AF4S31 Assessment 2 (V2) Brief
\nThis assignment will be marked out of 100%
\nThis assignment contributes to 50% of the total module marks.
\nThe assessments are bonded which means you need 40%+ over both assessments
\ncombined to pass the module.
\nLearning Outcomes to be assessed
\nAs specified in the validated module descriptor available at:
\nhttps:\/\/icis.southwales.ac.uk\/studentmodules\/10122\/studentmodulespecifications
\nLearning outcome 1
\nThe ability of students to critically assess, apply and evaluate the issues and techniques
\nof strategic financial management.
\nGrading Criteria
\nPlease see School\u2019s marking criteria for undergraduate\/post graduate assessments on
\nthe module VLE. Any additional grading\/marking guidance will be posted with
\nassessment task below.
\nAssignment
\nAYR Co. is considering two separate projects known as \u2018Aspire\u2019 and \u2018Wolf\u2019 which
\nare quite different but each of which has the potential to increase AYR Co.\u2019s
\nmarket share. To date $120,000 has been spent on market research into the
\nincrease in demand that can be expected for each project. The next stage is to
\nconduct a financial appraisal to determine which project should be taken forward
\nas AYR Co. can only afford to fund one project at this time.
\nProject Aspire:
\nThis project will require the acquisition of plant and machinery costing $2,250,000
\nwhich is payable immediately. This machinery will have a scrap value of $375,000
\nat the end of the 5 years. There is also $140,000 working capital to be used
\nimmediately. This amount has been taken from the company\u2019s retained profits
\nand will be repaid at the end of the project. Cash inflows are expected to be
\n$650,000 in year 1 rising at a rate of 7.5% per annum for years 2 to 5 inclusive.
\nVariable costs in year 1 are expected to be $27,000 per annum and are expected
\nto rise at 6.75% per annum. Capital allowances are available on the plant and
\nmachinery as follows:
\n$
\nYear 1
\nYear 2
\nYear 3
\nYear 4
\nYear 5
\n600,000
\n390,000
\n345,000
\n300,000
\n240,000
\nThis project will expand the current product range and will appeal to existing and
\npotential customers.
\nProject Wolf:
\nThis project will require an immediate outlay of $2,250,000. This expenditure will
\nnot attract capital allowances. Annual cash inflows of $955,000 are expected to
\nbe constant for the life of the project. Material costs are expected to be $14,400 in
\nthe first year, rising at an annual inflation rate of 7.5% per annum. Other
\nexpenses are expected to be $18,000 in year 1 and these are expected to fall by
\n7.5% per annum over the life of the project.
\nTo undertake Project Wolf, factory space which is currently generating rental
\nincome will need to be used for the project. The rental income, which would not
\nhave been expected to change over the five-year period, is $75,000 per annum.
\nThis project will take the company in a new direction appealing to a different type
\nof customer.
\nAdditional financial information:
\n\uf0b7 Corporation tax is paid at a rate of 20% and tax is payable one year in
\narrears.
\n\uf0b7 The weighted average cost of capital is 10% and, unless otherwise stated,
\ncash flows occur at the end of the year to which they relate.
\n\uf0b7 A straight line method of depreciation at a rate of 20% is applied to all noncurrent
\nassets.
\nThe initial investment of $2.250m, for whichever project is chosen, is significant in
\nterms of value for AYR Co. The board of directors is considering ways to finance
\nthe investment, and will choose between, increasing equity by issuing new
\nordinary shares, or taking on new debt in the form of a bank loan at a fixed rate of
\ninterest.
\nAYR Co. is currently financed as follows:
\nCapital Employed $million
\nEquity holder funds 20
\nLong term debt 18
\nTotal 38
\nRequired:
\nPrepare a report to the Directors of AYR Co. which includes the following.
\n1. A calculation of the Net Present Value (NPV), Internal Rate of Return (IRR)
\nand Payback Period for projects Aspire and Wolf. Detailed calculations should
\nbe included as an appendix to the report. All cash flows should be rounded to
\nthe nearest $. 30%
\n2. Analysis and evaluation of the investment project options as follows:
\ni. A recommendation regarding which project (if any) to undertake;
\nii. Justifications for your recommendation including an evaluation of the
\ninvestment appraisal techniques used in task 1 above.
\niii. A summary of other factors that should be considered and information
\nthat may be needed prior to making a final decision. 30%
\n3. A discussion of the two sources of finance being considered by the board of
\nAYR Co. Your report should include:
\ni. A description of Equity and Debt.
\nii. An explanation of the costs of each source of finance.
\niii. An analysis of the effect the selection of the source of finance may have
\non AYR Co.\u2019s weighted average cost of capital.
\niv. An assessment of the impact of the selection of finance on current and
\npotential shareholders and lenders.
\n30%
\nMarks are available for presentation of the report, which must not exceed 3,000
\nwords. 10%<\/p>\n
Total 100%
\nMarking guidance
\nSection Weighting Criteria
\n1) Calculation of NPV, IRR
\nand Payback.
\n2) Analysis evaluation and
\nrecommendation. Additional
\nfactors and information.
\n3) Discussion of two sources
\nof finance. Impact on WACC
\nand investors\/lenders.
\n30%
\n30%
\n30%
\nDemonstrate:
\n\uf0b7 Relevant practical, academic and
\nsubject specific skills
\n\uf0b7 Knowledge understanding and
\nappreciation of issues involved.
\n\uf0b7 Ability to research and provide
\npractical and relevant points
\n\uf0b7 Clear communication, explanation
\nevaluation and discussion of aspects
\nbeing covered.
\nReport
\nStructure and presentation 10%
\n\uf0b7 Clarity of layout, grammar, presentation
\nand inclusion of all relevant matters
\n\uf0b7 Tone and use of professional language
\ni.e. suitable for addressee of report
\n\uf0b7 Accuracy of referencing, and
\nappropriate use of appendices
\nAssessment guidance
\nYour report should be word processed, clearly laid out and concise and should be
\nsupported by appropriate workings for the numerical elements. The word limit for the
\nreport is 3,000 words.
\nThe text of this assignment must be in your own words (not even a sentence or phrase
\nshould be taken from another source unless this source is referenced and the phrase
\nplaced in quotes). It is dishonest not to acknowledge the work of other people and you
\nopen yourself up to the accusation of plagiarism. Referencing should in accordance with
\nthe Harvard System. A guide published by the Library lists the most common types of
\nreferences with examples. The guide can be found on the module VLE
\nHand-in requirements and dates:
\nPlease see the VLE
\nPLEASE NOTE THAT IF YOU ARE EVEN ONE MINUTE LATE UPLOADING YOUR
\nFILE THIS WILL COUNT AS A LATE SUBMISSION AND THE APPROPRIATE
\nPENALTY WILL APPLY.<\/p>\n","protected":false},"excerpt":{"rendered":"
AF4S31 Assessment 2 (V2) Brief This assignment will be marked out of 100% This assignment contributes to 50% of the total module marks. The assessments are bonded which means you need 40%+ over both assessments combined to pass the module. Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-437580","post","type-post","status-publish","format-standard","hentry","category-essay-paper-writing"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/437580","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=437580"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/437580\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=437580"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=437580"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=437580"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}