UGB363: Strategic Corporate Finance - Accounting and Finance Assignment Help

Assignment Task

The assignment has been designed to cover the following learning outcomes associated with successful completion of the module:

Knowledge

K1. Critical understanding of the key strategic decisions that a business may have to make and appreciated how accounting and finance can assist in making and evaluating those decisions.

K2. Critical understanding of specific analytical skills in key decision areas within strategy and finance at local and international level.

K3. Critical understanding of the limitations of the current state of financial theory in making strategic business decisions.

Skills

S1. Competence in applying the key valuation concepts and methodologies of financial decision making in order to contribute to the wider decision making of the organisation.

Part A (compulsory)

You have recently joined the investment team as a financial analyst at HK Index Consultancy Ltd, HSBC, a financial advisory firm based within Hong Kong. As part of the initial duties, you have been asked by the Board of Directors to investigate the three-year (2019,2020,2021) performance of HSBC with the view to potentially investing future company funds.

Required:

Prepare a report for the Board of Directors of HK Index Consultancy Ltd analysing and evaluating the three-year share price performance of HSBC

In this section students should analyse 3-year share price performance of HSBC by:

i) linking significant news events to the share price increases and decreases;

ii) looking at the company’s financial ratios and one other key area (dividend policy, M&As, capital structure alteration, financing strategy, investment strategy.), so can demonstrate both knowledge and understanding of a range of topics, theories, and concepts covered within the UGB363 Strategic Corporate Finance module.

A report format should be utilized that offers clear, concise analysis, resulting in the production of robust recommendations. For ratio analysis, you should show the formula used but could extract the ratios from financial based websites. Marks will be awarded based upon your analysis and interpretation.

Part B

(a) It is 31 January 2023 and the managers of XYZ Plc. are considering a change in the company’s dividend policy. Earnings per share for 2022 for the company were 50p, and the finance director has said that he expects this to increase to 55p per share for 2023. The increase in earnings per share is in line with market expectations of the company’s performance. The pattern of recent dividends, which are paid on 31 December is as follows:

The managing director has proposed that 60 per cent of earnings in 2023 and subsequent years should be retained for investment in research and development. It is expected that, if this proposal is accepted, the dividend growth rate will be 9 per cent. XYZ’s cost of capital is estimated to be 11.5 per cent.

Calculate the share price of XYZ in the following circumstances.

1. he company decides not to change its current dividend policy.
2. The company decides to change its dividend policy as proposed by the managing director and announces the change to the market.

(b) Critically examine the “for” and “against” theoretical views of the Dividend Irrelevance Theory, ensuring the response is supported by relevant academic research in this area

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