BIRMINGHAM CITY BUSINESS SCHOOL ASSESSMENT BRIEF

MODULE TITLE:            International Financial Strategy

MODULE CODE:            FIN7055

LECTURER:                   XXXXXXXXXXXX

ISSUE DATE:                 30^th May 2022

HAND IN DATE:             5^th September 2022 12:00 NOON

Learning outcomes and assessment criteria specific to this coursework:

On completion of the coursework, students should be able to demonstrate their ability to:

1. Critically examine Fisher-Hirshleifer model in relationship with the firm’s investment decisions with and without capital markets.

• Critically apprise theory and practice of determining cost of capital, using the Capital Asset Pricing Model for investment appraisal and its limitations for investment appraisal at advance level.

• Evaluate the role of stock market within the context of stock market efficiency, dividend policy and its implications for firm’s capital structure.

• Analyse and evaluate challenges and opportunities for national and international merger and acquisition activity, environment, and current research for the topic area. Consider international environment, risk, and evaluate strategies to manage such risks

Number of attempts

Please note that, under the Academic Regulations, you are entitled to only two attempts to pass each assignment. You are strongly advised to take every opportunity to submit work as failure to submit counts as a fail. Should you fail an assignment, it is very important that you arrange a tutorial with the marker so that you can improve your work.

Please read the full academic regulations available on the Course page.

Plagiarism

Please read the plagiarism guidelines on your module page.

Late Submissions

1.    Assessment Overview

1.1           Rationale

The assignment for International Financial Strategy tests at an advanced level knowledge and comprehension of a range of concepts, models and theories related to the theory of finance and strategy. It also provides the opportunity for students to demonstrate their ability to evaluate firm theories and analyse the firm performance thorough evaluating share price, consider relationships between dividend, investment, and divestment policies to promote core objectives of owners and the key stakeholders.

This is an individually assessed assignment. There is no objection to students discussing the content and approaches to be adopted, but the final submission must be 100% your OWN work.

Please ensure that all your calculations are supported by relevant workings and attribute any references you make to published work of others using Harvard Referencing.

To pass this module, you must achieve a final overall mark of at least 50%.

2.    Assessment Brief

The module is assessed through a 3000 words coursework.

2.1           Required task(s)

There are two questions in part 1 and two questions in part 2 in the coursework. You should attempt all questions. The word limit is 3,000 words. When determining the amount of effort for each question you should take notice of the mark allocations.

Coursework

Part 1

Select a company of your choice from FTSE 250 for which you are able to access all relevant information for the purposes of answering this question. Using the financial and market information, you are required to:

Critically evaluate the followings:

1. Capital Asset Pricing Model (CAPM), including considering its assumptions and consider its practical application for firms and investors.                                                                                                                     (20 marks)

• Using the dividend valuation model (DVM), estimate the company’s share price; compare the estimated share price with current price, and comment briefly on any differences in the estimated and current share price of the company.

(30 marks)

(Total 50 marks)

To use DVM, you will need to estimate cost of equity and estimate the beta value for CAPM. Compare the estimated beta value with the beta value provided on the company’s web page and comment on any variations. Use 3% as proxy for risk free rate and assume market return is 9%.

Part 2.

There has been a debate amongst academics and practitioners whether merger and acquisition activity is in the best interest of the economies. In view of this, you have been invited to:

• Define and discuss why merger and acquisition are popular amongst developed economies and critically evaluate whether merger and acquisition activity are in the economic interest of a country.

`           (30 marks)

• Using the Fisher-Hirshleifer model, explain consumption and investment decisions with and without capital markets

(20 marks)

(Total 50 marks)

Your coursework should not exceed 3000 words. There is no fixed penalty for exceeding the word count, but students should be made aware that the marker will not consider any work after the +10% word count tolerance has been reached, within the allocation of marks. Students may therefore be penalised for a failure to be concise and for failing to conclude their work within the word count specified.

Indicative marking points Part 1.

a)

Evaluation of the CAPM – define and explain the model, assumptions and its limitation Evaluation of the dividend policy – limitation of the model and assumptions

(20 marks)

b)

Estimate beta and comment

Identify beta for your chosen company and explain why the values may differ Estimate price using CAPM

Estimate price using DVM

Reasons for differences and comments

(30 marks)

(Total 50 marks)

Part 2 c)

Define M & A

Why M& A are popular

Discuss whether M& A activity is in the economic interest of a country

Define key stakeholders and comment how the interests of key stakeholders are affected by mergers and acquisition

d)

Explain HL model and the separation theorem.

Demonstrate how investment decision are made without capital markets Demonstrate how investment decision are made without capital markets Relate the HL model with agency relationship

(30 marks)

(20 marks)

(Total 50 marks)

2.2           Word count

The maximum word count is: 3000 words (+/- 10%).

The word limit is for your coursework and does not cover material submitted as an appendix. Material submitted as an appendix provides background for your coursework, but it will not be marked unless it is part of the main body of the coursework. Also, it is important that you cross-refer between the main text of your assignment and any appendices to demonstrate the linkage, and that the appendices do not constitute additional material unrelated to that included in the body of your assignment.

Your references page will not be included in the word count, but inline citations used in the main body of the assignment (e.g., Smith and Jones (2010) identified that…) will be included in the word count.

You are required to declare the number of words used in your assignment. There is no fixed penalty for exceeding the word count, but students should be made aware that the marker will not consider any work after the +10% word count tolerance has been reached, within the allocation of marks.

Students may therefore be penalised for a failure to be concise and for failing to conclude their work within the word count specified.

2.3           Drafts

You may ask any questions within class and out of class, but a draft copy of the assignment will not be read, as this will constitute double marking. You may also arrange to meet me via MS Teams to ask any specific question regarding the assignment.

2.4           Submission point

Your assignment should be submitted online through TurnitIn via the link provided in the Assessment area of the module’s Moodle site. Hard copy submissions will not be accepted. Please follow the University policy regarding online submission and submitting assignments on time.

You should attach the assessment cover sheet for feedback. The assessment cover sheet is on the Moodle.

2.5           Formatting and presentation

The assignment should be word-processed and double line spaced. Use of bullet points should be avoided or used sparingly

1. Use Arial size 11 point for your assignments, full justified
2. Each page should be numbered except for the content page (if any)
3. Presentation must be formal in language and style and must adhere to the structure given above.

2.6           Referencing

All work should be referenced using the Harvard format – there are handouts available online at the library website and are available as hard copy in the library if you are unsure of this.

Do not use popular websites like Wikipedia, Google, or Yahoo – the former is not peer assessed and the work is not always reliable.

Use textbooks and journal articles (newspaper articles may at times be acceptable). You should, however, make more use of current journal articles as these are peer reviewed and are often more recent than textbooks. If you are to use textbooks, these should be the latest, so it is important to check whether you have the latest edition.

3. Marking criteria

	0 – 39% Fail	40 – 49% Fail	50 – 59% Pass	60 – 69% Strong Pass (merit)	70 – 79% Very Strong Pass (distinction)	80 – 100% Exceptionally Strong Pass (distinction)
Criterion 1	Evaluate the role of stock market within the context of stock market efficiency, dividend policy and its implications for firm’s capital structure.
Mark:
Limited understanding                of models,                theories, and concepts Lack of ability to analyse and                                interpret information in the appropriate context.	Vague and unsatisfactory understanding of theory and ability to interpret or to apply or contextualise information to answer the question.	Demonstrates ability to understand the role of dividend policy and efficient capital markets to correctly value share prices. Evidence of independent inquiry and judgement in selecting, analysing, and evaluating firm specific data.	Evidence of good degree of subject specific literature and knowledge. Able to demonstrate critical awareness and an ability to apply analytical skills to answer the questions.	There is excellent evidence of independent inquiry and judgement in analysing and ordering data. Evidence of a high degree of critical awareness and ability to infer key conclusion from the analysis and ability to justify                     conclusions derived.	Excellent ability to synthesise theory and apply it to practice within the given scenario. Analysis is well referenced; critically evaluated and key conclusions are inferred.
Criterion 2	Analyse and evaluate challenges and opportunities for national and international merger and acquisition activity, environment , and current research for the topic area. Consider international environment, risk, and evaluate strategies to manage such risks
Mark:
Limited understanding            of the          topic          and demonstrates limited    ability           to analyse            and interpret information in the appropriate context.	Some       knowledge of    merger       and acquisition             but demonstrated limited   ability   to reason or evaluate the theory,	Some evidence of subject                       specific knowledge, ability to analyse and apply the acquired knowledge and reasons what are benefit of merger and acquisition for various stakeholders.	Good evidence of wider reading and reflection in terms of why firms merge and their implications for the               stakeholders. Ability to show a good degree of critical awareness               and analytical skills.	Excellent evidence of independent inquiry and judgement in analysing and reasoning theory and practice. Ability to show a high degree of critical awareness and analytical skills to produce conclusions consistent with the analysis.	An outstanding well researched and referenced work that shows evidence of extensive research, understanding and ability to infer key conclusions.

BIRMINGHAM CITY BUSINESS SCHOOL

ASSESSMENT BRIEF: FIN7055 International Financial Strategy

Criterion 3 Mark:	Critically apprise theory and practice of determining cost of capital, using the Capital Asset Pricing Model for investment appraisal and its limitations for investment appraisal at advance level.
	Limited understanding         of theory and models. Not able to use models. Lack ability to    analyse    and interpret information in the appropriate context.	Vague understanding              of theory   and    little ability     to      use CAPM model. Limited ability to interpret and apply or contextualise information         to answer                     the question.	Demonstrates ability to understand the role of CAPM and cost of capital to evaluate firm’s performance. Some evidence of independent inquiry and judgement in selecting and analysing and evaluating firm specific data.	Evidence of good degree of subject specific literature and knowledge relating cost of capital and CAPM to evaluate                       firm performance. Able to demonstrate critical awareness and an ability to apply analytical skills to answer the questions.	There is excellent evidence of independent inquiry and judgement in use of models and analysing and ordering data. Evidence of a high degree of critical awareness and ability to infer key conclusion from the analysis and ability to justify                   conclusions derived.	Excellent ability to synthesise theory and practice of models CAPM and its use for calculating cost of capital its application to share price evaluation. Analysis is well referenced; critically evaluated and key conclusions are inferred.
Criterion 4 Mark:	Critically examine Fisher-Hirshleifer model in relationship with the firm’s investment decisions with and without capital markets.
Basic level understanding of agency relationship within the context of HL model and role of managers and stakeholders. Lack of evaluation and application.	Some ability to explain agency relationship and HL model but this may be a little confused or incomplete at times.	An ability to demonstrate separation theorem and the role of HL model and the agency relationship. Able to provide good analysis of the conflict and resolution.	A good ability to explain and apply HL and its link with the agency relationship. Explanations are well reasoned, and some justification provided.	Good ability to explain, HL model and demonstrate its usability within the context of the agency theory and practice. Explanations are justified and applied to the given context.	Excellent ability to evaluate the agency relationship, conflict and show role of capital markets using the HL model. Explanations are fully justified and applied to the relevant context.

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