BAM010 Accounting And Finance
Master of Business Administration, Postgraduate Diploma and Postgraduate Certificate in Business Administration
Module: Accounting and Finance [BAM010]
Coursework (October 2017-March 2018 study session)
Submission Deadline: Monday 11 December 2017 by 1pm (1300 hours) GMT
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Your overall total word count should not exceed 2,000 words (Marked out of 30 marks, with 30% weighting of final mark for the module)
CASE STUDY: Investment Appraisal: Stevenage Techno Ltd
Stevenage Techno Ltd is considering buying a new machine to expand their production. The machine costs £1.8 million and will last for 6 years. The scrap value of these machines is £150,000. It is expected that the asset will be sold for this value on the last day of the sixth year and that a replacement machine will then be purchased. An investment of £200,000 in working capital will be needed initially. The projected financial data are reported below.
Projected financial data (£)
|Year 1||Year 2||Year 3||Year 4||Year 5||Year 6|
|Materials & Components||(280,000)||(300,000)||(380,000)||(380,000)||(300,000)||(300,000)|
|Advertising & Marketing||(50,000)||(50,000)||(50,000)||(50,000)||(50,000)||(50,000)|
The following information is also available:
- The machine would be financed with a 4‐year bank loan at an interest rate of 11.5% and would be bought on the last day of the company’s previous financial year.
- The expenditure on materials and components, labour and overheads is directly related to the project and would be avoided should this not be undertaken. The overhead of the period is 180,000 p.a.
- Advertising & Marketing costs stated in the table are an apportionment of the company’s total corporate advertising and marketing budget.
- The cost of capital for this type of investment is 12 per cent. The directors set a target accounting rate of return on investment of 14 per cent and a payback period of five years for all projects.
Ignore taxation and inflation.
Assume that you are an external consultant to Stevenage Techno Ltd. You are required to apply a range of methods to carry out an investment appraisal of the project and, based on your results, prepare a written report in which you provide a firm recommendation as to whether the company should invest in this project.
You are also required to:
- Evaluate the robustness of your findings, making reference to appropriate theory;
- Suggest and discuss 4 other sources of finance that could be used as an alternative to the proposed bank loan.
Make sure that you state any assumptions you have made and that you justify the investment appraisal methods adopted. You should minimise textbook descriptions of the methods you choose to use.
Include all workings related to the application of investment appraisal methods in an appendix. The report body should include only the final results of these calculations.
This piece of work is worth 30% of the final module mark. You will be assessed on:
Structure and content of cash flow model
Accuracy of application of investment appraisal techniques
Business application and integration of data and literature:
Coverage and critical evaluation of relevant theory Evidence of reading and research using appropriate sources
Discussion and analysis of results
Justification of recommendations
Structure and presentation
Style & Format:
- Font size:
- Line spacing:
- 12 pt (preferably Arial)
- double spacing
- Harvard style
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Penalties for exceeding the word count:
There are penalties for exceeding the specified word count.
The maximum word limit for this coursework assignment is 2,000 words (excluding the list of references).
You may use less than 2,000 words but in so doing you may be penalizing yourself as it is likely to be challenging to respond to the coursework brief.
You MUST state an accurate word count (excluding the list of references) at the end of your work. If you do not state an accurate word count your mark will be reduced by 5 marks.
The content within the main body of text comprises the overall word count, including in-text citations, references, quotes, heading and sub-headings. The cover page, reference list and any appendices do not count towards the overall word count.
If you submit more than 2,000 words the following penalties apply:
- Up to 10% more than 2,000 words – your mark will be reduced by 5 marks;
- For more than 10% than 2,000 words you will receive zero marks for this work.