UCBS7037 Financial Management | My Assignment Tutor

UCBS7037 Financial ManagementAssessmentUniversity of Cumbria and Robert Kennedy CollegeGeneral Instructions – Please read carefullyUniversity of Cumbria, Financial ManagementInterim Assignment and Final Assessment1. You are required to complete the assessment outlined below and submit your completedfinal document through the RKC Online Campus by the end of Unit 6. Your grade will bebased 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 ofUnit 3 (see Interim Assignment at the end of this document for more details). This draft will notbe graded, but it is an important way of monitoring your progress, and you will receive feedbackwith respect to the topic covered in the interim assignment.3. Please ask any questions about the interim assignment and final assessment in the Forum.4. Note that this is a fictional case focused on assessing your understanding of managementaccounting; you are not expected to comment in any way on aspects such as the marketfeasibility or actual rates of tax in the UK.Final AssessmentYou have been asked by your 65 year old aunt Hattie to help her assess a new venture. It isFriday night, and she needs the work finished by Sunday, in preparation for an early Mondaymorning meeting, so you know that she will not be able to give you any more information thanshe already has (and you will be unable to contact her over the weekend), and therefore you mayneed to rely on your own assumptions and estimates for some of the analysis where appropriate.Hattie lives near Manchester, England, and recently took early retirement (from a university shejoined 30 years ago), leaving them with a lump sum (after tax) payment of £450,000.Surprisingly, rather than being depressed by her new state of independence, she is tired of thebureaucratic life and excitedly contemplating a new career as a retailer of geodes1 and otherdecorative stones. She is confident that she can set up a business to import geodes from Uruguayand sell them in Europe. Her husband, who she met in the USA at business school, is pleasedwith her passion for this possible new venture, but concerned that it might turn into a financialdisaster. He has suggested that she develop a financial plan to evaluate the venture and itsviability._______________________________________________1. A geode is a spherical rock with a hollow cavity lined with crystalsAfter a couple of hours with Hattie you have assembled the following information from her:– Colada Geodes, an established supplier of geodes and similar stones based in Artigas (andowned by one of Hattie’s university colleagues), is prepared to give her exclusive rights to selltheir products in the UK for a six year period in exchange for an upfront payment for thoserights;– The geodes sell in Uruguay for an average of 350 Uruguayan Peso (or $U for short) per kg,and Colada Geodes is prepared to sell them to Hattie at a 45% discount to this price;– Colada Geodes would ship to Hattie on receipt of payment for each order;– Hattie has found out that freight from Artigas to Manchester, via Montevideo by truck and airfreight, would cost on average $U 200 per kg and that the time from her placing an order toreceiving the goods in Manchester would be four weeks (including the preparation and packingtime in Uruguay);– Hattie plans to order from Colada Geodes monthly and intends to maintain a minimum stockof one month’s worth of sales to ensure that she will be able to supply a suitable range ofproducts to customers;– She will buy a special jig and tools at a cost of £ 3,500 to break open and polish the geodes,and has found a small industrial room she can rent nearby at a cost of £ 300 per month (payablemonthly in advance, plus an initial security deposit of three months rent, refundable at the end ofher tenancy if there is no damage);– Hattie will sell the geodes throughout the UK by internet only, and is planning to spend£ 4,000 with a website designer to develop the site;– She has already spent £ 3,000 on a market study that told her that once established, demandwould be about 750 kg a month, although in the first year sales would start at only 50 kg in thefirst month before building up slowly to the full level at the end of the first year;– The above study assumed an average selling price of £ 35 per kg (ignore any impact of salestaxes in your calculations);– Packaging and shipping in the UK would average £ 5.50 per kg, and Hattie is not intending tocharge that to the customer;– All sales would be by credit card, with the credit card company taking 1.2% per sale andremitting the monthly total to Hattie two weeks after the end of each calendar month;– She believes that two part-time students could run the geode operation at a total cost to her(including employer’s social charges) of £ 1,500 per month;– Hattie believes that, if necessary, she could borrow up to an additional £ 40,000 at 7% p.a.;– The effective overall marginal tax rate on income from a company set up to undertake thisactivity would be 28%, payable one year in arrears; Hattie has also told you that she can investany available cash at an after tax 3% per annum.Hattie also has a friend, Ian, who runs a small chain of gift shops in the Lake District. Ian isinterested in the venture and has agreed that if Hattie would mount six different geodes in glassfronted cabinets for wall mounting, he would buy 6 such cabinets (each containing 1.5 kg ofgeodes on average) from her per month (which would be in addition to the internet salesoutlined above, and would start immediately), at a price of £ 45 (paid immediately) percompleted cabinet. To do this Hattie would need to buy-in cabinets and mounting accessories ata cost of £ 7 per cabinet and hire a part-time assistant specifically to assemble the cabinets, at anadditional cost (including employer’s social charges) of £ 200 per month. Ian plans to sell thecabinets at £ 75 each.Hattie remembers lectures on discounted cash flow analysis at business school (although sheadmits that she did not fully understand them, unlike her husband who was a distinctionstudent). She has asked you to prepare an analysis while she is away to help her with thedecision, making clear any assumptions that you make; the analysis should not exceed a total of25 pages (everything included), and should include:– A summary of all assumptions and estimates that you have made for your analysis, includingjustifications where appropriate;– A break even analysis;– A Profit and Loss Statement for the first year of operations and Balance Sheet at the end of thefirst 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 Hattie could offer Colada Geodes as an upfront fee for the exclusive rights forthe six year period (which does not include any geode purchases) which would leave her nobetter or worse off than if she had not undertaken the venture, and the amount you suggest sheshould actually offer them;– Conclusions and recommendations;– A critical reflection of the analysis that Hattie has asked you to prepare; how you haveevaluated the attractiveness of the venture and what, if anything, would you do differently in afinancial analysis of this opportunity, and why?Hattie has explained that she is going to be out of town for a wedding so will be unable toprovide any assistance at all, but as she pointed out before leaving “you will find this easy withcomputers and the internet to help”.Your report should demonstrate skills of critical reflection, effective communication andbalanced judgement; note that this is not a market report. Scripts that are excessively long (i.e.exceeding the page limit) will not be read beyond the point of the word limit; there is nominimum 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 Summary4. Main Report5. Critical Reflection5. List of References.The data in your answer should be clearly laid out in tabular format so that your approach andanswer are both plainly evident.Submissions should be machine readable and in MS-Word only; submit onlyone file, and include any Excel analysis as images, not embedded files.Grading will be based on the following breakdown:– Assumptions, estimates and sensitivity analysis: 25%– Cash flow and financial viability analysis: 25%– Other financial details (P&L Statement, Balance Sheet, break even, etc): 35%– Critical reflection: 10%– Referencing and presentation: 5% The Interim Assignment is to develop the Profit and Loss Statement for the first year ofoperations, which you will see is also part of the required content of your final assessmentpaper.You should clearly explain any assumptions in this P&L Statement and you may, if youwish, make any changes to that P&L Statement for your subsequent Unit 6 final assessmentsubmission. The Interim Assignment is not graded but you will receive feedback on it. Criteria and Weighting70% and above (Distinction)60% – 69% (Merit)50% – 59% (Pass)40% – 49% (Fail)0% – 39% (Significant Fail)Assumptions, estimatesand sensitivity analysis(25%)Excellent – wide range of keyand peripheral assumptions,demonstrating criticalevaluation andunderstanding of the issuesSubstantial selection of keyand peripheral assumptions,demonstrating analysis andcritical evaluation of a widerange of relevant issues forthe professional context.Good selection of key andperipheral assumptions withcritical evaluation ofsignificant issues for theprofessional.Limited selection ofassumptions; somerecognition and criticalanalysis of issues ofsignificance for theprofessional context.Limited evidencedemonstrating poorrecognition of significance forthe professional context.Cash flowand DCF analysis(25%)Excellent understanding ofthe theory and its applicationand subtletiesGood exploration ofknowledge and theoryrelevant to the assignment.Analysis and evaluation ofconcepts are critical and fairlyinsightful.Adequate exploration ofknowledge and theoryrelevant to the assignment.Analysis and evaluation ofconcepts lacks criticality andinsight.Poor exploration ofknowledge and theoryrelevant to the assignment.Analysis and evaluation ofconcepts are inadequate.Very weak or missingexploration of knowledge andtheory relevant to theassignment. Analysis andevaluation of concepts arenon-existent.Other financial details(35%)Excellent understanding ofthe theory and its applicationand subtletiesGood exploration ofknowledge and theoryrelevant to the assignment.Analysis and evaluation ofconcepts are critical and fairlyinsightful.Adequate exploration ofknowledge and theoryrelevant to the assignment.Analysis and evaluation ofconcepts lacks criticality andinsight.Poor exploration ofknowledge and theoryrelevant to the assignment.Analysis and evaluation ofconcepts are inadequate.Very weak or missingexploration of knowledge andtheory relevant to theassignment. Analysis andevaluation of concepts arenon-existent.Critical reflection(10%)Excellent understanding ofthe strengths and limitationsof the required analysis, withclear ideas on areas ofimprovementGood understanding of thestrengths and limitations ofthe required analysis, withsome ideas on areas ofimprovementAdequate understanding ofthe strengths and limitationsof the required analysis, withfew ideas on areas ofimprovementUnclear understanding of thestrengths and limitations ofthe required analysis, withfew ideas on areas ofimprovementWeak or confusedunderstanding of thestrengths and limitations ofthe required analysisReferencing andpresentation(5%)Excellent piece of writing,well-structured, coherentprogression of argument,well-articulated andaccurately referenced, withexcellent summary and clearconclusions andrecommendationsWell written, well-structured,coherent progression ofargument, reasonablyarticulated and accuratelyreferenced.Good summary, conclusionsand recommendationsFairly well written andstructured, some coherence,some inaccuracies inreferencing and minor issueswith expression.AppropriatePoorly written andstructured, incoherent andinaccurately referenced.Lacks summary, conclusionsand recommendationsVery weak piece of writing.Incoherent and poorlyarticulated. Inaccuratelyreferenced.Lacks summary, conclusionsand recommendations

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