Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit 

Advanced Corporate Financial Management – U26322

2019

Question 1

The finance director of Confused World plc has requested your assistance in understanding the implications for the business given ongoing global economic and political uncertainty. Confused World plc has local business operations across the world and trades in most products and in most markets.

Examples of such events include the uncertainty surrounding the economic future of the United Kingdom as a result of Brexit, instability arising on the Korean peninsula, the ongoing chill in relations between Russia and the world as well a revised trade policy between the United States and China.

Proportionately more marks will be awarded for events and discussion demonstrating significant evidence of reading of the financial press.

Required:

a) Appraise a regional or global political or economic event arising since September 2018 with financial management consequences for an international business like Confused World plc. (8 marks)

b) Assess how the event is relevant in the context of your choice of one section of your course (valuation or mergers & acquisitions or risk or MSME finance or market efficiency). (13 marks)

c) Depending on your choice in (b) above, provide concise advice to the finance director of Confused World plc as to what measures might be required to reduce any potential impact of associated political and / or economic changes. (13 marks) 

 [34 marks]

[End of Section A]

Section B 66% of total examination marks

Answer any TWO of the following questions identifying clearly each part of each question attempted. All questions are weighted equally.

Question 2

(a) “Valuation is about perceptions – more art and less science.” Evaluate whether a valuation specialist might agree. (13 marks) 

(b) Which of the following two companies creates more value, assuming that they are making the same initial investment? (20 marks)

South Limited projected profits

Sea Limited projected profits

Please note the following information:

· Profits for both companies are 20 per cent of sales in each year;

· South Limited calculates additional debtors of 15p for every £1 increase in sales;

· Sea Limited requires additional investment in debtors of 5p for every £1 increase in sales;

· Increased inventory levels result from increased sales in the amount of 12p and 4p for every extra £1 in sales for South Limited and Sea Limited respectively;

· Further adjustments other than for working capital are not required to the profit in calculating the cash figures in both companies;

· The cost of capital for both firms is 17 per cent.

[33 marks]

Question 3 

(a) “Data Science and Artificial Intelligence are revolutionising the world of finance.” 

Critically evaluate this statement. (17 marks)

(b) “Microfinance and microfinance institutions are good for one thing only – loan credits. They do not offer any other products to their customers.” 

Discuss the accuracy of the above statement in appraising the importance of product development in microfinance. Recent product innovations should be highlighted, particularly in terms of financial technology. (16 marks)

[33 marks]

Question 4

(a) You supply goods to Spain and are concerned about the potential disruption of Brexit. You are waiting to be paid 1,000,000 euro in three months’ time. You have been advised that a money market hedge may be a worthwhile way to mitigate exchange rate risk. The spot rate is 1.15euro/£1. Borrowing rates on loans are 3% for three months and deposit rates for three months are 1%.

Illustrate with calculations the outcome arising under such a strategy. (12 marks)

(b) You have borrowings of £500,000 at a variable rate of 5% per annum. Your bank has informed you of the risk of an interest rate rise following Brexit and has offered you the possibility to buy an interest rate cap at 6.5%.

Illustrate with calculations, the benefit, if any, of taking the offer proposed by the bank and comment whether any alternative possibilities may exist. (11 marks)

(c) “When choosing between hedging strategies, sometimes it may be better not to hedge at all.” Critically appraise this statement. (10 marks) 

[33 marks] 

[Total 100 marks]