600543 Current Issues in Financial Management

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Coursework Template

Module Title	Current Issues in Financial Management
Module Code	600543
Coursework Element	Assignment
Word Count	n.a.
First Sit or Resit?	First sit
Reassessment by resubmission or new assessment? Note: reassessment should be by resubmission wherever possible	By resubmission
Submission Date Please ensure that the submission date for the main/final module assessment is set between 10th May and 28th May 2021. Only interim module assessments can have submission dates outside of this period.	First sit: To be confirmed Tuesday, 9th May 2023   Resit: To be confirmed

Note:

1. Please type all answers using a Word file.

2. When calculations are involved, type all essential explanatory steps.

3. Submit via Canvas when completed.

2022-23 Assignment Title: Assessment

Section A (answer all questions)

The CFO of NF plc is considering redeeming all outstanding debt of the company by issuing new shares. Debts are considered risk-free and can be raised at a lower cost than that of equity. The corporate tax rate is positive. 

Do you think NF plc should proceed with the plan? Support your answer with appropriate arguments. (15 marks)

Would your answer be different if the corporate tax rate is zero? Support your answer with appropriate arguments. (15 marks)

Given debt capital is cheaper than equity capital and corporate tax is positive, would you recommend NF plc to finance its operation using 100% debt capital? Give five reasons to support your answer and explain each of them. (20 marks)

(Section A total 50 Marks)

Section B (answer all questions)

A corporate bond issued by HullTech plc pays 8 per cent of the £100 face value annually.

Suppose the bond is approaching its maturity in 2 years, and its last quoted price was £95. What is the yield to maturity of the bond? Explain your answer with appropriate calculations. (10 marks)

What is the duration of this bond? Explain your answer with appropriate calculations.

Suppose HullTech has issued a new bond which has a duration equals to 2.5. Which of the two bonds has a longer duration? (5 marks)

Suppose the two bonds issued by HullTech have the same coupon rate. What factor or factors could have made the duration of one longer than that of the other? Explain. (5 marks)

What is the meaning of having a longer duration? (5 marks) (Total 25 marks)

As the CEO of Beverley Pharma plc, you are considering replacing an old vaccine whose patent protection will expire in two years. The R&D team of the company has produced an improved version of the vaccine which has patent protection for three years. The cash flow of these two are given in the table below.

Should you replace the existing product now or wait for two years?  Explain your answer with appropriate calculations. (13 marks)

Will your decision be different if you can sell the patent and production facilities of the existing product to another company for £15,502? The discount rate is 11% and there is zero inflation. Explain your answer with appropriate calculations. (12 marks)

	0	1	2	3
CF existing		10,000	8,000
CF new	-25000	20,000	18,000	15,000

(Total 25 marks) 

(Section B Total 50 marks)

Appendix

Learning outcomes to be assessed

LO1	Explain and evaluate recent and future potential developments in corporate finance.
LO2	Describe and critically evaluate the overall relationship between the chosen topics of study
LO3	Evaluate the increasing realities of the complexity of the current financial environment
LO4	Critically assess the political nature and socio-economic influence of financial information

Assessment criteria

o Analysing relevant information in appropriate ways;

o Seeking academic support;

o Understanding the implications of both theory and empirics;

o Numerical skills as are appropriate for the level.

o Displaying capability of integrating knowledge and using it to serve the purpose (persuasively argue for the points you are trying to make, whatever it might be).

Grading descriptors

First (>=70)

ü Direct & penetrating in answering question, drawing on wide range of relevant evidence.

ü Fluent, reasoned & sustained argument, with excellent use of supporting evidence.

ü Excellent & critical understanding of concepts of current conceptual issues, & of current debates &/or issues in field of study.  

ü Clear evidence of critical ability & of insight, perceptiveness & originality.  Extensive & comprehensive information base.

ü Clear evidence of familiarity with relevant literature, including recent research literature*.

ü Significant 'value added' to material from lectures & prescribed reading.

Upper Second (60 – 69)

ü Direct in answering question, drawing on range of relevant evidence.

ü Reasoned & sustained argument, with effective use of supporting evidence.

ü Clear understanding of concepts, of current conceptual issues, & of current debates & or issues in the field of study.

ü Evidence of critical ability & perhaps some evidence of insight or perceptiveness.

ü Wide & sound information base.

ü Evidence of familiarity with relevant literature, including the recent research literature*.

ü Considerable 'value added' to material from lectures & prescribed reading.

Lower Second (50 – 59)

ü Answers question, drawing on limited range of relevant evidence.

ü Some evidence of ability to develop reasoned & sustained argument, with adequate use of supporting evidence.

ü Understanding of concepts & conceptual issues. Limited evidence of critical ability.

ü Adequate information base.

ü Evidence of awareness of relevant literature & of some of the recent research literature*.

ü Little or limited 'value added' to material from lectures & prescribed reading.

Third (40 – 49)

ü Attempts to answer question, but may digress at times & may have limited awareness of implications of question.

ü Argument not always fully reasoned or sustained, perhaps with limited use of supporting evidence.

ü Limited understanding of concepts & conceptual issues.

ü Little or no evidence of critical ability.

ü Limited &/or shaky information base.

ü Little awareness of relevant literature, with little or no awareness of the recent research literature*.

ü No significant 'value added' to

Fail (<40)

ü Does not answer question directly, or does so with weak &/or flawed argument.

ü Little understanding (or misunderstanding) of concepts.

ü Poor information base, perhaps with factual errors.

For more information, please refer to UG Programme Handbook.

Model answers (where appropriate)

Supplied to examiners

Assessment Submission (for your information)

eSubmission is the approved method for your programme of study. You must hand in your assessed Assignment(s), for all modules that you are taking during the 2020/21 Academic Year using the Canvas system. Submission of a printed copy is NOT allowed. You should submit via the Assignments menu item on the relevant module Canvas site.

Assignments must be submitted by the date and time stipulated.  Deadlines will be strictly adhered to. Students submitting late, and who do not have mitigating circumstances approved by the Mitigating Circumstances Panel, will be subject to penalties for late submission specified by the University.  Please note that Saturday and Sunday are treated as “working days” for the purposes of the late submission policy.