctuation and correctly refers to sources including prescribed texts and braod range of additional readings. Uses extensive range of	Accurate use of punctuation and spelling and succinct use of vocabulary and correctly refers to sources including prescribed texts and broad range of additional readings.	Accurate use of spelling and punctuation and correctly refers to a minimum sources including prescribed texts and a range of additional readings. Uses some of resources	Mostly accurate use of spelling and punctuation; correctly refers to a few sources including prescribed texts and/or additional readings. Uses some references and	Inaccurate use of spelling and punctuation Lack of references and incorrectly formatted reference list or no reference list.

Trading as The Institute of International Studies

Address: L4, 22 Market Street, Sydney NSW 2000 Australia Tel: 61 2 8098 0702 E-mail: [email protected]

Website: www.tiis.edu.au

resources and accurate formatting using APA styles.

Uses broad range of resources and correctly formatting using APA styles.

and minor errors in formatting using APA styles.

formatting with minor errors using APA styles.

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