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CAPITAL INVESTMENT APPRAISAL
CAPITAL INVESTMENT APPRAISAL
Please find attached all the necessary notes which will help you complete the work. I have named the pictures sent by a couple of friends as (1.1,1.2,….1.10 & 2) so I hope it will come in handy. Other considerations: – Are projected cash flows certain? If not calculate Expected Net Present Value (ENPv) – Deduct tax from cash flows – Depreciation is not allowed when calculated profit against which tax is paid. Add the depreciation if its deducted but remember to deduct any capital allowances. These reduces the profit and thus the company pays less tax. – Inflation / Cost of borrowing / Gearing – Opportunity cost – If you choose one investment then the opportunity cost is the other opportunities you are unable to take advantage of. Also, the calculations are to be shown in the appendix. furthermore, there are files which has assignment requirement and notes and you can in zip file other documents which would help you in writing Thanks
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FACULTY OF BUSINESS AND SOCIETY
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Final mark awarded:_____ |
Assessment Cover Sheet and Feedback Form 2015/16
| Module Code:AF4S31A | Module Title:Strategic Financial Management | Module Lecturer:Caroline Carr | |
| Assessment Title and Tasks:CAPITAL INVESTMENT APPRAISAL | Assessment No.Two | ||
| No. of pages submitted in total including this page:Completed by student | Word Count of submission(if applicable): Completed by student | ||
| Submission Date:Please upload to TURN IT IN by 23:59 on Tuesday 8th March 2016 | Return Date:17:00 on Tuesday 27th April 2016 | ||
| Part A: Record of Submission (to be completed by Student) | |||
| Extenuating CircumstancesIf there are any exceptional circumstances that may have affected your ability to undertake or submit this assignment, make sure you contact the Advice Centre on your campus prior to your submission deadline. | |||
| Fit to sit policy:The University operates a fit to sit policy whereby you, in submitting or presenting yourself for an assessment, are declaring that you are fit to sit the assessment. You cannot subsequently claim that your performance in this assessment was affected by extenuating factors. | |||
| Plagiarism and Unfair Practice Declaration:
By submitting this assessment, you declare that it is your own work and that the sources of information and material you have used (including the internet) have been fully identified and properly acknowledged as required[1]. Additionally, the work presented has not been submitted for any other assessment. You also understand that the Faculty reserves the right to investigate allegations of plagiarism or unfair practice which, if proven, could result in a fail in this assessment and may affect your progress. |
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| Details of Submission:Note that all work handed in after the submission date and within 5 working days will be capped at 40%[2]. No marks will be awarded if the assessment is submitted after the late submission date unless extenuating circumstances are applied for and accepted (Advice Shop to be consulted). | |||
| School of Law, Accounting and Finance submission policyYou are required to submit one copy electronically on Blackboard by 10:00 on the submission date. Please also note any further instructions for paper submission below.
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| You are required to acknowledge that you have read the above statements by writing your student number (s) in the box:
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Student Number(s): | ||
IT IS YOUR RESPONSIBILITY TO KEEP A RECORD OF ALL WORK SUBMITTED
| Part B: Marking and Assessment(to be completed by Module Lecturer) | ||||||||||||||||
| This assignment will be marked out of 100%
This assignment contributes to 50% of the total module marks.
The word limit for the assignment is 3,000 words (+/- 10%) Note: Footnotes and Bibliography will not be included in the word count but should not be abused.
Learning Outcomes to be assessed As specified in the validated module descriptor available at: https://icis.southwales.ac.uk/studentmodules/10122/studentmodulespecifications
Learning outcome 1 The ability of students to critically assess, apply and evaluate the issues and techniques of strategic financial management.
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| Grading CriteriaPlease see School’s marking criteria for undergraduate/post graduate assessments on the module Blackboard site. Any additional grading/marking guidance will be posted with assessment task below.
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| Assessment Task
Assignment Title: Hunter and Pride Co. Investment Appraisal
Hunter and Pride Co. manufacture leather goods including footwear and clothing. The Board of Directors are currently planning the allocation of the capital investment budget which is restricted to £750,000 for this financial year.
One option being considered is to expand their catalogue by adding a new range of leather briefcases. Samples of the briefcases have been produced and a marketing exercise has been undertaken which together cost £10,000. The results of the marketing exercise were quite promising so the Board are now considering investing in the machinery and inventory needed to start production.
The new production line will require the purchase of machinery costing £500,000 and require an investment in working capital of £75,000, both payable immediately. The initial phase of the new product range is expected to have a life of 5 years. At the end of this time the machinery will have a residual value of £50,000 and the working capital will be recovered. Hunter and Pride Co. depreciate non-current assets of this type using the straight-line method.
Marketing intelligence suggests that sales will be 6,000 briefcases in the first year, 10,000 in each of years 2 and 3 and 12,000 in each of years 4 and 5. The sales price is £65 per briefcase and is expected to increase by 5% each year. Variable costs are 50% of the sales in each year.
The new production line will require the appointment of a new supervisor on an annual salary of £35,000 in year one, rising by 2% per annum. In addition an area of the factory that is currently being let out at an annual rent of £50,000 will have to be used for the production of the briefcases.
Corporation tax is charged at 30% and taxation is payable one year in arrears. The machinery will attract the following tax writing down allowances:
Hunter and Pride Co. uses a money discount rate of 12% to appraise capital investment projects and assumes that, unless otherwise stated, all cash-flows occur at the end of the year to which they relate.
Required:
Prepare a report to the Directors of Hunter and Pride Co. which includes the following:
(a) An appraisal of the project as follows:
(i) A calculation of the net present value (NPV), payback period and Internal Rate of Return (IRR) of the project and an appropriate recommendation. (Round all cash flows to the nearest $). (30%) (ii) An analysis of any other factors Hunter and Pride Co. should consider before coming to a decision. (15%)
(b) Analysis and evaluation of the investment appraisal techniques as follows:
(i) An evaluation of the investment appraisal techniques used in part (a) highlighting the advantages and limitations of each method, and an explanation of how they can be used to make investment decisions when funds are limited.
(ii) A critical evaluation of one other capital investment appraisal technique including examples to demonstrate its potential strengths and weaknesses. (45%)
Marks are available for presentation of the report, which must not exceed 3,000 words. (10%)
Total: (100 %)
Marking guidance
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| Feedback/feed-forward (linked to assessment criteria):You should read this feedback carefully as it will identify areas where you have done well and provide guidance to help you improve future assessments.
· What you can do to improve future assessments:
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| Mark:
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Marker’s Signature:
Moderator’s signature
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Date: |
| Please note that in line with USW procedures, a sample of work on this module has been moderated/double marked/seen by external examiner. | ||
| Provisional mark only: subject to change and/or confirmation by the Assessment Board | ||
Faculty of Business and Society Marking Criteria for Postgraduate Assessments
| Grade | Relevance | Knowledge | Analysis | Argument and Structure | Critical Evaluation | Presentation | Reference to Literature | |
| Distinction | 86 – 100% | 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 ample excellent evidence showing that all the learning outcomes and skills appropriate to that level are fully satisfied. The work is exemplary in all the categories shown above and demonstrates a particularly compelling evaluation, originality, and elegance of argument, interpretation or discourse. | ||||||
| 76-85% | The work examined is outstanding 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 skills appropriate to that level are fully satisfied. The work is outstanding in the majority of the categories shown above or demonstrates particularly compelling evaluation and elegance of argument, interpretation or discourse. | |||||||
| 70 – 75% | The work examined is excellent and is evidence of comprehensive knowledge, understanding and skills appropriate to the level of the qualification. There is also excellent evidence showing that all the learning outcomes and skills appropriate to that level are satisfied. The work will be excellent in the majority of the categories shown above or demonstrates particularly compelling evaluation and elegance of argument, interpretation or discourse. | |||||||
| Merit | 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 | Comprehensive analysis – clear and orderly presentation | Well supported, focussed argument which is clear and logically structured. | Contains distinctive or independent thinking; and begins to formulate an independent position in relation to theory and/or practice. | 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 a wide range of sophisticated source material. |
| Pass | 50 – 59% | A reasonable attempt to address the requirements of the assessment: may drift away from this in less focused passages | Adequate knowledge of a fair range of relevant material, with intermittent evidence of an appreciation of its significance | Reasonable analytical treatment which has a clear purpose | Generally coherent and logically structured, using an appropriate mode of argument. | It will contain some distinctive or independent thinking; may begin to formulate an independent position in relation to theory and/or practice. | Competently written, with only minor lapses from standard grammar, with acceptable format | Draws on a good variety of literature which includes recent texts and/or appropriate literature including a range of appropriate source material. |
| 40 – 49% | Some correlation with the requirements of the assessment but there is a significant degree of irrelevance | Basic understanding of the subject but addressing a limited range of material | Some analytical treatment, but may be prone to description, or to narrative, which lacks clear analytical purpose | Some attempt to construct a coherent argument, but may suffer loss of focus and consistency. | Work which expresses a coherent position only in broad terms and in uncritical conformity to one or more standard views of the topic | A simple basic style but with significant deficiencies in expression or format that may pose obstacles for the reader | Evidence of use of appropriate literature. Frequently only uses a single source to support a point. Weak use of quotation. | |
| Fail | 35 – 39% | Relevance to the requirements of the assessment may be very intermittent, and may be reduced to its vaguest and least challenging terms | A limited understanding of a narrow range of material | Largely descriptive or narrative, with little evidence of analysis | A basic argument is evident, but there is a lack of clarity and coherence | Some evidence of a view starting to be formed but mainly derivative. | Numerous deficiencies in expression and presentation; the writer may achieve clarity (if at all) only by using a simplistic or repetitious style | Barely adequate use of literature. Over reliance onmaterial provided by the tutor. |
| The evidence provided shows that the majority of the learning outcomes and skills appropriate to that Level are satisfied. | ||||||||
| 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 skills appropriate to that Level are satisfied. The work will be weak in some of the indicators. | |||||||
| 0-29% | The work examined is unacceptable and provides little or no evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence shows that few if any of the learning outcomes and skills appropriate to that Level are satisfied. The work will be weak in the majority or all of the indicators. | |||||||
[1] University Academic Integrity Regulations
[2] Information on exclusions to this rule is available from Campus Advice Shops
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