UGB363 Strategic Corporate Finance

Free Sample

UGB363 Strategic Corporate Finance

Individual assignment

This is an individual assignment of 3,000 words. (+ or – 10%)

Students are required to submit their coursework through JIRA. Only assessments submitted through JIRA will be marked. Any other submission including submission to your study centre in hard copy will be treated as a non-submission.

Requirements:

Part A of the assessment is compulsory for all students with a marking allocation of 50% awarded within this element. Students will then select to attempt EITHER Part B or Part C of the assessment with this element of the work also being awarded a mark allocation of50%.

Knowledge

K1. Critical understanding of the key strategic decisions that a business may have to make and appreciated how accounting and finance can assist in making and evaluating thosedecisions.

K2. Critical understanding of specific analytical skills in key decision areas within strategy and finance at local and international level.

K3. Critical understanding of the limitations of the current state of financial theory in making strategic business decisions.

Skills

S1. Competence in applying the key valuation concepts and methodologies of financial decision making in order to contribute to the wider decision making of the organisation

Part A (compulsory)

You have recently joined the Finance team of Power Assets Holding Limited (https://www.powerassets.com/en/about-us). As part of the initial duties you have been asked by the Board of Directors to produce a report that:

investigates and analyzes the latest three-year performance of the company, and (35 marks)
evaluates the need and how to adjust its existing capital structure, if the strategic direction of the company in the near future is a more high-growth, entrepreneurial, acquisition-active and global one. (15 marks)

Required:

In this section students should demonstrate both knowledge and understanding of a range of topics, theories, and concepts covered within the UGB363 Strategic Corporate Finance module. A report format should be utilized that offers clear, concise analysis, resulting in the production of robust recommendations. Topics and concepts that can be considered for inclusion within the report include corporate governance policy, financing strategy, investment strategy, ratio analysis and interpretation, capital structure alterations, dividend policy, and merger and acquisition activity. This is not an exhaustive list and students should be prepared to investigate other key aspects from the module if they feel necessary.

Total for Part A – 50 marks

Part B

On August 20, 2019, Li Ka-shing’s CK Asset offers to pay US$3.27 billion to buy Greene King, operator of 2,700 pubs, restaurants and hotels in UK”. You are required to:

critically analyze the impact of this news on the share price of CK Assets by studying the stock price movement of the company before and after the release of the news. Your impact analysis should specifically consider impacts on the expected financial position and health of the company (20 marks) using corporate finance notions and models on firm value. Usage of charts and graphs, e.g., on stock movement prior and post the news release, etc., is required to support your analysis (15 marks).

(25 marks)

examine the movement of the company’s share pricebefore and after the release of the news in terms of the Efficient Market Hypothesis (EMH). The examination should reflect on the validity of the EMH in this case, bearing in mind the specific factors that influence the market efficiency of the Hong Kong Stock Market.

(15 marks)

discuss what financial managers of listed companies in Hong Kong could learn from your evaluation answers in (i) and (ii) for their corporate financial management practices.

(10 marks)

Required:

In this section students should demonstrate an understanding and knowledge of the theoretical aspects that underpin the differing strengths of market efficiency. The discussion / evaluation should be supported with relevant, contemporary, academic research that has been undertaken within this field and should be referenced accordingly. Ensure the response does not become overly descriptive within its approach, rather, attempt to incorporate a critical viewpoint throughout, allowing logical conclusions to be offered. Specifically, it is important to examine the share price movement of CK Asset prior and post the news release, with share price movement charts.

Total for Part B - 50 marks

Part C

The balance sheet of Victory plc for the year just ended is summarized below:

($ millions)

ASSETS
Cash & Bank Balances	380
Other Current Assets	1,340
Total Current Assets	1,720
Fixed & Non-Current Assets	1,960
Total Assets	3,680
LIABILITIES & EQUITY
Liabilities
Current Liabilities	1,290
Unsecured 6% bonds	70
Total Liabilities	1,360
Equity
Ordinary Shares ($0.5 per value)	800
Retained Earnings	1,520
Total Equity	2,320
Total Liabilities & Equity	3,680

The company which has been earning good profits has been paying a dividend of $0.2 per share on its ordinary share capital in each of the last few years. The same rate of dividend has already been announced for the year just ended. The company’s ordinary shares are now trading at a market price of $6.5.

At a meeting of Victory plc’s board, the company’s Chairman suggests that, in addition to the normal dividend of $0.2 per share, the shareholders should be rewarded with an additional one-off special dividend exactly equal to the normal dividend.

A Non Executive Director points out that the firm’s major shareholders are sophisticated investors like investment trusts, and given investor rationality in an efficient market, the Chairman’s proposal would make no difference to shareholder value.

Required:

With reference to the Non Executive Director’s remark, evaluate the theoretical impact of the Chairman’s proposal (i.e., the special dividend) on the wealth of a shareholder in Victory plc currently owning 1,000 shares. Provide appropriate calculation (10 marks), and comment on your results (5 marks). (15 marks)

Critically examine the “for” and “against” theoretical views of the Dividend Irrelevance Theory (35 marks)

In this section students should demonstrate knowledge, understanding, and an ability to critically evaluate and analyse the main dividend relevance and irrelevance theoretical viewpoints. The response should be developed through use of a wide range of relevant academic literature, referenced as per Harvard referencing requirements. The inclusion and ability to integrate real-life practical business examples, addressing whether differing companies adopt a dividend relevance or irrelevance standpoint would assist in developing the response in greater depth.

Total for Part C – 50 marks

Generic Assessment Criteria – Undergraduate Bachelor’s degree

Categories

Grade

Relevance

Knowledge

Analysis

Argument and Structure

Critical Evaluation

Presentation

Reference to Literature

Pass

86 –

The work examined is exemplary and provides clear evidence of a complete grasp of the knowledge, understanding and skills appropriate to the Level of the qualification. There is also unequivocal evidence showing that all the learning outcomes and responsibilities appropriate to that Level are fully satisfied. At this level it is expected that the work will be exemplary in all the categories cited above. It will demonstrate a particularly compelling evaluation, originality, and elegance of argument, interpretation or discourse.

100%

76-85%

The work examined is excellent and demonstrates comprehensive knowledge, understanding and skills appropriate to the Level of the qualification. There is also excellent evidence showing that all the learning outcomes and responsibilities appropriate to that level are fully satisfied. At this level it is expected that the work will be excellent in the majority of the categories cited above or by demonstrating particularly compelling evaluation and elegance of argument, interpretation or discourse and there may be some evidence of originality

70 –

The work examined is of a high standard and there is evidence of comprehensive knowledge, understanding and skills appropriate to the Level of the qualification. There is also clearly articulated t evidence demonstrating that all the learning outcomes and responsibilities appropriate to that level are satisfied At this level it is expected that the standard of the work will be high in the majority of the categories cited above or by demonstrating particularly compelling evaluation and elegance of argument, interpretation or discourse.

75%

60–

69%

Directly relevant to the requirements of the assessment

A substantial knowledge of relevant material, showing a clear grasp of themes, questions and issues therein

Good analysis, clear and orderly

Generally coherent and logically structured, using an appropriate mode of argument and/or theoretical mode(s)

May contain some distinctive or independent thinking; may begin to formulate an independent position in relation to theory and/or

Well written, with standard spelling and grammar, in a readable style with acceptable format

Critical appraisal of up-to-date and/or appropriate literature. Recognition of different perspectives.Very good use of source material. Uses a range of

50–

59%

Some attempt to

Adequate knowledge of a fair range of relevant material, with intermittent evidence of an appreciation of its significance

Some analytical

Some attempt to construct

Sound work which

Competently

Uses a variety of literature which includes some recent texts and/or appropriate literature, though not necessarily including a substantive amount beyond library texts.

Competent use of source material.

address the

treatment, but

a coherent argument, but

expresses a coherent

written, with only

requirements of

may be prone to

may suffer loss of focus

position only in broad

minor lapses from

the assessment: may

drift away

description, or to

narrative, which

and consistency, with issues at

stake stated only

terms and in uncritical

conformity to one or

standard grammar, with

acceptable

from this in less

lacks clear

vaguely, or theoretical

more standard views

format

focused passages

analytical

purpose

mode(s) couched in simplistic

terms

of the topic

40–

49%

Some correlation with the requirements of the assessment but there are instances of irrelevance

Basic understanding of the subject but addressing a limited range of material

Largely descriptive or narrative, with little evidence of analysis

A basic argument is evident, but mainly supported by assertion and there may be a lack of clarity and coherence

Some evidence of a view starting to be formed but mainly derivative.

A simple basic style but with significant deficiencies in expression or format that may pose obstacles for the reader

Some up-to-date and/or appropriate literature used. Goes beyond the material tutor has provided. Limited use of sources to support a point.

Fail

35–

39%

Relevance to the

A limited

Heavy

Little evidence of coherent

Almost wholly

Numerous

Barely adequate use of literature. Over reliance on material provided by the tutor.

requirements of

understanding of a

dependence on

argument: lacks

derivative: the writer’s

deficiencies in

the assessment

may be very

narrow range of material

description,

and/or on

development and may be

repetitive or thin

contribution rarely

goes beyond

expression and

presentation; the

intermittent, and may be reduced to its vaguest andleast

challengingterms

paraphrase, iscommon

simplifying paraphrase

writer may achieve clarity (if at all) only by using a simplistic or

repetitious style

The evidence provided shows that the majority of the learning outcomes and responsibilities appropriate to that Level are satisfied – for compensation consideration.

30–

34%

The work examined provides insufficient evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence provided shows that some of the learning outcomes and responsibilities appropriate to that Level are satisfied. The work will be weak in some of the indicators.

15-29%

The work examined is unacceptable and provides little evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence shows that few of the learning outcomes

and responsibilities appropriate to that Level are satisfied. The work will be weak in several of the indicators.

0-14%

The work examined is unacceptable and provides almost no evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence fails to show that any of the

learning outcomes and responsibilities appropriate to that Level are satisfied. The work will be weak in the majority or all of the indicators.

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