CO5109 Corporate Finance Assessments

ASSESSMENT TASK 1: PORTFOLIO

Aligned subject learning outcomes

· SLO1. Critically analyse and apply theoretical finance concepts to business.

· SLO2. Evaluate and apply finance concepts for value creation in corporate planning and decision making.

Group or individual

Individual

Weighting

20% (Part A 10%, Part B 10%)

ASSESSMENT TASK 1: DESCRIPTION

Overview

The goal of finance is to increase the shareholders' wealth. Your text and other readings present shareholders' wealth maximisation as being the best way to increase the utility of individual shareholders. However, your readings also suggest that firms have other objectives. The purpose of this task is for you to see the value‐ maximisation objective within the context of other objectives a firm may pursue.

The objective of this assessment is to:

identify and differentiate the financial dimensions of business decision making by the multiple goals a firm may pursue including, the maximization of shareholder wealth and to critically evaluate the goal of shareholder wealth maximization goal with what may appear to be, or in fact are, the non‐ shareholder maximization goals with the
apply the concepts of the present value and future value of future cash flows and convert a present value to equivalent annual amounts (annuity), and
explain what present value means in terms of its equivalence to a set of future cash

This assessment has two parts.

PART A – Research report

Part A of this assessment task requires you to

Read through Part A of the marking rubric for this
Complete a research report (approximately 1500 words, business format but double spaced) that addresses the following:

1. Choose two companies from different industries that are listed on the Australian Stock Exchange (ASX). A list of companies can be obtained at https://www.asx.com.au/asx/research/listedCompanies.do

2. Write a report on your analysis of the company objectives including wealth maximisation, profit maximisation, environmental issues, ethical suppliers, employees, gender equality and social responsibility. In your report:

a. Detail the objectives of the company from the company website, annual reports, an internet search or other relevant information sources.

b. Assess the relevance of shareholder wealth maximisation to these companies and reconcile the objectives with shareholder wealth maximisation or state why the objective(s) cannot be reconciled.

c. Determine whether shareholder wealth maximisation is an explicit objective of the company.

d. Analyse the company objectives, contrast these with the objective of wealth maximisation and, if possible, state how you believe these objectives are reconcilable with wealth maximisation. For example, if a company states it has an objective of maintaining employee safety, this may be reconciled with wealth maximisation through the reduction of working days lost and reduced workers' compensation insurance premiums.

In completing this task, you will need to:

Obtain the Company objectives annual reports from the company website using an internet search or other relevant information
1. To perform this assignment may require a careful examination of the company website, annual reports, an internet search or other relevant information sources. For most listed companies, their web page will usually have an Investor Relations Centre where you may find the information you On other websites this information is more difficult to find. For example, Qantas’ ‘Principles, beliefs and values’ are found under ‘Our Determine whether shareholder wealth maximisation is an explicit objective of the company.
Analyse the company objectives, contrast these with the objective of wealth maximisation and, if possible, state how you believe these objectives are reconcilable with wealth

For example, if a company states it has an objective of maintaining employee safety, this may be reconciled with wealth maximisation through the reduction of working days lost and reduced workers' compensation insurance premiums.

PART B – Present Value analysis

Part B of this assessment task requires you to

Read through Part B of the marking rubric for this
Use the spreadsheet template provided available in the JCU Lean assessment and address the following:

Cunningham Holdings Ltd is presently considering two possible 10‐year investments at 5% per annum. Details of the two investments are included in the assignment template downloadable from LearnJCU.

The purpose of the below tasks is for you to demonstrate your ability to perform and interpret the impact of the time value of money on business decisions. Using the spreadsheet template provided, you are required to complete the following tasks:

1. Calculate the present value of the two cash flows presented in the assignment template.

2. Calculate the future value of each of the cash flow streams.

3. Explain why the present value of the cash flows for 'Investment A' are greater than the cash flows for 'Investment B'.

4. Calculate and discuss the impact on your answer to question 5, if the interest rate on the investments was higher at 10% per annum.

5. Assuming the risk associated with both investments is similar, identify and justify as to which investment should be undertaken.

Submission

Upload the following completed documents for Part A and Part B to the dropbox: “Assessment task 1”.

PART A – Research report
PART B – Assessment task 1 spreadsheet

ASSESSMENT TASK 1 RUBRIC: See Section 5 Rubrics

ASSESSMENT TASK 2: CRITICAL REVIEW

Aligned subject learning outcomes

· SLO1.identify and differentiate the financial dimensions of business decision making

· SLO2. critically analyse and apply theoretical finance concepts to business

· SLO3. evaluate and apply finance concepts for value creation in corporate planning and decision making

Group or individual

Individual

ASSESSMENT TASK 2: DESCRIPTION

Aim

The aim of this report is to apply appropriate valuation techniques for choosing between two investments based on the relevant operating costs and capital costs. You should apply the present value analysis to value of future cash outflows and convert a present value to equivalent annual amounts (annuity). The results of the analysis should be communicated for review by the CHL Board. At the completion of this assessment students should have demonstrated the ability to:

Identify and apply relevant
Calculate present value
Calculate equivalent annual costs/benefits of a project
Interpret the analysis and recommend, in a report, the decision you believe is the value adding course of

Instructions

Read through the marking rubric for this assessment in Section
Read the memo from John Chiu, CFO, CHL Agriculture & Aquaculture located in the LearnJCU Assessment menu.

John Chiu has requested that you evaluate the purchase of a hybrid engine to operate the pumps used for water circulation at their new prawn processing plant. Preliminary analysis of suitable and available engines has identified two potential alternatives:

Alternative 1 – Purchase a second hand engine and perform an extensive overhaul and reconditioning of the engine.
Alternative 2 – Purchase a new engine.

Detailed information about the two alternatives are supplied in the memo.

The selected engine (whether new or overhauled) is expected to have a life of approximately 10 years by which time it will need to be replaced. As business grows and consistent with our ‘sustainability’ objective we may wish to replace this equipment earlier, after either five or seven years. Currently the firm does not have a purchase and replacement policy that can be applied.

The choice of engine is an investment decision like any other, except we also need a policy on when to replace the engine. So, when we make this decision, we are essentially making a decision about projects of differing lives – a five‐year project, a seven‐year project or ten‐year project.

You are requested to you prepare a short business report (2000 words) and a spreadsheet (using the provided) detailing the following:

Identify and discuss with supporting analysis, if the selected engine was not replaced till 10 years, which alternative should be adopted?
Identify and discuss with supporting analysis, if there is any quantitative advantage to holding an engine for a shorter period of time than 10 years before replacing it. (i.e. 5 or 7 years). For the purpose of this analysis assume that this will involve the replacement of an equivalent engine at either five or seven years).
Perform a sensitivity analysis of the work performed above (for example, you should consider the sensitivity of the assumptions made including the discount rate).
Discuss any limitations in your approach that may impact the results obtained in your
Based on your findings above, recommend which engine (Alternative 1 or Alternative 2) should be purchased and the optimal time (5, 7 or 10 years) that we should hold the engine before replacing it. Keep in mind when making your recommendation that it is expected that after seven years both machines begin to have excessive non environmentally friendly emissions).

Your short business report should detail your recommendations and contains all supporting input data and analysis.

Submission

Upload your two (2) documents to the dropbox “Assessment task 2 – “CHL Agriculture & Aquaculture Engine Project”:

ASSESSMENT TASK 2 RUBRIC: See Section 5 Rubrics

ASSESSMENT TASK 3 WEIGHTED AVERAGE COST OF CAPITAL (WACC) ESTIMATION

Aligned subject learning outcomes

· SLO1. identify and differentiate the financial dimensions of business decision making;

· SLO2. critically analyse and apply theoretical finance concepts to business;

· SLO3 evaluate and apply finance concepts for value creation in corporate planning and decision making.

Group or individual

Individual

ASSESSMENT TASK 3: DESCRIPTION

Aim

The aim of this assessment task is to apply finance theory and concepts to the practical estimation of a firms cost of capital and provide a report to management.

Instructions

Read through the marking rubric for the
Develop a business report that includes:
1. Calculate the current weighted average cost of capital for SFL using an appropriate

a. In doing so, you should use the excel workbook “Assignment 3 Template DMR SFG.xls”.

Calculate the weighted average cost of capital for the year 2020 for CHLAA using an appropriate technique.

a. In doing so, you should use the excel workbook “Assignment 3 Template DMR CHL Agriculture and Aquaculture.xls”.

Explain your calculations and the judgements you made in arriving at your answers in Tasks 1 and 2.
Calculate and compare gearing ratios for both SFL and CHLAA and discuss any issues in doing
If CHLAA was to have a capital structure with proportions of debt and equity and cost of equity similar to SFL in Task 2, calculate and assess the impact on CHLAA’s weighted cost of capital and capital structure. You should analyse your findings with reference to capital structure
Provide a recommendation to the Board based on your analysis is Tasks 1 to 5 and discuss any action you consider would be appropriate so as lower its weighted average cost of

Submission

Upload your written report and the two excel workbooks used to the drop box “Assessment task 3 – “CHL Agriculture & Aquaculture WACC Project”.

ASSESSMENT TASK 3 RUBRIC: See Section 5 Rubrics

Assessment Task 1: Objectives and Present Value (20%)

Criteria

HD (85 to 100%)

D (75 to 84%)

C (65 to 74%)

P (50 to 64%)

N (0 to 49%)

PART A

Source information relevant to assessment objectives / purpose

Weight 10%

Able to find multiple objectives for the companies including those that are legally prescribed,

e.g. QANTAS / Modern Slavery Act 2015 Section 54(1)

Student multiple objectives from a variety of sources, both print/PDF and electronic and information is relevant to the task

Student gathered multiple objectives from a limited range of sources and student made little effort to evaluate the quality of the sources

Information gathered lacked relevance to the topic:

Failed to investigate web site thoroughly

Failed to investigate other sources included the Annual Report

There is no evidence the student consulted either the web site or the company Annual Report or the paper may be plagiarized

PART A

Critical analysis

Weight: 30%

Compares nature of objectives between the selected two companies and reasons the relevance of those objectives.

Critically evaluates and explains their conformity with or opposition to shareholder wealth maximization. Draws conclusions about the appropriateness of the wealth maximization objective

Compares nature of objectives between the selected two companies and reasons the relevance of those objectives. Some evaluation of the objectives. Draws some conclusions without a full critical analysis of the appropriateness of the wealth maximization objective

Limited comparison of the nature of objectives between the selected two companies. Discusses the relevance of those objectives. Little evaluation of the objectives. Draws limited conclusions. No critical analysis of the appropriateness of the wealth maximization objective to the companies

Compares objectives with wealth maximization but makes no attempt to evaluate the relationship between objectives and wealth maximization.

Makes a rudimentary comparison between wealth maximization and the objectives of the companies. Shows little insight into the interaction between objectives.

PART A

Writing Style and Conventions:

Write a professional business report

Weight: 5%

All key structuralelements of the report are present and completed to a high standard. Logical flow and transition between sections. The document is presented professionally, using informative headings and visuals where appropriate in the correct style.

Accurate APA referencing used for any external sources and visuals.

All key structural elements of the report are present, completed to a high standard and flow logically. The document is presented professionally, using

informative headings and visuals whereappropriate in the correct style.

Minor errors in APA referencing used for any external sources and visuals.

All key structural elements of the report are present and flow logically. The document is presented professionally with some headings and visuals.

APA referencing is used with some errors.

All key structural elements of the report are present. The document is presented professionally with some headings and visuals.

APA referencing is used with some errors

Key structural elements of the report are not present and/or presented with errors evident. The document is not presented professionally, with limited use of headings and visuals lacking appropriate style. Limited or no APA referencing with errors.

PART A

Control of Syntax and Mechanics:

Sentence construction, grammar, punctuation & spelling

Weight: 5%

Always uses appropriate terminology, correct punctuation, grammatically correct and good sentence structure that conveys meaning to readers with clarity. No spelling errors are present. Paragraphs are well constructed and flow logically.

Mostly uses appropriate terminology, correct punctuation, grammatically correct and good sentence structure that conveys meaning to readers with clarity.

Limited spelling errors are present. Paragraphs are well constructed and flow logically.

Mostly uses appropriate terminology. Some grammatical errors that do not interfere with meaning. Limited spelling errors are present.

Paragraphs are well constructed and support the overall structure of the report.

Language used is occasionally not clear, but the meaning is still conveyed to the reader. Some grammatical errors that do not interfere with meaning. Paragraphs support the overall structure of the report and mostly discuss one main idea.

Terminology used is not clear and/or does not convey meaning to readers. It contains grammatical errors that interfere with meaning. Paragraphs seem disjointed, and/or follow poor organisation.

Criteria

HD (85 to 100%)

D (75 to 84%)

C (65 to 74%)

P (50 to 64%)

N (0 to 49%)

PART B

Application of the time value of money

Weighting: 40%