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ASSESSMENT TEMPLATE

Module Code
3BM070
Module Title
Strategic Corporate Finance

Level
3
Module Tutor
Doug Meikle

Credit Value of Module
20
Feedback Process
Delete or edit as appropriate
Overall feedback provided in Grademark using Turnit-in

Type of Submission
Delete or edit as appropriate
 
Online via Turnitin
Expected Feedback Date
This will normally be 15 working days from the date of submission (excludes weekends and University closure dates)
Friday 31st March 2017

Assessment Task
Assignment 1

Weighting
50%
Word Count
Length of Presentation
Length of Exam
Delete as appropriate
Relevant excel files plus 2,000 words for all written parts

Due Date
Friday 10th March 2017 at 14:00

·         Your student number must appear on all pages.
·         Pages must be numbered.
·         Work should be submitted to Moodle
·         You are required to add the following declaration on page 2 of their assignment: “I ………… [name] declare that I am the sole author of this assignment and the work is a result of my own investigations, except where otherwise stated. All references have been duly cited”.
·         Your attention is drawn to the University policy on cheating and plagiarism. Penalties will be applied where a student is found guilty of academic misconduct, including termination of programme (Policy link).
·         You are required to keep to the word limit set for an assessment and to note that you may be subject to penalty if you exceed that limit. (Policy link).  You are required to provide an accurate word count on the cover sheet for each piece of work you submit.
·         For late or non-submission of work by the published deadline or an approved extended deadline, a mark of 0NS will be recorded. Where a re-assessment opportunity exists, a student will normally be permitted only one attempt to be re-assessed for a capped mark. (Policy link).
·         An extension to the published deadline of up to one week for the submission of a piece of assessed work may be granted to an individual student if they meet the eligibility criteria of the Business School extensions policy (S:Business SchoolSecureFaculty MeetingsExtensions & Mitigating Circumstances).
·         The assignment should be word processed.
·         The York St John Harvard Referencing system should be used.
Examinations are subject to the University Examination Procedures (link).

Module Specific Requirements

This assignment requires you to submit two files to two separate drop boxes.
·         An excel file
·         A word document

Learning Outcomes

1.     Evaluate capital investment projects using a range of techniques including the assessment of risk

Assignment Description

Introduction
You work at the headquarters of Yorkshire Solar Farms plc. and are responsible for the evaluation of capital investment projects. The business is currently trying to decide between two solar power plants that will be based in Yorkshire.
Each farm has an expected life of 20 years but one is much larger than the other.
At the end of the project, the plants can be dismantled and sold with no lasting impact on the environment.
 
The estimated capital costs for this project are below:
 

Costs and timings
Small
Large

Investment costs
£’000
£’000

Preparatory costs (planning, legal etc.)
           800
         5,500

Land Purchase Cost  (year 0)
       9,000
       28,000

Total Interest expense
       1,200
         2,500

Equipment (year 1)
     16,000
       48,000

Initial cost
     27,000
       84,000

Refurbishment of Equipment (year 5)
       3,000
         6,000

Total cost
     30,000
       90,000

less Resale value (yr20)
       2,000
         8,000

Net cost for depreciation
     28,000
       82,000

Less government grant
       3,000
       12,000

Net capital cost
     25,000
       70,000

 
Revenue
Revenue will come from selling the electricity. The price earned per KWH has been set at 6.38p per KWH.
The output has been estimated as below:
 

 
Small
Large

 
KWH ‘000
KWH’000

Year 1
50,000
120,000

Years 2-20
60,000
160,000

 
 

Small Solar  farm projected profit and loss accounts
 

Year
 1
 2
 3
 4
 5
 6-19
 20
Total
 

£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000

Sales revenue
3,190
3,828
3,828
3,828
3,828
3,828
3,828
75,922

Government grant
150
150
150
150
150
150
150
3,000

Total revenue
3,340
3,978
3,978
3,978
3,978
3,978
3,978
78,922

Annual operating costs

Insurance
185
185
185
185
185
185
185
3,700

Business Rates
95
95
95
95
95
95
95
1,900

Wages
190
190
190
190
190
190
190
3,800

Annual management fee
175
175
175
175
175
175
175
3,500

Other operating costs
100
100
100
100
100
100
100
2,000

Interest expense
60
60
60
60
60
60
60
1,200

Depreciation
1,250
1,250
1,250
1,250
1,250
1,450
1,450
28,000

2,055
2,055
2,055
2,055
2,055
2,255
2,255
44,100

Profit/(loss)
1,285
1,923
1,923
1,923
1,923
1,723
1,723
34,822

 

Large Solar farm projected profit and loss accounts

Year
 1
 2
 3
 4
 5
 6-19
 20
Total

£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000

Sales revenue
7,656
10,208
10,208
10,208
10,208
10,208
10,208
201,608

Government grant
600
600
600
600
600
600
600
12,000

Total revenue
8,256
10,808
10,808
10,808
10,808
10,808
10,808
213,608

Annual operating costs

Insurance
600
600
600
600
600
600
600
12,000

Business Rates
270
270
270
270
270
270
270
5,400

Wages
625
625
625
625
625
625
625
12,500

Annual management fee
585
585
585
585
585
585
585
11,700

Other operating costs
250
250
250
250
250
250
250
5,000

Interest Expense
125
125
125
125
125
125
125
2,500

Depreciation
3,800
3,800
3,800
3,800
3,800
4,200
4,200
82,000

6,255
6,255
6,255
6,255
6,255
6,655
6,655
131,100

Profit/(loss)
2,001
4,553
4,553
4,553
4,553
4,153
4,153
82,508

 
 
Further information
The following information is also available
 
a)      Depreciation is based on the capital cost.
b)      Depreciation on original equipment is calculated on a straight line basis over 20 years.
c)      Depreciation on the refurbishment is calculated on a straight line basis over 15 years (years 6-20).
d)      The investment will be financed using a mixture of loans and retained profits. The average cost of capital for this is expected to be 8%.
e)      Payments and receipts arise at the year ends unless otherwise stated.
f)       The project is expected to have a life of 20 years.
g)      All costs and revenues are expressed at today’s prices (year zero) with no allowance for inflation.
h)      The government grant will be received in year 0. However it has been spread over the life of the project in the profit and loss accounts.
i)        The preparatory costs have already been incurred.
j)        The annual management fees for both projects include a fee of £25,000 which is an apportionment of head office overheads.
k)      The refurbishments in year 5 require the use of specialised equipment that will be borrowed from another division of the Company. This will cost the other division additional hire costs of £100,000 per project and is not reflected in the profit and loss accounts.
l)        An initial cash reserve is needed for each project. It will be paid back at the end of year 20.
a.      Small £120,000
b.      Large £500,000
m)   Ignore corporation tax.
n)      The company currently has a return on capital employed of 15% and this is the company target for new projects.
o)      The company expect projects to have a payback period of no more than 10 years.
 
Required:
 
Task 1 Calculations (using the spreadsheet)
 
·         You must use and submit this spreadsheet.
·         Enter relevant figures into the cash flows worksheet and justify any adjustments to the profit and loss accounts as a result of the information in points a)-j) above.
·         Using the figures in the calculations worksheet for Net present value (NPV), Internal Rate of Return (IRR), accounting rate of return (ARR) and Payback Period, state, with reasons which project you would accept.
·         Use the sensitivity worksheet to prepare a sensitivity analysis for each project by adjusting each variable +/- 10%.
 (30 marks)
 
Task 2 Risk
You are not expected to do any calculations for this task.
·         Evaluate these projects using your sensitivity analysis.
·         Discuss how using expected values could help analyse the projects.
·         How could Yorkshire Solar Farms plc. could take account of inflation in their analysis of the two plants?
Credit will be given in this task for appropriate use of academic literature along with accurate citations and referencing using the Harvard system.
(70 marks)
 

Additional Information

Methods of working
You are expected to the use the assignment 1 spreadsheet for your calculations. This should be uploaded to Moodle along with your written work.
Use a minus sign (-) to indicate cash outflows
 
Assignment 1 spreadsheet
There are 4 worksheets in this workbook to help you with your assignment (cash flows, calculations, sensitivity worksheet and sensitivity answers).
 
Cash flows worksheet:
Enter all cash flows into this worksheet.
 
Calculations worksheet: Enter the discount rate and data for the Accounting Rate of Return into the lighter shaded cells
 
Sensitivity worksheet: Use this worksheet to adjust the different variables by +/- 10% to see the effect on NPV and IRR. See seminar examples of how to work with this tab.
 
Sensitivity answers
Enter your answers to the sensitivity analysis in the lighter shaded cells.
 

Assessment Criteria

See Next page

 
 

Generic Assessment Descriptors (UG)

Assessed
Components
A*
A
B
C
D
F (fail)
F (fail)
0
NS

(100-85)
(84 – 70)
(69 – 60)
(59 – 50)
(49 – 40)
(39 – 20)
(19 – 1)
F (0)
0NS

Knowledge & Understanding
Work submitted is considered to be outstanding in the assessed components
Excellent understanding of a wide range of ideas
Very good understanding of a range of ideas
Good understanding of relevant ideas
Fair understanding of a few relevant ideas
Subject knowledge is poorly demonstrated
 
Non-Serious Attempt
Work submitted is not considered to be a serious attempt to meet the assessed components
 
Work submitted is judged to be of no value (in relation to the assessed components)
 
Non Submission

Analysis & Evaluation
Excellent ability to analyse, evaluate, compare and construct values
Accurate analysis and very good evaluation
Good analysis and sound evaluation
Fair analysis with some evaluation
Weak analysis and evaluation

Critical
Thinking
Excellent thinking, logical and creative with insightful outcomes
Very good synthesis of ideas that are articulated clearly
Good synthesis of ideas with mostly consistent logic
Logical with some synthesis of ideas
Inconsistent logic and synthesis

Research & Enquiry
Rigorous and sustained enquiry with excellent outcomes
Accurate and consistent enquiry using appropriate methods
Consistent approach drawing on a range of sources
Relevant methods of enquiry with some inconsistencies
Little evidence of research or understanding of appropriate approaches

Creativity
Outstanding original or innovative work
Shows imagination and originality
Good imagination with some originality
Some originality. Work is mostly derivative
Derivative work that offers little in the way of new ideas

Presentation & Referencing
Technically excellent, accurate referencing and presentation
Accurate and consistent referencing and presentation
Good referencing and consistent approach to conventions
Fair understanding of conventions
Poor referencing and little understanding of conventions

Communication
Excellent ability to communicate ideas clearly and appropriately
Very good ability to communicate ideas clearly
Most Ideas communicated effectively
Ideas are communicated with some success
Ideas are not communicated effectively

Practical skills
Excellent demonstration of skills
Very good demonstration of skills
Good demonstration of skills
Fair demonstration of skills
Skills not relevant or require significant development

Independent work & team work
Excellent ability to work effectively within a team environment. Excellent management of own time and skills
Very good ability to work effectively within the team environment. Very good at managing own time and skills
Good team work and management of own time and skills
Mostly effective approach to team work. Own time management is satisfactory
Contribution to team work may be very limited. Inability to organize own time and skills effectively

Professional values
Excellent understanding of
values and approach to professionalism
Very good and consistent approach to professional values
Good approach to professional values
Mostly professional work
Appropriate values are not demonstrated consistently

 

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