UGB363 Strategic Corporate Finance
Weighting – 100% of the marks for this module
This is an individual assignment of 3,000 words. (+ or – 10%) The hand in date is: 8th May 2020 29th May 2020
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.
If your centre supports Turnitin©, a copy of your Turnitin© originality report must be submitted in conjunction with your assignment.
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 of 50%.
The assignment has been designed to cover the following learning outcomes associated with successful completion of the module:
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 those decisions.
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.
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 investment team as a financial analyst at Wisdom Wealth Consultancy Ltd., a financial advisory firm based within Hong Kong. As part of the initial duties you have been asked by the Board of Directors to investigate the five-year performance of a SINGLE company that is currently listed on the Hong Kong Stock Exchange and forms part of the Hang Seng Index with the view to potentially investing future company funds into the chosen company:
Select a SINGLE company that is listed on the Hang Seng Index and prepare a report for the Board of Directors of Wisdom Wealth Consultancy analysing and evaluating the five-year performance of the chosen company.
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
(a). Company A has 8 million shares in issue and Company B 10 million. On day 1 the market value per share is £20 for A and £8 for B. On day 2, the management of A decides, at a private meeting, to make cash takeover bid for B at a price of £12 per share. The takeover will produce large operating savings with a value of £60 million. On day 6, A publicly announces an unconditional offer to purchase all shares of B at a price of £12.00 per share with settlement on day 20. Details of the large savings are not announced and are not public knowledge. On day 12, A announces details of the savings, which will be derived from the takeover.
Ignoring tax and the time-value of money between days 1 and 20, and assuming the details given are the only factors having an impact on the share prices of A and B, determine the day 2, day 6, and day 12 share prices of A and B if the market is:
In each of the following circumstances:
(i) the purchase consideration is cash as specified above, and (5 marks)
(ii) the purchase consideration, decided upon on day 2, and publicly announced on day 6, is one newly issued share of A for each share of B. (5 marks)
(b). The Efficient Market Hypothesis states that “security prices fully reflect all available information” (Fama, 1991).
Critically evaluate the previous statement, ensuring the response is supported with relevant empirical evidence. (40 marks)
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.
Total for Part B – 50 marks
The body of academic research provides conflicting evidence as to whether an optimal capital structure does indeed exist for individual companies and businesses. Demonstrating knowledge and understanding of the differing theoretical viewpoints associated with capital structure, and incorporating relevant empirical findings, critically evaluate and analyse whether financial managers can strive for an optimal capital structure.
In this section students should demonstrate knowledge, understanding, and an ability to critically evaluate and analyse the main capital structure 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.
Total for Part C – 50 marks
Generic Assessment Criteria – Undergraduate Bachelor’s degree
Grade Relevance Knowledge Analysis Argument and Structure Critical Evaluation Presentation Reference to Literature
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.
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
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.
Directly relevant to the requirements of the assessment
A substantial knowledge of relevant material, showing a clear grasp of themes, questions and
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
Some attempt to Adequate knowledge of a
Some analytical Some attempt to construct Sound work which Competently Uses a variety of literature which
address the requirements of
fair range of relevant material, with intermittent
treatment, but a coherent argument, but expresses a coherent written, with only may be prone to may suffer loss of focus position only in broad minor lapses from
includes some recent texts and/or appropriate literature, though not
the assessment: may
evidence of an appreciation of its
description, or to
and consistency, with issues at
stake stated only
terms and in uncritical
conformity to one or
standard grammar, with
necessarily including a substantive amount beyond library texts.
from this in less lacks clear vaguely, or theoretical more standard views format
Competent use of source
focused passages analytical
mode(s) couched in simplistic
of the topic
Some correlation with the requirements of the assessment but there are instances of
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.
Relevance to the A limited Heavy Little evidence of coherent Almost wholly Numerous Barely adequate use of literature.
requirements of understanding of a dependence on argument: lacks derivative: the writer’s deficiencies in
Over reliance on material provided
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
by the tutor.
intermittent, and may
be reduced to its vaguest and least challenging terms
paraphrase, is common simplifying
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.
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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