Guidance for AC3650 Assignment 2 18/19
The assignment should be around 2500 words but there are no extra marks/penalties if your word count is more or less than this. The idea of a word count is to set an expectation for how much time and effort should go into this assignment.
The structure just needs to be clear to the reader. I don’t expect an introduction/executive summary but a conclusion might be useful to highlight the key points of your argument. As a minimumI’d expect 3 sections, being the 3 questions highlighted in the assignment brief.
I would expect that subsections will also be useful to clarify the points you’re making.
Some reminders of what I suggested you could include in your analysis of each of the questions:
Part: A)30 marks
m.
Discuss the factors that could influence an investor to buy particular securities and so the validity of your friend’s statement.
As part of the discussion include reference to risk v return, behavioural finance, market efficiency, insider dealing and an index model (like CAPM).
You should/could:
- Explain why you think people buy shares of one company rather than another
- We’ve covered lots of detail in class (as per the third paragraph in the question) that you might use to comment on what drives investment decisions
- Comment on whether you think your friend is correct or not
- Conclude with what you think are the prime reasons why people buy certain shares
- Hint: there’s lots of people in the world and so I’d suggest it depends on who we’re referring to. So there might be lots of answers to this question
I’d like this section to be phrased in a way that your friend would understand. You don’t need to bring every area of our study into your answer but you need to explain them well.
Part B) 40 marks
For the company that you were allocated in Assessment 1 (if you wish to analyse a different company then email your Module Tutor with an alternative suggestion and reasons for the change):
a) Compare the movement in it’s quoted share price on a quarterly basis for the past 3 years with the change in some market statistics like:
i. Interest rates
ii. Inflation
iii. GDP
iv. Unemployment
v. Any others you believe to be useful
(15 marks)
b) Complete a PESTLE analysis for the company’s industry (some of the sections may be more brief than others);
(15 marks)
- Based on your understanding of the company, the economy and the results of a) & b), justify 3 key factors that you’d expect to influence the value of the company’s shares over the next 12 months
(10 marks)
This section doesn’t need to be a report or essay – it’s more like an exam question. So just provide an answer to each element.
- You don’t need to compare your share price with all the factors listed. You could use others if you think they’re more useful.
The idea of this section is to see if there is a link between these factors and the share price of your company (there might not be, which is OK but could you try to find a market index which does seem to change with your share price?) - The PESTLE could be presented in a table but please make sure you explain each point. The key is to link the factor with how it could affect the profits of your company. You’ll get very few marks if you don’t do that or your comments are very general (i.e. they could apply to any company).
- This is the most interesting bit! After all this analysis you should have a view of what factors might affect the future performance of your company. This should be highlight some factors from a) and b) (plus others if you wish) which you think are the most important. You must justify why they’re important and how they’ll affect profits
Part: C)30 marks
a) Explain, in simple terms, the various ways that a target company could be valued as part of a takeover bid.
(15 marks)
b) What options would a listed company have to raise finance to fund a takeover bid? Explain the advantages and disadvantages of each option (consider issue costs, issue value, control and life time costs).
(15 marks)
Like Part b) this is not an essay/report, it’s just like an exam question.
I would imagine that you’re producing a guide for these topics to someone who is new to accounting.
You need to try to cover most of the areas we’ve been describing in class but in your own words. Using illustrations or practical examples you’ve found would improve the score but isn’t necessary. If you search for takeovers you should be able to find lots of practical examplesbut it might be difficult to get any details that would greatly assist with these two questions.
- Try to give a view on what you think would most likely be the best type of valuation technique for different types of target (as usual there isn’t a right answer here – it usually depends on the circumstances so think about what type of valuation scenario we might be dealing with – we did that in class)
- Again, try to conclude on which method would be better for different circumstances.
Obviously this report is about some very technical concepts.
A report will score well if you
- Summarise things in a simple way. I don’t expect you to be able to write a text book on these areas. I’m assessing whether you understand what we’ve covered and have an opinion.
- Give a balanced point of view. Most things in accounting aren’t exact – you need to show me that you recognise that the best answer probably depends on the circumstances. So think about what scenarios we might be dealing with.
- Use illustrations to explain the point. This might be tricky in this assignment but it’s always good if you can do it.
- Convince me of your opinion. This isn’t about being right or wrong, the assignment is about coming up with a convincing argument.
As always if you have any questions then let me know and if you want me to look at a draft then just send it to me. I might have to limit the number of drafts you send me at this time of year but there’s no harm in asking for help!