MSc Accounting and Finance; MSc Finance

ACFI7016 Financial Modelling Semester 2 2023-2024

Assignment: Practical skills assessment (100%)

Latest submission: 1300 hours Thursday 16 May 2024

Learning outcomes assessed

1 Identify and extract large volumes of relevant data, and process them into concise analysis
2 Apply appropriate financial models to complex problems in practical decision making and
financial management
3 Demonstrate comprehensive understanding of various principles that underlie financial
modelling and analysis
4 Evaluate critically the assumptions underlying financial models and demonstrate
understanding of the consequences of inappropriate assumptions.
5 Communicate complex ideas effectively through verbal and written means

Objectives

The assignment tests understanding of the modelling techniques introduced in the

course, requiring you to use Excel effectively and to be able to explain your
assumptions and approaches.

Required

There are two tasks to complete.

Task 1 Corporate valuation. Excel file Bellway 2023.xlsx

Your task is to value the shares of the company Bellway plc using the data provided
in the below Excel file. You are required to:

1. Forecast the financials of the company for six years 20 marks

2. Build a free cash flow forecast 5 marks
3. Using the WACC and long term growth rate given, perform the DCF analysis
of the company and calculate the implied price per share. 5 marks
4. Add a data table varying WACC and the long term growth rate 5 marks
5. Add a scenario analysis on sales growth, using the current forecast as the
base case. Vary upside case by +1%, downside case by -1% 5 marks
6. Insert a textbox into the Assumptions tab of your spreadsheet and using the
company’s annual reports. Identify four items where the assumptions made
for 2024-29, which typically are somewhere between the 2022 and 2023
 figures, could be improved, based on your reading of the 2023 Annual Report.
(max 500 words) 20 marks
Total: 60 marks

Task 2 Option pricing and implied volatility

1. Choose a company for which option prices are available – for Yahoo Finance
this means one that is quoted on a US exchange. Download daily share
prices for the past 12 months.
2. For call options only, select two expiration dates, one that is 1 – 3 weeks, and
the other that is 3 – 12 months in the future. Download prices for your
selected options.
3. For each of your chosen dates, and with an annual interest rate of 5%, use
the Black-Scholes model in a spreadsheet to calculate and present the
implied volatility of the underlying share for 8 – 10 exercise prices. 15 marks
4. Use the share price data to calculate the historic volatility over the past month
and the past 12 months. 5 marks
5. Within a textbox in your spreadsheet, discuss reasons for the discrepancies
between the different figures you have obtained for volatility; is there a good
predictor of volatility? (max 400 words) 20 marks
Total: 40 marks

Assessment criteria

For calculations:
● Techniques correctly applied to the data
● Work well-presented

For discussion:
● Demonstration of understanding of concepts
● Clarity of writing

Presenting coursework for assessment

Submit two Excel files

There is no overall maximum length for this assignment but observe the maximum
words given for the discussion tasks above.

Submission

You must submit two Excel files to the Turnitin dropboxes in Moodle by the date
above. Give the files names which begins with your student number. For example,
‘12345678 Task 1’; ‘12345678 Task 2’
Marking, moderation and return of coursework and feedback

Your marked work and feedback will be available on Tuesday 18 June. The
feedback, focusing on how your work could be improved, will be in Turnitin’s
Feedback Studio.