MBA financial management Referencing Styles : Harvard | Pages : 49 University of Cumbria, Financial Management, September 2015: Assessment General Instructions – Please read carefully…

MBA financial management

Referencing Styles :
Harvard | Pages :
49

University of Cumbria, Financial Management, September 2015:
Assessment General Instructions – Please read carefully 1. You are
required to complete the assessment outlined below and submit your
completed final document through the RKC Online Campus by the end of
Unit 6. Your grade will be based 100% on this final document, to which
you will also receive written feedback. 2. In addition you must upload
part of your draft of the above document by the end of Unit 3 (see
Interim Assignment, below). This draft will not be graded, but it is an
important way of monitoring your progress. General feedback with respect
to the topic(s) covered in the interim assignment will be posted on the
Forum after Unit 3 has been completed. 3. Please ask any questions
about the interim assignment and final assessment in the Forum. Final
Assessment You have been asked by your 55 year old uncle Andrew to help
him assess a new venture. It is Friday night, and he needs the work
finished by Sunday, in preparation for an early Monday morning meeting,
so you know that he will not be able to give you any more information
than he already has (and you will be unable to contact him over the
weekend), and therefore you may need to rely on your own assumptions and
estimates for some of the analysis. Andrew lives in Atlanta, USA, and
was recently made redundant (from a company he joined 25 years ago),
leaving the company with a lump sum (tax paid) payment of $750,000.
Surprisingly, rather than being depressed by his new state of
independence, he is tired of corporate life and excitedly contemplating a
new career as a retailer of a range of gourmet chocolates. He is
confident that he can set up a business to import chocolates from
Belgium and sell them in the USA. His wife, whom he met at business
school, is pleased with his passion for this possible new venture, but
concerned that it might turn into a financial disaster. She has
suggested that he develop a financial plan to evaluate the venture and
its viability. After a couple of hours with Andrew you have assembled
the following information from him: – ChocoBelg SA, an established
manufacturer of fine Belgian chocolates, is prepared to give him
exclusive rights to sell their products in the US for a five year period
in exchange for an upfront payment; – The chocolates retail in Belgium
for an average of Euro 50 per kilogramme, and ChocoBelg is prepared to
sell the chocolate to Andrew at a 40% discount to this price; –
ChocoBelg would ship to Andrew on receipt of payment for each order; –
Andrew has found out that air freight from Belgium via air courier would
cost on average Euro 7 per kg and that the time from him placing an
order to receiving the goods in Atlanta would be three weeks (including
the factory time in Belgium); – Andrew plans to order from Belgium
monthly (to maximise the shelf life in the US) and intends to maintain a
minimum stock of four weeks worth of sales to ensure that he will be
able to supply a suitable range of products to customers;  – He
will buy a special refrigerator at a cost of $4,500 to keep the
chocolates in good condition, and has found a small industrial room he
can rent nearby at a cost of $350 per month (payable monthly in advance,
plus an initial three month deposit); – Andrew will sell the chocolate
throughout the US by internet only, and is planning to spend $2,000 with
a website designer to develop the site; – He has already spent $3,500
on a market study that told him that once established, demand would be
about 1,500 kg a month, although in the first year sales would start at
only 200 kg in the first month before building up slowly to the full
level at the end of the first year; – The study also indicated that
sales would be dramatically above that average in October (2,500 kg) and
January (2,000 kg) due to Thanksgiving and Valentines Day; – The above
study assumed an average selling price of $60 per kg (ignore any impact
of sales taxes in your calculations); – Packaging and shipping in the US
would average $2 per kg, and Andrew is not currently intending to
charge that to the customer; – All sales would be by credit card, with
the credit card company taking 1% per sale and remitting the monthly
total to Andrew one week after the end of each calendar month; – He
believes that one person could run the chocolate operation part-time at a
total cost (including social charges) of $2,650 per month; – Andrew’s
believes that if necessary he could borrow up to an additional $50,000
at 8% p.a.; – Andrew’s marginal tax rate on investment or earned income
is 30%, payable one year in arrears; he has also told you that he can
invest any available cash at an after tax 4% per annum. Andrew also has a
friend, Juanita, who runs a small chain of delicatessens in the Atlanta
area. Juanita is interested in the venture and has agreed that if
Andrew would package the chocolates in boxes decorated with views of
Brussels, she would buy one hundred boxes (each containing 550 gm of
chocolates) from him per month (which would be in addition to the
internet sales outlined above, and would start immediately), at a price
of $28 each. To do this Andrew would need to buy-in boxes and wrapping
paper at a price of $1.25 per box and hire an assistant specifically to
pack and deliver the boxes, at an additional cost of $300 per month.
Andrew remembers discussions on discounted cash flow analysis at
business school (although he admits that he did not fully understand it,
unlike his wife who was a distinction student). He has asked you to
prepare an analysis while he is away to help him with the decision,
making clear any assumptions that you make; the analysis should not
exceed 4,000 words (excluding the content of exhibits, headings, etc),
or a total of 30 pages (everything included), and should include: – A
summary of all assumptions and estimates that you have made for your
analysis, including justifications where appropriate; – A break even
analysis; – A Balance Sheet at start-up (to show the initial capital)
and at the end of the first year; – Monthly cash flow for the first year
of operation; – Annual cash flow thereafter; – A clear explanation, in
plain English, of how much cash the venture will need to get started; –
Any sensitivity analysis that you think would be helpful; – The most
that Andrew could offer ChocoBelg as an upfront fee for the exclusive
rights for the five year period which would leave him no better or worse
off than if he did not undertake the venture, and the amount you
suggest he should actually offer them; – Conclusions and
recommendations; – A critical reflection of the analysis that Andrew has
asked you to prepare – what, if anything, would you do differently in a
financial analysis of this opportunity, and why? Andrew has explained
that he is going to be out of town for a wedding so will be unable to
provide any assistance at all, but as he pointed out before leaving “you
will find this easy with computers and the internet to help”. Your
report should demonstrate skills of critical reflection, effective
communication and balanced judgement; note that this is not a market
report. Scripts that are excessively long (i.e. exceeding the word limit
by more than 10%) will not be read beyond the point of the word limit;
there is no minimum word limit. Do not put your name on the paper. The
overall structure should be as follows: 1. Cover Page (1 page) 2. Table
of Contents/List of Exhibits (1 page) 3. Executive Summary 4. Main
Report (within the 4,000 word limit as above) 5. Exhibits (if any) 6.
List of references. The data in your answer should be clearly laid out
in tabular format so that your approach and answer are both plainly
evident. Submissions should be machine readable and in MS-Word format
only; submit only one file, and include any Excel analysis as images,
not embedded files. Grading will be based on the following breakdown: –
Assumptions, estimates and sensitivity analysis: 20% – Cash flow and DCF
analysis: 25% – Other financial details (break even, balance sheet,
etc): 25% – Critical reflection: 20% – Referencing and presentation: 10%
Interim Assignment The Interim Assignment is to develop the Balance
Sheet at start-up (to show the initial capital) and at the end of the
first year which you will see is part of the required content of your
final assessment paper. General feedback on the class’s submissions will
be posted in the Forum during Unit 4. You may, if you wish, make any
changes you wish to your balance sheets for your final assessment
submission. The Interim Assignment is not graded.  Criteria and
Weighting 70% and above (Distinction) 60% – 69% (Merit) 50% – 59% (Pass)
40% – 49% (Fail) 0% – 39% (Significant Fail) Assumptions, estimates and
sensitivity analysis (20%) Excellent – wide range of key and
peripheral assumptions, demonstrating critical evaluation and
understanding of the issues Substantial selection of key and peripheral
assumptions, demonstrating analysis and critical evaluation of a wide
range of relevant issues for the professional context. Good selection of
key and peripheral assumptions with critical evaluation of significant
issues for the professional. Limited selection of assumptions; some
recognition and critical analysis of issues of significance for the
professional context. Limited evidence demonstrating poor recognition of
significance for the professional context. Cash flow and DCF analysis
(25%) Excellent understanding of the theory and its application and
subtleties Good exploration of knowledge and theory relevant to the
assignment. Analysis and evaluation of concepts are critical and fairly
insightful. Adequate exploration of knowledge and theory relevant to the
assignment. Analysis and evaluation of concepts lacks criticality and
insight. Poor exploration of knowledge and theory relevant to the
assignment. Analysis and evaluation of concepts are inadequate. Very
weak or missing exploration of knowledge and theory relevant to the
assignment. Analysis and evaluation of concepts are non-existent. Other
financial details (25%) understanding of the theory and its application
and subtleties Good exploration of knowledge and theory relevant to the
assignment. Analysis and evaluation of concepts are critical and fairly
insightful. Adequate exploration of knowledge and theory relevant to the
assignment. Analysis and evaluation of concepts lacks criticality and
insight. Poor exploration of knowledge and theory relevant to the
assignment. Analysis and evaluation of concepts are inadequate. Very
weak or missing exploration of knowledge and theory relevant to the
assignment. Analysis and evaluation of concepts are non-existent.
Critical reflection (20%) Referencing and presentation (10%) Excellent
understanding of the strengths and limitations of the required analysis,
with clear ideas on areas of improvement Excellent piece of writing,
well-structured, coherent progression of argument, well-articulated and
accurately referenced, with excellent summary and clear conclusions and
recommendations Good understanding of the strengths and limitations of
the required analysis, with some ideas on areas of improvement Well
written, well-structured, coherent progression of argument, reasonably
articulated and accurately referenced. Good summary, conclusions and
recommendations Adequate understanding of the strengths and limitations
of the required analysis, with few ideas on areas of improvement Fairly
well written and structured, some coherence, some inaccuracies in
referencing and minor issues with expression. Appropriate Unclear
understanding of the strengths and limitations of the required analysis,
with few ideas on areas of improvement Poorly written and structured,
incoherent and inaccurately referenced. Lacks summary, conclusions and
recommendations Weak or confused understanding of the strengths and
limitations of the required analysis Very weak piece of writing.
Incoherent and poorly articulated. Inaccurately referenced. Lacks
summary, conclusions and recommendations
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