MN7029 Financial Decision Making Coursework Assessment Brief Spring 2025 | LMU

Individual coursework:

Section A: Learning outcomes of the assessment:

The following learning outcomes are assessed by this assessment

• LO 2. Demonstrate an understanding and use of the appropriate analytical techniques to be applied to business case development and investment appraisal; the raising of finance and distribution of funds to investors.;
• LO 3. Demonstrate an understanding of basic statistics and modelling techniques and be able to interpret and communicate findings.

Section B: Introduction

Based on a case study, students will prepare an investment appraisal of a business project or major sale. They will submit a presentation and support spreadsheet analysis.

This summative assessment is an individual coursework and accounts for 70% of your total module grades. You must include a reference list identifying all your sources and use citations, both using the Harvard Referencing system.

The University takes academic misconduct very seriously and always seeks to rigorously protect its academic standards. Plagiarism, collusion, and other forms of cheating constitute academic misconduct, for which there is an explicit range of graduated penalties depending on the particular type of academic misconduct. We can use Google Classroom to check the plagiarism status of students when they submit their assessments.

Section C: Assessment Detail

You are the Business Manager for Summit Trails Co., a luxury travel company specialising in guided mountain expeditions and personalised adventure travel in the Himalayas. The company has been conducting Research and Development (R&D) on a new luxury travel package aimed at high-net-worth individuals, combining exclusive helicopter tours, premium accommodation, and personalised services. Now, the company needs to decide whether to launch this exclusive package and determine the appropriate pricing for the product.

As the Business Manager, you are responsible for preparing a detailed report on the potential investment in launching the new travel package. Unfortunately, the Finance Manager is unavailable for the next month, so you will be presenting the findings to the CEO and the Board on your own.

You’ve been given the following information by different departments within the organisation:

R&D Team:

“We have already invested a significant amount of £200,000 in developing the concept for this package, including partnerships with hotels and helicopter services. We estimate that an additional £50,000 will be required to finalise contracts and prepare for the launch.”

Operations Department:

“To support the scale of this new package, we’ll need to acquire a luxury helicopter for £5 million and invest £1 million in immediate working capital for operations. We have enough capacity with our current ground staff, but we will need to hire a helicopter pilot with an estimated salary of £100,000 per year. The helicopter will have a service life of 7 years and a residual value of £200,000.”

Marketing Department:

“We have conducted market research and believe that we can charge £25,000 per client for the first year, with adjustments for market demand thereafter. Our pricing projections for the next five years are:

• Year 1: £25,000
• Year 2: £23,500
• Year 3: £22,000
• Year 4: £20,500
• Year 5: £19,000

The variable cost per client (including accommodation, food, and transportation) is estimated to be £12,000. Fixed costs, including the helicopter’s maintenance and depreciation, are projected to be £1 million annually. Marketing costs will be £500,000 annually.

Projected client numbers for the first five years are as follows:

• Year 1: 200 clients
• Year 2: 300 clients
• Year 3: 400 clients
• Year 4: 350 clients
• Year 5: 250 clients

Beyond five years, we expect the luxury adventure market to evolve, so we anticipate the package will only have a five-year life.”

HR Department:

“The pilot’s salary will increase by 2% annually due to inflation and other benefits.”

Financial Information:

• The market value of the company’s shares is £3 per share, with 3 million ordinary shares in issue. Dividends are currently 20p per share and are expected to remain constant.
• The company has £4 million in irredeemable loan capital with an interest rate of 10%, quoted at £90 per £100. The corporate tax rate is 25%.
• Historically, the company has used a Weighted Average Cost of Capital (WACC) of 18%, but the management team is interested in calculating the current WACC for the company.

Your Task:

The CEO has requested that you prepare a presentation for the Board outlining the financial viability of launching this new travel package. The Board consists of non-financial professionals, so your presentation must be comprehensive and include explanations of the financial techniques used. Specifically, the Board would like the following:

a. Executive Summary

(Include a short-recorded presentation of no more than 5 minutes summarising the key points and conclusions)

b. Projected cash flow for the travel package over its five-year life.

c. Explanation of WACC:

• What is WACC?
• Why do we use WACC?
• Your calculation of the company’s current WACC and an explanation of the individual components.

d. Financial evaluation of the project using NPV and Payback Period:

• Calculate NPV and Payback Period using the calculated WACC.
• Calculate NPV and Payback Period using the company’s historical WACC of 18%.
• Based on these calculations, provide a recommendation on whether to proceed with the project.

e. Conduct the financial SWOT analysis of the publicly listed company. Assess its financial strengths, weaknesses, opportunities, and threats using its latest financial statements and market performance. Provide a well-supported analysis with relevant financial data and insights.

g. Conclusion:

• Provide a final recommendation on whether the company should move forward with the new travel package, considering both the calculated WACC and the historical WACC.

Prepare a report with an executive summary, detailed financial calculations, and your final recommendation for the project’s viability based on different capital cost assumptions.

Structure of the report

The report should be prepared in PowerPoint and should contain the following slides:

• Coverage Page
• Executive summary (A summary of your proposal on a page)
• Company Introduction
• Calculation and critical evaluation of WACC (detailed calculation may be shown in an Appendix)
• Projected cash flow
• Calculation of NPV and PP (detailed calculation may be shown in an Appendix) using the WACC
• Calculation of NPV and PP (detailed calculation may be shown in an Appendix) using a cost of capital of 18%
• Financial SWOT analysis of a public company and provide the relevant financial data and insights.
• Conclusion
• Appendices – detailed calculations and references

The PowerPoint file should be uploaded to MST. A template is provided, but you should feel free to adapt and personalise this.

Section D: Assessment Marking Scheme

The assessment is marked out of 100. The following shows the mark allocation and the approach required for each section.

Marking Guide

Section E: Assessment Grade Description