Page 1 Kaplan Business School Assessment OutlineAssessment 2 Information Subject Code:FIN203Subject Name:Corporate FinanceAssessment Title:Individual AssignmentAssessment Type:Written Assignment and Excel SpreadsheetWord Count:1000Words(+/-10%)Weighting:25 %Total Marks:60Submission:Via Turnitin for written assignment, via excel link for excel spreadsheetDue Date:Friday (19:55pm AEST) Week 11 Assessment Instructions• Complete this individual assignment (parts 1-3) by the due date above• Please submit written answers and final numbers through the Turnitin “Written Report”link and submit ONE excel spreadsheet you used in calculating answers through “ExcelSubmission” link (you can use multiple sheets in your one file). Both of these sectionswill be marked.• The written part of your assignment will be put through Turnitin and any plagiarism willbe traced and penalised. Please refer to the policy.Assessment DescriptionAnswer the questions below with reference to the following sources:Complete all two parts of the written assignment below.1. Company Perspective – Blackmores Group [30 marks]https://www.blackmores.com.au/Page 2 Kaplan Business School Assessment OutlineSource 1: Blackmores Group Annual Report 2019https://www.blackmores.com.au/about-us/investor-centre/annual-and-half-year-reports(Financial Year 2019 Annual Report View Online Download)Source 2: Blackmores Group Governance & Board of Directorshttps://www.blackmores.com.au/about-us/investor-centre/corporate-governanceSource 3: Blackmores Limited (BKL.AX) Yahoo Financehttps://au.finance.yahoo.com/quote/bkl.ax/a) What is the Net Working Capital for Blackmores both in 2108 and 2019. What type of currentasset management strategy is the company pursuing? Explain why and what are the prosand cons of this strategy. (4 marks)b) You are trying to value Blackmores share today (End of 2019). Assume the current price ofthe share in the stock market is $88.16 and that you would like to hold the investment for 5years. Assume that the total dividend paid by Blackmores in the 2019 year were paid as alump sum (at once) today. You also estimate that for the next two years dividends will growrespectively at 30%, 25% per year. After this (starting in time 3) you estimate dividends willgrow at a constant rate of 6% forever. Assume that today the Australian treasury notes 2.5%,the market risk premium is 8% and the beta of Blackmores is 1.16. Based on this price wouldyou purchase the share? Why or why not? (10 marks)c) What was the market capitalization of Blackmores, on the 16 January 2020, assuming thatthe total number of share outstanding is the same as per the end of the 2019FY? (Use theclosing price on that day). (3 marks)d) Consider the Blackmores Group 2017 Annual Report. Based on the note to financialstatements about “Financing”, what type of source (non-current) is Blackmores primarilyusing to finance its long-term operations? Is Blackmores improving its financial positionbetween 2018 and 2019? (4 marks)e) Assume that the Blackmores Group would like to replace its bank loan facilities (2019) witha new issuing of bonds. Assume that the issue will have a coupon rate of 1.5% with a 10year maturity. Assume this are semi-annual coupon bonds and each have a face value of$1.000 and the required rates of return for similar bonds in the market is 2.5%.What wouldbe the issuing price of these bonds? How many bonds Blackmores will have to issue in orderto replace its bank facilities? (9 marks)Page 3 Kaplan Business School Assessment Outline2. Capital Budgeting – Blackmores Group [30 marks]Answer the below questions in your word file and refer to your excel spreadsheet as a supportingdocument. Upload your excel spreadsheet under “Excel Submissions”.All amounts are in $AUD. Blackmores is evaluating to invest into a new manufacturing facilityin Asia. In order to mitigate the risk and assess the fit for purpose of this manufacturing plantBlackmores asked “SGS Ltd.” to conduct a technical due diligence on the plant and advise onthe feasibility of this project. “SGS Ltd.” is asking $1 Million as a fixed fee for its consultingservices. The manufacturing plant has an initial outlay of dollars $500 million and will produce150,000,000 tablets ready for sale starting at the end of year 1 until the end of year 5 and250,000,000 tablets starting at the end of year 6 until the end of year 10. It will also incur workingcapital expenses at the end of year 1 to 5 of $1 million (this working capital will not berecovered). Assume that the average selling price of a single tablet is $1 over the ten years.The operating costs of the project will be 35% of the revenues from year 1-10. The investmentwill be depreciated on a straight-line basis over ten years to 0 book value. Blackmores hasestimated that the manufacturing plants can be sold at the end of year 10 for $10 million. Thetax rate is 30%. All cash flows are annual and are received at the end of the year. The weightedaverage cost of capital for Blackmores is 10%.a) Based on the above information calculate the FCFs of the project. (10 marks)b) Calculate the NPV for the new manufacturing facility. (5 marks)c) Blackmores would like to recover the investment within 5 years. What is the DiscountedPayback Period for the project? (5 marks)d) What is the IRR for the project? (5 marks)e) Based on your analysis a) to d) should Blackmore undertake this project? Justify youranswer with reference to theory. (5 marks)Page 4 Kaplan Business School Assessment OutlineImportant Study InformationAcademic Integrity PolicyKBS values academic integrity. All students must understand the meaning and consequencesof cheating, plagiarism and other academic offences under the Academic Integrity and ConductPolicy.What is academic integrity and misconduct?What are the penalties for academic misconduct?What are the late penalties?How can I appeal my grade?Click here for answers to these questions:http://www.kbs.edu.au/current-students/student-policies/.Word Limits for Written AssessmentsSubmissions that exceed the word limit by more than 10% will cease to be marked from the pointat which that limit is exceeded.Study AssistanceStudents may seek study assistance from their local Academic Learning Advisor or refer to theresources on the MyKBS Academic Success Centre page. Click here for this information.
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