You have been requested to submit a report to the board of directors outlining your strategy for raising an additional £50 million to fund the next development stage of an international project

Global Finance Assessment Brief

The price quoted for this assignment includes both Part A and Part B (4000 words)

1) Module title

Global Finance

2) Module leader

3) Tutor with responsibility for this Assessment – Student’s first point of contact

4) Assessment

1x Written report (with two parts, Part A and Part B) 10x End-of-unit tests

5) Weighting

Written report: 90% of module assessment

10x End-of-unit tests: 10% of module assessment

6) Size and/or time limits for assessment

Written report: 4,000 words total (+/- 10%) divided equally between Part A (2,000 words) and Part B (2,000 words)

10x End-of-unit tests: 10x questions each

7) Deadline of submission

Friday of week 13, 23:59 (UK Time)

8) Arrangements for submission

Submit report electronically via Turnitin on the module’s Moodle page. You are advised to keep a copy of your submission.

Submit End-of-unit tests through the module’s Moodle page.

9) Assessment Regulations

The Edinburgh Napier AI guidelines apply to this assignment (https://my.napier.ac.uk/your- studies/improve-your-academic-and-study-skills/referencing-and-academic-integrity/artificial- intelligence-tools ).

10) The requirements for the assessment

For the end-of-unit tests (weighted 10%) – these are available within Moodle, at the end of each Unit.

For the written report (weighted 90%):

The total word count should be approximately 4,000 words, with a variation of ±10%, excluding references, tables, figures, and notes.

There are two parts, each is weighted 45%, as follows:

Part A: Report on raising £50 million to fund an international project.Part B: Critically evaluate derivatives (forwards, futures, options, and swaps) for managing foreign exchange risk.

You are required to integrate Parts A and B into a single report. Each part should be equally weighted, with around 2,000 words for each.

1. Part A

As the Chief Financial Officer (CFO) of a UK-listed company, your company is currently trading at £10 per share, with 10 million shares in issue, giving a total market capitalisation of £100 million. You have been requested to submit a report to the board of directors outlining your strategy for raising an additional £50 million to fund the next development stage of an international project.

Note for Part A:

For the report in Part A, your task is to conduct a critical review of the advantages and disadvantages associated with the main funding options. Ensure that you include relevant academic references to enhance the depth of your discussions. Your analysis should encompass an examination of various types of financing choices available in both the equity and debt markets. Additionally, discuss the advantageous role of interest rate swaps in mitigating financing costs and eliminating interest-rate risk.

2. Part B

This additional funding will enable the company to expand globally and engage in business across various countries, where payments can be conducted in local currencies. The directors maintain a conservative approach toward risk. You have been tasked with presenting a report to the directors, critically evaluating alternative derivatives, including forwards, futures, options, and swaps available in the market. The aim is to minimise the risk associated with international currency payments.

Note for Part B:

In your report, you are expected to conduct a critical discussion and comparison of derivatives, including forwards, futures, options, and swaps, as tools to hedge foreign exchange (FX) risk. This analysis should be backed by relevant academic references. You should explain how each derivative works to mitigate FX risk, followed by an evaluation of the pros and cons of each in the context of managing FX risk.

11) Special instructions

N/A

12) Return of work and feedback

Written feedback will be provided within three weeks of submission via Turnitin.

13) Assessment criteria

The end-of-unit tests (10%) are automatically marked within Moodle. The report (90%) is marked based on the marking criteria underneath.

Marking Criteria*

≥D2

All the required elements have been well addressed; appropriate and clear use of references; well supported argument with evidence; appropriate use of all the relevant information; Good presentation of arguments; Substantial evidence of extensive readings.

D1-P5

All the required elements have been fully addressed; clear use of references; argument are supported by evidence; appropriate use of all the relevant information; Good presentation of arguments;

P4-P3

All the required elements have been addressed; some reference used; argument are supported by some relevant evidence; there is relevant information but not fully discussed;

P2-P1

At most one element has not been addressed; little reference used; some relevant information used; argument is not well supported by relevant evidence;

F1

Little reference used; no information used; argument are not supported by relevant evidence;

≤F2

No reference used; no information used; argument is not supported by relevant evidence;

Sample Answer – Plagiarised, Do Not Copy

Part A

Report to the Board of Directors: Strategy for Raising £50 Million

Introduction

As Chief Financial Officer (CFO), I have been tasked with outlining a strategy to raise an additional £50 million to fund the next stage of our international project. This report presents several viable options for securing the required funds, analysing the financial and operational implications of each method, and concluding with a recommendation for the most suitable approach. Given that our company is currently trading at £10 per share, with 10 million shares in issue and a total market capitalisation of £100 million, the funding strategy will need to balance our growth ambitions with the interests of our shareholders.

1. Funding Options

The primary methods for raising £50 million include:

Equity Financing (Rights Issue or Share Placement)

This involves issuing new shares to raise capital. The two common approaches are:

Rights Issue: Offering new shares to existing shareholders at a discount to the current market price, proportional to their existing holdings. This is often seen as equitable for current shareholders, as it gives them the opportunity to maintain their shareholding percentage.Share Placement: Selling new shares to institutional investors, typically at a slight discount to the market price. This can be quicker than a rights issue, but may dilute existing shareholders’ interests if not offered widely.

Debt Financing (Bond Issuance or Bank Loans)

This approach involves raising capital through borrowing. Key options include:

Bond Issuance: Issuing corporate bonds to raise funds from investors. Bonds can offer flexibility with fixed or floating interest rates and varying maturities.Bank Loans: Negotiating a loan with a financial institution. This option could be structured as a term loan or a revolving credit facility, depending on the flexibility required.

Hybrid Instruments (Convertible Bonds)

Convertible bonds combine debt and equity by giving bondholders the option to convert their bonds into shares at a later date. This method allows the company to initially raise debt, with the possibility of converting it to equity, reducing long-term debt obligations.

Asset Sales or Divestitures

Selling non-core assets or divesting from underperforming subsidiaries can provide the necessary capital without increasing debt or diluting shareholders. However, this may not always align with long-term strategic objectives