Submission Deadline ------------ Marks and Feedback

Before 6pm on: 15 working days after deadline (All Levels)

CORPORATE FINANCE FC30 – 3

Module title & code

2A (WR-I)

Assignment number and title

Individual Report

Assessment type

40%

Weighting of assessment
 1. Explain various finance theories and concepts, and their interrelationship and influence on
Module learning outcomes the financial management of a company.
2.Critically analyze financial management problems ,and apply the relevant tools and
techniques for financial decision making /corporate decisions

What am I required to do in this assignment?

Cost of capital, which is used as a financial standard, plays a crucial role in capital budgeting decisions. It is the
discount rate applied for evaluating the desirability of investment projects. An investment project can be accepted if it
has a positive net present value. Besides, financial decisions taken by the management of a firm are appropriately
evaluated using the weighted average cost of capital. The cost of capital influences debt policy of affirm. While
designing the proportion of debt and equity in the capital structure, a firm aims at minimizing the overall cost of
capital. The cost of capital is widely used in deciding about the method of financing at any particular point of time. It
plays an important role in dividend decision. Cost of capital is one the important metrics that decides the amount of
investment in current assets.
As a newly appointed financial manager of Super Technologies, you are required to prepare a report for the board
meeting, evaluating the weighted average cost of capital and dividend policies, so that appropriate strategies can be
formulated and implemented.

Super Technologies, a listed company, aims to manufacture innovative engineering products which are
environmentally friendly and sustainable. These products have been highly marketable because of their affordability.
Super Technologies’ mission statement also states its desire to operate to the highest ethical standards. These
commitments have meant that Super Technologies has a very high reputation and a high share price compared to its
competitors. 

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Super Technologies is considering a new project, the UWA Project, to manufacture drones for use in the agricultural
industry, which are at least 50% biodegradable, at competitive prices. The drones will enable farmers to increase crop
yields and reduce crop damage. Manufacture of drones is a new business area for Super Technologies. Super
Technologies is planning to raise funds for the new project and in preparation for this, the company has decided to
calculate its weighted average cost of capital.  

Super Technologies has the following capital structure: 

Debt:
The company can raise an unlimited amount of debt by selling a 10-year Term Finance Certificates (TFCs) of Omani
Rials 1,000 par value with 8% coupon rate on which annual interest payment will be made. To sell the issue, an
average discount of Omani Rials 50 per TFC would have to be given. The company must also pay the floatation cost
of Omani Rials 20 per TFC.

Preference Shares:
The current price of the company's 10% preference shares of Omani Rials 100 par value is Omani Rials 114. The
company would incur the floatation charges of Omani Rials 2.90 per share on a new issue.

Ordinary Shares:
Company’s common share is currently selling at Omani Rials 70 per share. Its last dividend (D 0) was Omani Rials 6,
and dividends are expected to grow at a constant rate of 5% in the foreseeable future. Company’s beta is 1.5, the risk
free rate is 5%, and the market risk premium is estimated to be 6%.
The company’s tax rate is 35% and its target capital structure is 30% long-term debt, 10% preference shares, and 60%
common equity.

Dividend Policies:

Super Technologies Company has been maintaining a steady distribution of dividends for many years. Retained

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earnings were used to finance capital investment projects to avoid cost of raising external funds. However, the newly
appointed finance director suggested that external financing would be beneficial with increasing requirements of
capital expenditure. The company expects with some degree of certainty to generate the following net profit and plans
to make the following capital expenditure during the next five years:

Particulars Years
2021 2022 2023 2024 2025
Net Profit 6,000,000 4,500,000 7,500,000 6,900,000 5,400,000
Capital investment 3,000,000 4,500,000 6,000,000 4,500,000 6,000,000

The company currently has 3,000,000 ordinary shares outstanding and pays annual dividend of Omani Rials 1 per
share.

You are required to write a report addressing the following

● A brief introduction of cost of capital as an important metric that decides the amount of investment in current
assets and dividend decisions.

● Theoretical discussion of optimal capital structure by looking at the traditional view of capital structure, the
view of Miller and Modigliani on capital structure and market imperfections approach.

● Factors that determine the cost of capital of Super Technologies investment in new project.

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● Explain the difference between systematic and unsystematic risk in relation to portfolio theory and the capital
asset pricing model. 

● Assess after tax weighted average cost of capital (WACC) of Super Technologies. (Show your computations
separately pretax interest rate on Super Technologies’ debt and its after tax cost of debt, cost of preference
shares and cost of equity using CAPM approach)

● Discuss factors to be considered in formulating the dividend policy of a stock-exchange listed company

● Determine dividend per share and external financing required each year if Super Technologies is considering
three dividend policies: (i) Residual dividend policy is opted (ii) Dividend pay-out ratio is 50% and (iii)Annual
dividend per share is Omani Rial 1.

● Evaluation of the three dividend policies that Super Technologies is considering, justify which one of the
above three dividend policies gives maximum aggregate dividends in five years and minimum aggregate
external financing (total of five years).

● Appropriate conclusion

● All discussion should be supported by relevant calculations and adequate recent literature review.

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 ● Your report should include a Title, and appropriate and recent references.
For Operational Guidelines refer to Student Handbook Section IV: ASSESSMENTS.

Deliverables

Submission
Submission of the Individual report will be done via Turnitin Link on MOVE.
At the time of submission, you need to make sure that the assignment is your own and all the sources have been
acknowledged.

Is there a word limit (Number of Words ± 10%)?

2500 words (+/-10%)

What do I need to do to pass? (Threshold Expectations)

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In order to pass this assessment you need to

● Demonstrate a conceptual understanding of the cost of capital concepts and theories

● Appropriate computation from the available data
● Analyze the data and apply appropriate tools and techniques to substantiate the results
● Ability to evaluate the results of the analysis , and give recommendations
● The report should be properly structured and most of the task should be addressed.
● Discussions needs to be supported with evidences from literature
● Conclusions should be evident and be supported with some reasoning.

● The report should show some compliance to Harvard style referencing

How do I produce high quality work that merits a higher grade?

● The report exhibits an excellent understanding of the theories and concepts of cost of capital
● Excellent analysis and application of the information using wide range of relevant and current sources
● Critical reasoning and application are consistently evident across the discussions
● Conclusions are supported with strong reasons and evidence
● All the tasks are discussed astutely with proper focus.
● Demonstrates excellent Harvard style formatting skills. In-text citations are presented at relevant areas.
● The structure of the report is excellent. Discussions are free of grammar or writing errors.

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How does assignment relate to what we are doing in scheduled sessions?

The scheduled sessions introduce you to optimal capital structure, cost of capital and dividend policies and other
concepts and skills that are related to your assignment. The sessions will help you gain knowledge of application
of the concepts to practical situations, and develop analysis and application, through case study and scenarios which
will guide you towards the completion of the assignment tasks.

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How will my assignment be marked?

Your assignment be marked according to the threshold expectations and the criteria on the following page.
You can use them to evaluate your own work and estimate your grade before you submit.

Sub Standard /
N Weighi Poor Satisfactory Good Very Good
Criterion No Attempt
o ng (%) (20 Marks) (40 Marks) (50 Marks) (60 Marks)
(0 Marks)
1 Grasp of 20 Does not show Shows some Shows a limited Shows the Shows a good S
concepts: any grasp of grasp of the grasp of the required level grasp of the e
Understanding the subject subject matter, subject matter of grasp of the subject matter o
of relevant matter; demonstrating demonstrating subject matter demonstrating an m
concepts demonstrating inadequate limited but demonstrating accomplished d
inadequate understanding acceptable an average understanding of in
understanding of the topic understanding understanding topic/s and u
of the topic/s and issues. of topic/s and of topic/s and issue/s. o
and issue/s. issue/s. issue/s. is

2 Argument/Analy 35 Lack of analysis Poor analysis of Some analysis of The Good application E
sis: of information. the information. information of the information a
Development of No discussion is information. Although there from various to the task. There in
Argument / evident. The The analysis is is evidence for sources is evidence of in- a
Analysis , discussed tasks incomplete and some although depth analysis of a
Detailed are completely vague. discussion, they relevant is not data. But, all the th
discussion on out of focus. are discrete and properly tasks are not
the tasks lacking focus. It applied to the consistent in the
E
involved, does not reflect task. There is analytical rigor.
Little or no th
Critical critical some evidence The inferences
evidence cr
awareness / application of for critical drawn could have
 interpretation Of critical the concepts to analysis and been more a
evaluation of the task. reasoning. meaningful. a
material. e
Evidence of Evidence of a Evidence of good re
limited general critical critical th
critical stance, appreciation re
evaluation in although and evaluation of sy
some areas, some material relevant theory cr
with not evaluated. and research and a
some lost a systematic re
opportunities or attempt to relate to
it to the topic.
Misunderstandi
ngs.

3 Conclusion & 20 Conclusions are Recommendati Conclusions are Conclusions Conclusions are C
Recommendatio not supported ons given and supported with are supported supported with a
ns with any conclusions are very weak with limited reasons and w
reasons or reasoning and reasoning and evidence; a
not supported
evidence; no little evidence; evidence; presents a fairly e
with proper
evidence of any Interpretations presents a balanced view; p
interpretations. reasoning. Only are one –sided somewhat interpretation is fa
few relevant and not one-sided both reasonable a
points have objective. interpretation. and objective. v
Presents hardly
been discussed. in
any
is
recommendati Presents Presents
re
ons, realistic, recommendatio recommendati o
appropriate or ns but these are ons which are
otherwise. not realistic or
somewhat Presents
appropriate and P
realistic and specific,
with little, if d
any, support appropriate realistic and
sp
from the but not very appropriate
re
analysis and specific; there recommendati
a
concepts is some ons supported
discussed. re
support from by the analysis
o
the analysis and concepts
su
and concepts
th
discussed.

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 a
d
discussed.

The report is At times report Frequent More than Well executed. W

difficult to read can be read but compositional occasional Few grammar or w
due to too many errors or errors or writing errors. co
overwhelming language errors misspellings, misspellings, Reads easily.   d
errors or have been but the report but that does T
4 Language 10 misspellings observed. The can be read. not take away o
meaning of significantly e
many from the
sentences is quality.
lost due to
language errors
5 Completeness 15 Incomplete in Complete in Information Complete in Complete in most E
Information, all respects; only few search is not many respects; respects; reflects co
Research & does not reflect respects; adequate. reflects many most th
Referencing: in
any barely reflects requirements. requirements.  
fr
Variety of requirements. requirements. Limited and Good usage of so
sources used, uncritical use of variety of
There is no Relevant E
relevance of a restricted information from
evidence for The report information o
sources used range of sources various sources.
information references search is in
search. The report su
clearly do not evident, but
shows some d
No references comply with not adequate. Use of a wide
compliance to
at all. the basic range of U
HARVARD STYLE
requirements appropriate ra
referencing, but Use of a range
of HARVARD sources with some a
shows many of appropriate
STYLE format. critical awareness so
errors. sources.
of their status and in
The report p
relevance
The references demonstrates
The report re
are not a basic level of w
Very few demonstrates a
adequate to references HARVARD a
solid
support the STYLE th
quoted which understanding of
literature used referencing, a
are inconsistent the basic elements
in the report but still T
with the of HARVARD d
amount of contains major
STYLE formatting. e
literature used deficiencies. H
In-text citations if
in the report. No S
presented at
sophistication fo
relevant areas will

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is evident. lend more sk
appropriateness
to the report In
ci
p
re
C
o
cu
so
e
d

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