Accounting and Managerial Finance

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LSBF
Module Accounting and Managerial Finance
Assignment
Title		 AMF Written Coursework Assignment
Assignment
Type		 Individual Assignment
Word Limit 3,500 – 4,000
Weighting 100%
Issue Date 1st June 2020
Submission Date 6th July 2020
Feedback Date 19th – 21st August 2020
Issued by
(Assessor)		 Sherrihan Radi
Internal Verifier Shahnaz Hamid
Plagiarism When submitting work for assessment, students should be aware of the
LSBF guidance and regulations concerning plagiarism. All submissions should
be your own original work.
You must submit an electronic copy of your work. Your submission
will be electronically checked.
Harvard
Referencing &
Special
Instructions		 The Harvard Referencing System must be used. The Wikipedia website
must not be referenced in your work.
You are allowed to upload only ONE attachment (e.g. an Excel sheet) in
addition to your original assignment, unless there is a requirement for more
than one document in the assignment brief.
You must upload your assignment in PDF or Word document format. Your
paper will not be graded if it is submitted in any other format.
If you submit your assignment as a PDF version, please include the exact
word count of the assignment on the title page.
Learning
Outcomes		 On successful completion of this assignment you will be able to:
1. Summarise key principles, trends and tools in accounting and
corporate finance.
2. Demonstrate effective approaches to the analysis of corporate finance
structure and analysis of corporate financial statements.
3. Assess the value of practical value of models and theories on making
decisions on corporate financing in context.
4. Critically evaluate the benefits of various types of financing for
different kinds of organisations.
5. Utilize internal and external financial information to appraise business
performance.
Grading Criteria Postgraduate Grading Criteria for this assignment is available at the end of
this document.
Your Task Question one of the individual assignment is to perform a detailed financial
analysis of a listed company using key financial ratios and analysis of
company financial statements. Critical evaluation of the financial health of the
company, including the company’s approach to working capital management,
should be submitted.
Question two of the individual assignment is to prepare a report to the
investment board of Britvic Plc that recommends the appropriate funding
choice for an investment project that will be evaluated based on the
information provided below for question two.
Important: The two components of this assessment are independent of
each other.
Question 1 – 50%
Using the following link, https://www.britvic.com/media-centre/reports,
download the annual reports of Britvic Plc from 2017 to 2019 and provide a
critical analysis of the financial health of the company. The annual reports are
in a consolidated format, and relevant financial statements can be found
under the financial statements section. Do not forget to review the notes to
the financial statements. (This report should be a minimum of 2,500 words
of the total word count.)
Required:
a) Write a brief introduction of the company and the current mid-term (5
years) outlook. Maximum of 300 words. Be sure to include an analysis of
the company’s share price to the present.
[5 marks]
b) Calculate Britvic Plc’s key financial ratios (for at least the 3 most recent
years) and present them in the report in table or chart format. Key ratios
must cover all categories: profitability, liquidity, efficiency, investment,
and gearing (leverage) ratios.
[15 marks]
c) Interpret and assess the trend of the financial performance of Britvic Plc
in the most recent year (the newest annual report) in comparison to
the previous years as well as its competitor/industry. Make sure you justify
any significant differences (trends) you observe here.
[20 marks]
d) Critically assess the company’s approach to working capital management.
[10 marks]
Notes: The accompanying analysis should be detailed and provide reasons
for any changes. Use both internal and external (financial and non-financial)
information to support your analysis. Simply stating that a certain ratio has
changed and by how much is not sufficient for analysis at this level. All
equations and findings must be included in the report.
[Total Q1: 50 marks]
Question 2 – 50%
Britvic Plc is currently evaluating a new project to produce canned coffee
drinks. The project will require an initial outlay of £45m on production
machinery and other costs. The project is expected to have a three-year life
span, and the projected cash flows associated with the project are displayed
in the below table:
Table 1: Britvic Plc potential project’s cash flow information
All figures in £’m 2021 2022 2023Sales 1,800 1,950 2,000COGS (990) (1,073) (1,100)Gross Profit 810 878 900Operating Expenses (73) (80) (82)EBITDAa 737 798 818Depreciation (7) (7) (7)EBITa 730 791 811Tax Expense (131) (142) (146)EBIATa 599 648 665CAPEXb 3 3 3Investment in Working Capital 0 0 (2)aEBITDA: Earnings Before Interest, Taxes, Depreciation and Amortisation
EBIT: Earnings Before Interest and Taxes
EBIAT: Earnings Before Interest and After Taxes
For simplicity, taxes are calculated assuming no interest expensebAnnual capital expenditures in addition to the initial outlay, and assumed to cease at the end of
the project
The project has a debt capacity of 50% of the cost of the project, with an
annual interest charge of 8%. The company currently has £10m of retained
earnings available for this project, and the remainder would potentially be
financed with a rights issue. The rights issue incurs additional costs of 2% of
the amount raised, and the debt issuance is a bit cheaper, costing 1%, where
both issue costs are tax deductible.
Table 2: Additional information
Key Rates and FiguresRisk-free Rate (irf) ?Project Cost of Debt (id) pre-tax 8.00%UK Market premium 6.58%UK Marginal Corporate Tax Rate 18.00%Britvic Plc Equity Beta (β) ?You will need to research the other values needed to complete Table 2 above.
Required:
The company believes this will be a successful project and will help to
distinguish them from their competitors. However, they would like you to
evaluate the project using different methods and present a proposal to the
investment committee in order for them to approve it.
a) Britvic Plc is considering financing the project with 40% debt. Using
Adjusted Present Value (APV), value the project. (Assume the same
level of debt is held until the end of the project. Do not consider the
repayment of the debt principal in any of the valuations.)
Hint: calculate the free cash flow of the project and use CAPM to
compute the discount rate.
[12 marks]
b) How would your evaluation change if the machinery manufacturer
offered to sell you the production machine with a three-year £35m
8% loan (subject to 1% issue costs)? Assume the remainder of the
initial outlay is equity. Discuss the benefits and disadvantages of the
APV method.
Hint: use APV again, but this time do not forget to take into account
the benefits and the additional costs of this option.
[12 marks]
c) Using NPV, evaluate the project using the Weighted Average Cost of
Capital (WACC), assuming a 50% debt.
Hint: assume the Beta obtained is Equity Beta.
[12 marks]
d) Contrast the methods and scenarios and give a final recommendation
to the investment committee. Make sure you critically evaluate the
methods and discuss other risk factors that were not included in the
analysis.
[14 marks]
[Total Q2: 50 marks]
Suggested Structure:
The presentation is open to your own interpretation of the project but should
include the following items as a minimum:
1) Executive summary (objectives and content)
2) Rationale for the project (describe the current situation)
3) Ratio analysis (financial and non-financial)
4) Project financials (investment valuation methods)
5) Project risks (minimum one each of financial and non-financial)
6) Critical discussion of the methods (if the company did not invest in
the project)
7) Final recommendation to the investment committee for the chosen
funding method and supporting reasons for the choice
Guidelines Please read all questions and information provided carefully. Answers should
be an appropriate length, keeping in mind the question requirements and
total word count allowance.
In addition, your assignment should demonstrate the following qualities:
A critical appreciation of relevant literature and its use to support your
argument, substantiate calculations, and address other aspects of the
assignment.
Taking ownership of the content, being prepared to debate and argue a
personal position, and providing evidence of evaluative skills. A submission
made up of extracts from published sources which is descriptive or simply
theoretical regurgitation is not acceptable. Your submission must have
interpretation and consideration of the challenges and issues of applying
theory to practice.
Logical flow of ideas and treatment; appropriate selection of real-world
factors related to the companies under scrutiny.
Evidence of additional personal research, and the ability to analyse material
from a variety of appropriate, relevant perspectives.
Presentation, structure, appropriateness of methodology, breaking into
section headings/subheadings, tidiness.
Marks will be awarded for proper referencing and originality of work. Also
note that plagiarism is a serious offence and your submission will be
electronically checked.
Your report must be handed in electronically no later than the given date of
submission.

Grading Criteria

Grading
Criteria		 70%+ (Distinction) 60-69% (Merit) 50-59% (Pass) 0-49% (Fail)
Generic
skills: communication
and presentation.		 Comprehensive and
correctly structured
assessment. Style of
writing is very fluent
and develops a
coherent and logical
argument. Excellent
referencing.		 Well structured report
which follows
appropriate format but
some aspects of
layout and referencing
could be improved.
Style of writing is fairly
fluent. Good
referencing.		 Good report in most
aspects but suffers
from variations in
quality and the layout
contains some
inadequacies. Style of
writing is satisfactory.
Referencing needs
improving.		 Very poor report which
is incorrectly structured
and contains major
errors and omissions.
Style of writing is
descriptive, lacks
coherence and fluency.
Poor referencing.
Knowledge &
Understanding		 Demonstrates
excellent knowledge
of theory and provides
critical theoretical
underpinning. Very
good interpretations
and summarising of
main themes.		 Wide range of
knowledge
demonstrated and
evidence of good
understanding of the
topic.
Ability to interpret and
summarise
succinctly.		 Good range of
knowledge
demonstrated but with
some room for
improvement. Some
understanding
displayed of the
topic.
Summary and
interpretation are
satisfactory.		 Very poor range of
knowledge, research
and interpretation of
information that is
subjective and lacks
conceptual
coherence. There is no
clear identification,
understanding or
interpretation of main
themes.
Analysis Excellent use of
theoretical and
conceptual models to
guide analysis linked
with a critical
discussion of main
themes.
Has demonstrated an
ability to discriminate
in the use of more
abstract concepts and
techniques.		 Very good use of the
theoretical and
conceptual models
with good critical
discussion. Has
applied a range of
analytical skills with
greater independence
and understanding of
more abstract data or
concepts.		 Use of theory and
concepts limited in
scope and depth but
relevant. Application
could be improved and
there is a tendency
towards description
rather than application
of concepts.		 Very poor use of theory
and very little
application of core
concepts.
Very little or limited
analysis and evaluation
in relation to
fundamental principles
and concepts.
Synthesis/ Creativity/
Application		 Logical presentation of
themes with
appropriate examples
being demonstrated.
Very good
demonstration of
synthesis. Models
have been clearly
applied to the
argument.		 Very good account of
main themes with
sound application.
Good attempt at
applying models to the
argument. Fairly good
attempt at
synthesising the
salient points.		 Good account of main
themes with some
attempt at application.
Limited
evidence of
synthesis.		 Very poor account of
main themes with little
or no application. No
links between models
and argument.
Evaluation Shows clear evidence
of in-depth critical
reflection and
evaluation of the
argument by providing
a robust defence of
the opinions
presented in the
assessment.		 Shows evidence of
critical reflection and
evaluation and a fairly
cohesive defence of
the argument		 Shows some evidence
of critical reflection but
could have been
developed.		 Shows little or no
evidence of critical
reflection and needs to
be much more
developed. There is no
defence of the opinions
presented.
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