Aguia and Pomba are two companies operating in the same industry. They have the same business and operating characteristics. Aguia is financed with debt and equity whereas Pomba is an all equity company.
Aguia currently earns three times as much profit before interest and tax as pomba. It is company policy of both companies to pay 100% of earnings each year as dividend.
The Market Value of each Company is Currently
Equity (20 million shares) 72 30
Debt £12 million of 12%
Loan Stock 28*
• Note market value of debt
Aguia earns a regular profit before interest and tax of £6 million and Pomba earns £2 million. Both companies pay corporation tax at 35%
Aguia’s shares are currently trading in the market at £8.00
1) Apply the M&M formula to establish what you think the share should be the correct equilibrium price of Aguia’s shares? (10 marks)
2) If the shares of both companies traded in a perfect market what should a rational investor do and what should happen to the share price of both companies? (10 marks)
3) Why are capital structure decisions often referred to as ‘ the Capital Puzzle’?
Note Your answer to question two should be 1,000 words and question three should be at least 2,000 words. There is no word count for question one as it is mainly calculations. qwert123
Department of Accounting and Finance
BA (Hons) Accounting
BSc (Hons) Accounting and Finance
BSc (Hons) International Finance (and Banking)
Financial Management ( AF002-3)
Academic Year 2014 - 2015
This is an important component of the Financial Management unit as it represents 40% of the total assessment weighting for the unit. The broad aim of the assessment is to offer students the opportunity to investigate a real and current issue within the field of financial management.. In particular, students must demonstrate that they can structure a programme of study, identify information needs, draw from the body of existing knowledge on a particular subject, compare theory with practice, construct reasoned arguments supported by evidence, and make logical conclusions, all within the context of a group investigation and presentation, an individual written submission and strict deadlines. t.
This document should be read in conjunction with the unit handbook which provides detailed guidance on the skills required and the resources available to you.
If you want more general help with preparing for assessments then visit the PAD web site at http://lrweb.beds.ac.uk/pad or their BREO site which provides access to a range of relevant additional on-line resources.
2 The Assessment
Assessment is not just about ‘grading’ your performance but an integral and important part of your learning. Preparation for assessment, undertaking the set tasks and using the feedback provided helps you to develop and demonstrate skills as well as being able to evidence your knowledge and understanding. The assessment criteria are included as an appendix.
2.1 Assessment task
Your assessment task is to investigate the issues surrounding the question and to present your findings.
Following the research you are required to write and submit an individual report. The report will provide an individual analysis of the problem or issue and appropriate or current actions necessary to deal with it.
2.1.1 Individual report
In addition to the above, the individual report will focus on the following:
• A comparative analysis using the data and information you have gathered.
• A sound conclusion based on the evidence you have presented.
2.2 Presentation of Findings
2.2.1 Individual report
Students are required to write a Report (2000 words) ON A STRICTLY INDIVIDUAL BASIS. This means no copying from other students or published sources. The individual report will focus on the following:
• A comprehensive comparative analysis using the data and information you have gathered.
• A review of the relevant literature
• A sound conclusion based on the evidence you have presented.
2.2.2 Written Presentations
There word limit for the individual written report is 3,000 words (plus or minus 10%). However, you may include any additional, relevant material in the appendix – which is not included in your word count.
It is important to present your work correctly and learning to do so at an early stage, by consulting these guidelines, may save you time and trouble in the long run.
The report should be written according to the highest standards of English usage. The Oxford English Dictionary is recommended as the ultimate authority. Avoid the use of the first person in the main report. Conciseness of expression is expected and sentences should be constructed in order neither to be too long and convoluted, nor e-mail or texting style. Remember that quality is more important than quantity. Clarity is increased by adopting a logical order of presentation (especially regarding paragraphs or section headings).
Although spell checks are invaluable for detecting typing errors and the odd spelling mistake, they are no substitute in the end for careful proof reading. You cannot rely on a spell check which will not, for example, pick up mistakes which sometimes may be related to grammar (such as their/there) when these are in fact quite different words in the dictionary.
Careful editing is essential and it is sometimes difficult to detect mistakes in your own work with which you are familiar. You are strongly advised to persuade a friend or colleague to read through your work in its final form. It is not the task of your tutor to do this for you.
Numbers below one hundred in the main text are usually spelt out in full (e.g., sixty-five), as well as those which can be expressed in two words (three million); but 2,760 specimens, 516 students. Numerals should be used for dates (consecutive years should appear as 1992-93, not 1992-3 or 1992/93), street numbers, decimals, exact sums of money and percentages (with ‘per cent’ spelt out rather than %). Uniformity is important; mixtures of words and numbers should always be avoided.
A suggested (but not mandatory) structure could look like this:
List of Contents
List of Tables, Illustrations and/or accompanying materials
Referencing is the way in which you arrange in your work the quotations you make from other authors or the sources on which you draw. Details of how to reference effectively can be found on the learning resources web site at
http://lrweb.beds.ac.uk/help/guide-to-ref and in the invisible library at http://lrweb.beds.ac.uk/invisiblelibrary. PAD also run sessions on effective referencing (see http://lrweb.beds.ac.uk/pad and their BREO site for further details).
If you don’t reference correctly then you are at risk of being accused of plagiarism. Plagiarism is an academic offence which covers both direct copying and copying or paraphrasing with only minor adjustments:
• A direct quotation from a text must be indicated by the use of quotation marks and the source of the quote (title, author, page number and date of publication);
• A paraphrased summary must be indicated by attribution of the author, date and source of the material including page numbers for the section(s) which have been summarised.
The Accounting degree adopts the Harvard Reference System and no other method should be used.
2.4 Coursework submissions
A submission will constitute a recognisable response to the task brief. Your submission will comprise of the following components:
• An electronic submission of your individual report through TURNITIN on BREO by 5:00pm on Thursday, 12 th March 2015
• A hard copy must be submitted to me in HM08 on Monday 16th of March 2015 no later than 12.00 hours.
Late work is not accepted, and will be deemed a fail and graded G (0) (no work submitted).
Working to deadlines is an important life-skill and we would encourage you to develop appropriate practices.
If you believe that you are likely to miss a deadline because of Mitigating Circumstances you should apply to the Student Support Mitigation Team (through SiD) for an extension. Only they can make the decision - it's important to realise that your lecturers are not able to extend published deadlines
If you do submit a claim, you should not assume that it is necessarily going to be accepted; it is your responsibility to make sure that you complete all assessment requirements in a unit as far as possible.
2.5 Collecting assignments
You can expect to collect your marked assignments, with relevant feedback, by15th April 2015 ( note this includes the Easter vacation).
2.6 Grading, Results and using feedback
The University uses a grading system to indicate your performance and you will receive a grade (A to F) for the work you submit. The assessment criteria for this assignment are appended to this document.
It is important that you receive focused, meaningful and timely feedback to support your learning. You should reflect upon and use any feedback to develop your skills and improve performance.
Dr. Humphrey Shaw
University of Bedfordshire
Assessment of Written Report
Weightings (Please note: These are not chapter headings)
• Introduction and theoretical background (10%)
• Presentation of evidence (30%)
• Comparative analysis (25%)
• Conclusion & Recommendation (20%)
• Overall presentation and structure (15%)
An excellent pass (A: 14, 15, 16): In addition to the criteria for a good pass (below), an excellent report will demonstrate:
• comprehensive and accurate coverage of the area;
• critical, balanced and well-informed evaluation;
• clarity of argument and expression;
• the introduction of new ideas, creativity, and independent thought;
• transfer and integration of models, ideas and information from a range of sources;
• depth of insight into theoretical issues;
• originality of exposition or treatment.
A good pass (B: 11, 12, 13): A good pass report will:
• be generally accurate and well-informed;
• show some evidence of a wide range of reading utilising primary sources;
• show clear understanding of the material;
• show an ability to evaluate the material, although this may be derivative;
• demonstrate the ability to analyse;
• be reasonably comprehensive;
• directly address the question;
• be clearly presented in a concise manner;
• be well organised and logically structured;
A clear pass (C: 8, 9, 10): A clear pass report may demonstrate:
• generally sound work but with a number of notable errors or omissions;
• general accuracy, although with some omissions and errors;
• an adequate answer to the question, although with less evidence of wide-ranging reading;
• a strong answer to a related question, but not the one set;
• only limited development of arguments;
• only limited analysis and interpretation of presented material;
• clear presentation.
A bare pass (D: 5, 6, 7): A bare pass is likely to include a number of significant errors and/or omissions. A bare pass report may:
• contains appropriate material but at a rather basic level;
• show only sparse coverage and analysis of relevant material;
• miss key points of information;
• contain important inaccuracies;
• fail to support arguments with adequate evidence/meaning unclear.
A marginal fail (E: 4): This is unsatisfactory work with serious errors or omissions. Specifically it may:
• fail to answer the question directly;
• show some evidence of relevant reading but provide only cursory coverage with numerous errors, omissions or irrelevancies;
• be disorganised;
• contain much inappropriate material;
• lack any real argument.
A clear fail (F: 1, 2): Work of a very poor standard with little relevant information constitutes an F (2) fail and “nothing of merit” constitutes an F- (1). A clear fail report is likely to:
• show a profound misunderstanding of basic material;
• show a complete failure to understand the question or anything related to it;
• provide totally inadequate information;
• be an incoherent or inappropriate submission.