Assessment Brief 7BSP1245 Finance for Intemational Business Module Tile: Fnancefor international Module Code: 7BSP1245 ‘Rssignment Format & Maximum] INDVIDUAL Report, 2500 words sani ‘Word count 4/10% ‘Assignment Weighting: | 60% Time23.55 Courseworkretum | 26 January Coursework Submission: Date: 18 December 2022 Datereturned to 2023 Method: Canvas students: arthur Dyirekumunda Dr Nurgul Module leader ‘Arthur Dyirakurrunda Fist matker Chambers, DrEcna Starr Maduka ‘Approved Intemal Moderator pee 2002 ModuleBoardname | PG BoardA External Examiner Aoproved CI Module Board date ‘Assessment Criteria Learning Outcomes: Knowiedge and Understanding testedin this assignment: “1 evakiate strategies evallable to an organisation to enable the creation and maintenance of value. 2. assess the financing choices available to organisations and the relevance of capital structure. 3. anaiyse the financial and operating risks faced by organizations and the strategies for mtigating these risks. 4. research the specific issues relating investing and raising finance on an international basis. Teaming Outcomes: Skils and Attributes tested in this assignment: ‘5 analyse financial statements and interpret the results in the context of valuecreation 6. critically evaluate capital investment proposals both domestic and international including estimation of component and overall captalcosts. 7. devise strategies for identifying and managing foreign exchange risk and the risks of international investment 8. dovise financial strategies f or enhancing enterprise value. Feedback /Marking criteria for this Assignment Performance willbe assessed using HBS Grading Criteria and Mark acheme Guidance for improvernent willbe given in writing on the Assessment Feedback Form or on the Study Net Feedback Form within 4 weeks of submission. 1For each day or part day up to five days after the published deadiine, coursework relating to modules submitted late will have the numeric grade reduced by 10 grade points until or unless the numeric grade reaches 50 for level 7 (PG). Ifa submission is more than 5 working days after the published deadline, a grade of zero willbe awarded. Where the numeric grade awarded for the assessment isless than 50 for level 7, no lateness penalty will be applied: Detailed Brief for Individual/ Assessment Assignment Tite: Investment Appraisal Report Description of theassignment: Report testing an evaluation of international business finance decisions78SP1245 Finance for Intemational Business Coursework Brief Coursework, Semester A 2022.23 Loop ple (10 = 2022) Loop ples a technology company based in Hertfordshire (United Kingdorr), specialising in research and development of wireless electronic gaming gadgets. The company sells its products throughout the UK, Western Europe, South Korea, and USA. The company has developed a new portable games console (The Galactic Lite) that will be sold in these international markets, Thus, the firm will have cash flows denominated in, GE sterling £, €Euro, Won and USS dollar. The unit figures given below are the sterling equivalent of these cash flows at current exchangerates. The British pound Sterling £ is expected to severely fluctuateagainst world currenciesover thenext 5 years. The company spent £3,000,000 on R&D on the Galactic Lite wireless gadget in the past few ‘years. Dueto the rapid changing nature ofthe electronics gaming industry and the uncertainty surrounding rising inflation, recession in the world economies and impacts of the UK exiting the European Union, the company directors are faced with a cilerrma of how todrive the new product forward. The directors are now faced with two mutually exclusive options to exploit the financial potential of the new product. Proposal 1: Loop pe could go ahead and manufacture the electronic gaming gadget itself. The company will need to acquire new manufacturing equipment at a cost of £180 milion. The equipment could be financed through a rights issue or bond issue and would be bought on the last day of the company's current financial year. Investment in working capital will need to be ££45,000,000 and thisis recovered at the end of the project. The estimated scrap value of the equipment at the end of the production period is £1,000,000. Loopplchasa large warehouse‘which will be used as a factory for manufacturing the device, The warehouseis currently rented out to another company for £20,000,000 a year. Loop picis set to sell the new product at £320 peer unt (current price). Seling priceinflation is expected to be 3% per year trom the first year. Variable cost is £160 per (current price). Variable cost inflation is expected to be 4% per year fromthe first year. Marketing expenses including online advertising willbe £30,000,000 (current price) a year subject to2%annual inflation. Additional fixed costs will be £25,000,000.a year and not subject to inflation. Loop plc plans to use the straight line depreciation method on manufacturing equipment. The directors set a target accounting rate of return on investment of 30 per cent and 2 payback period of three years for all projects. Loop ple estimates the future sales from next year onwards as follows (assuming a product life of 5 years ueto competitions}: Year Year Year 2 Year 3 Year 4 Year 5 Number of | 500,000 1,200.000 [7,500,000 | 2,000,000 | 600,000 units Loop ple pays corporation tax at2 rate of 20%per year, one year in arrears. Tax ispaid on the operating cashflow(profit) Loop ple pays corporation tax at the rate of 20% on its taxable profits which is paid one year in arrears. (Assume that operating cash flowis the seme as taxable profit) Ordinary Share Capital recent report by financial consultants suggests that the Loop ple’s equity has a beta of 1.4and reported that medium temUK government bonds are eaming 2.89% per annum. In addition, the report noted that the FTSE All-share index returned an average of 11.6% in each of the last three years. Loop ple ordinary shares aretrading on the stock exchange at £1.65 whilst their debenture/bond istrading at £104.70, Inspection of the Loop plc balance sheet reveals the following 4No of Shares Ordinary shares par value £1 £20,000,000 -Debt Capital 10% debentures are due to mature in 4 years at par. The current market value of each debenture is £104.70, and the total book value of the debentures is €5m. 8% irredeemable bonds aretrading at £97. The interest hasjust been paid. There are£2m nominal value worth of itredeemable bonds, as perthe statement of financial postion. “The corporation tax rate applicable is 20%. Loop ple uses its Weighted average cost of capital as the cost of capital (discount factor) Proposal2:Loop pic could sell thepatent rights to another business (Nitro Dynamic Lt) that specialises in manufacturing electronic products for a feeof £70 milion. It will be payable immediate in a one-offinstalment. Loop Plewillnot be allowed to manufacture any of thennew products onoethe patentis sold Required ‘You arerequired to produce a written business report in which you provide firm recommendation on a financial basis as to whether Loop ple should invest in the new machinery or sal the patent right. You arerequited to apply a range of methods to carty out the investment appraisal of theproject. Your answer should be presented in the form of a report of 2500 words total (excluding ‘thereferencelist). You must also submit an Excel spreadsheet containing your cashflows (NPV, Payback, IRR and ROCE) and cost of capital (WAC) calculations Your report should ') Evaluate your findings (Cashflows, NPV, Payback, ROCE, IRR), referring to appropriate theory in investment appraisal, cost of capital and risk i) Discuss sources of finance that could be considered and their possibleimpactson risk firm value, ownership, and control. il) Explore the international non-financial factors management would need to consider in adcition to financial factors before making a final decision on the project. iv) Also, comment on the potential impact of foreign exchange risk on the project. You should support your arguments with relevant theory and calculations and indicate any non-financialmatters you feal should be taken into consideration Only relevant cash flows, which are the incremental cash flows arising as the result of an investment decision, should be included in the investment appraisal Relevant cash flows include opportunity costs and incremental investment in working capital ‘Submission requirements: ‘You should use Arial font size 12 and 1.5 line spacing. Exceeding the word count by 10% ‘oF more or deviations from the formatting instructions will attract a penalty of up to S marks ‘Thehanc-in deadline for submission is 23.59 on 18 December 2022. For deferred coursework, submissions up 10 24 hourslate will attract a daily late 10% penalty. Reporis submitted more than 5 days late will attract a mark of zero. ‘Submit one electronic copy via Studyne/Canvas asa Word fle. In addition, submit an Excel spreadsheet containing your calculations. Non submission of the spreadsheet will ncur loss of marks This isan individual assignment and the report submitted should be entirely your own work ‘This assessment is subject to anonymous marking so do not put your nameon any document you submit. However, you must put your SRN on each document you submit. Guidance for the preparation of your report. ‘The purpose of this assignment is simply to give you the opportunity to demonstrate ‘that you have acquired the knowledge and skilis identified in the Module Outcomes and ‘that you can apply them in a typical business situation. Do refer to theassessment cntteria given on the Module site which gives an outiine of how marks will be awarded You should approach the task asa business manager dealing with a reat business and should 2) Adopt a coherent approach to dealing with the set task with a clearly stated business purpose b) Identify an appropriate theoretical dimension and consider the implications for practice. ©) Adopt appropriate analytical methods and a ertical perspective 66) Refer to empirical work where appropriate ‘Task Specific Assessment Criteria: Coursework Communication Skills (Written) Marks willbe awarded for a) for the physical presentation and layout of your report, b) adopting logical well supported (ie using appropriate citations) arguments, c) theextent towihich the report is accurate, brief, concise, and clear, d) thestandard of English, and, @) compliance with standard Harvard referencing. Equal account willbetaken of each element. Knowledge & Understanding You should establish a clear business focussed conceptual basis for your report ~ ieyou need to show what you are seaking to achiave and why it isimportant for managing the Loop ple business (supported using appropriate citations) Synthesis From the casedata given you should identify the nature of the decision(s) facing Loop ple and identify appropriate theory to support the approach you adopt and give your reasoning, which analytical tools are consistent with ‘business focused conceptual basis referred to above? (Supported using appropriate citations). Analysis Using the case deta given, you should apply the anaiytical methods identified in the previous section and evaluate the impact on the businessin relation to the’business focussed conceptual basis’ referred to above. Evaluation Conclusions should be arrived at based on your analysis of Loop ple issues: ie what do the results of your analysis tell you? In your conclusions section you should summarise the results of your analysis. Yourrecommendations willbe assessed on the extent to which they are linked to the analysis of Loop ple issues and on the extent to which they are theoretically coherent — that is the extent to which they are consistent with the theoretical/conceptual base you establish Student Support and Guidance 7. For further help, contact your module leader in their drop-in hours or by email, Use the Grading Criteria and Mark Scheme to help improve your work. Go to CASE workshops, use the CASE website and drop-in hours www studynet herts.a¢.uk/qo/CASE/ Academic English for Business support is available through daily drop-ins, from the CASE office. See the CASE workshop timetable on the CASE main website page for details Make full use of Library search to identify relevant academic material and the ‘Subject Toolkit for Business’ which contains links to other Information Databases and the Information Management contact details. (http'// www.studynet!_herts.ac.uk/ptI/common/LIS.nsf/lis; ADAF5390094771C2802575ED004212BF) Tutors allow students to test their work using Turnitin. Guidance on submission to Tumitin via StudyNet can be found by using the following link. http:// www. studynet],herts.ac.uk/ptl/common/asu.nsf/resourcetlibrary/ TURNITIN+FOR+STUDENTS+2016+USER+GUIDE pdf/SFILE/ TURNITIN+FOR#STUDENTS+2015+USER+GUIDE pdf PG Grading Criteria for HBS Individual ReportMedule Code: Lecturer: Student ID number [EOE] Pression insta Cresty | Coreen Tea anes Discs aha sucure (Qual ofecaderic | Fincings/Deftions/ | Appleaion. | Crticaeduaton /or sources Cauttons Inegraton of | Refecion Used prcetation cf Datatrature Herat aferencng Takeeais | Folowsreper | Felewarlavaayls | Certawnchded Tregaind | Trestaganere lectrer’o” | suctued | forirtxtetaton 2 | specify equrements.as | appieaton of | devdcpment of crendc | heepstoword | RefeenceList nmoduestes ‘oration ‘rom | decusion 23 suit limtor Useamimimot... | ecurseworkguitence | coursemark | instnicionalvarbsto aut ‘sours guidencemotule | theta tiowas ‘Oursianding | Outstanding saicion | Outing Daisinaing | Ouitandnglanaat 0-109 | presenions | ofquattyscures wel | ecortonottope | ausnessiiscnt | alcussion/anassy repotwueture, | boyendooes Showngevealat | Lappleatn. | ericalvauator Sor rstnang | winnnumberes | ecorrrendes lnowkog2 utstnaing | referton. 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(19 marks er moccan with oper omecves,Ornarks or mathodogytectnque discussion 20 Excel sheet, Computation and Results presentation Clear excel spread sheets provided with the calculated data/tesults to evaluate the investment Tables can also be provided if they provide key data (Calculate WACCNPVROCE Payback IRR) 20 Results analysis, Synthe /Creativity Evaluation &15 marks Discussion of findings, the nature of the decision (Discuss the resulis calculated here and use resus to evaluate decision. Financing risk on-financial factors and Value creation discussion) 15 marks Provide adiscussion of alteratie financing, FX isk, other non financiel factors.and Velue eresten. 30 Conclusion/recommendation 10 12Conclusions should be arrived at based on analysis of issues; ie. what do the results cf your analysis tell you? In your conclusions section you should summarise the recults of your analysis. Yourrecommendatione will be assessed en tho extent to which they are linked to the analysis of the firm issues and on the extent to which they are theoretically coherent - ie. the extent to which they are consistent with the theoreucal/conceptual base you establish TOmarks Generic: Communication Skill (Written) ‘ZO marks ‘physical presentation and layout of your report, b) adopting logical well supported (2. using appropriate citations) arguments, c) the extent to which the report is accurate, brief, concise and cleay d) the standard of English, and, e) compliance with ‘standard Harvard referencing. Equal account will be taken of each element.(Smarks ‘each oloment) 13