ASSESSMENT GUIDE
BAFN602: Corporate Finance
Semester 1, 2023
Assessment Method: Individual presentation
Assessment number: 1
Assessment Artefact: Oral presentation and written PowerPoint submission
Weighting [30%]
Marks [90]
Why this assessment:
Types of employability skills that will be acquired upon completion of this assessment
Overview of Assessment
This assessment task consists of a presentation, excel calculations and a PDF of the presentation
equivalent to a 1000-word research report. This task requires students to comment on a company’s
strategies and apply capital budgeting techniques to investment decision-making. It requires students to
draw on their critical thinking and ethical perspectives to make decisions.
• Provides an opportunity for students to apply theoretical ideas of capital budgeting and
capital budgeting techniques to hypothetical investment projects
• Provides an exposure to real-life scenarios
• The feedback from this assessment will help students to improve their performance in the
final assessment.
Skill Type
Developed critical and analytical thinking ☒
Developed ability to solve complex problems ☒
Developed ability to work effectively with others ☐
Developed confidence to learn independently ☒
Developed written communication skills ☒
Developed spoken communication skills ☒
Developed knowledge in the field study ☒
Developed work-related knowledge and skills ☒
Develop effective research skills ☒
Due date 7
th April 2023
Weighting 30%
Length and/or format 10-minute video presentation, excel spreadsheet and Power Point Slides
Learning outcomes assessed LO2
Graduate attributes assessed GA5; GA7
How to submit Turnitin
Return of assignment Turnitin
Assessment criteria Rubric: See end of document
2
INSTRUCTION AND CONTEXT
This assessment requires students to analyse long-term investment projects, present the results in a video
and submit the video together with PowerPoint slides using LEO through Turnitin. The tasks involve
assessing the viability of proposed projects by analysing their risk and reward profiles.
You must choose one (1) of the three (3) listed scenarios at the end of this assessment guide and premised
on the given background, apply the principles of capital budgeting and investment decision criteria to
assess the viability of the selected projects.
The road transport industry is one of the essential sub-sectors of the Transport, post, and warehousing
industry. Its relevance is earmarked by the proposed $120 billion investment in transport over the next
ten (10) years in the 2022-2023 federal budget. This investment is expected to spur growth in the
transport sector for the next ten (10) years.
You have been tasked to prepare relevant documentation which would form the basis for a presentation
to be delivered to the board of directors. To ensure that the relevant issues are addressed, you are
required to provide an appropriate response to the following questions:
Required:
1) What is the nature of the relationship between the projects of your selected scenario and how
does it affect the company’s investment decision making.
2) Assess any relevant business strategy that would be appropriate for firm expansion in your chosen
context
3) Determine the free cash flow of the projects associated with your selected scenario highlighting
initial outlay, operating cash flows, depreciation, changes in net working capital, and terminal
value.
4) Assess the viability of the projects associated with your selected scenario using net present value
(NPV), internal rate of return (IRR), and profitability index (PI).
5) Assess the financial risk of the selected using sensitivity analysis and comment on the risk profile
of the projects. Assume 20% change in cost of operation for the chosen scenario
Each student will make an oral presentation via Zoom at a mutually agreed time and date in week
commencing 17 April 2023. Presentation will be of 10-minute duration. You are required to answer the
questions specified in this assignment. You are expected to use visual materials such as PowerPoint.
Grading will be based on the rubric that can be found at the end of this document.
You should submit your PowerPoint slides and workings via Turnitin by 7th April 2023.
Oral Presentations
Oral presentation and debating skills are valued by managers/employers. important in business. Oral
presentations are common in business life, and you will be required to make presentations many times
and in various settings. Therefore, developing such skills are essential for a successful professional life.
Rubrics – Assessment 1 (30%)
SCENARIO 1
Allied Express Group (AEG) is a courier and freight company with operations which is primarily focused on providing
transport services to clients located in the urban centres of Melbourne, Australia. With the current goal of
increasing its market share of the transport sector, management of AEG has proposed an expansion in business
operation to boost its market share. In the view of this, the board of directors is currently considering two projects
for investment: an acquisition of existing regional freight company and/or the setting up of regional operation.
The chief financial officer (CFO) has presented the following financial data as reasonable estimate for the two
projects based on reasonable assumptions.
Acquisition of existing regional freight company
Item Growth rate/inflation
Purchase price $120 million
Project duration 10 years
Cost of operation 30% of revenue 8% per year
Opportunity cost (years 3 to year 6) $105,000
Other operating cost (Year 1) $120,000 2% per year
Salvage value:
Building
Truck
$1.5 million
$15 million
Applicable depreciation method: Building
Truck
Prime cost
Diminishing value
Revenue (Year 1) $30 million 5% per year
Net operating working capital $100,000 5% per year
Additionally, the CFO has noted that the purchase price includes $5 million used for feasibility study and $25 million
which relates to the value of a non-depreciable asset. 20% of the remaining amount relates to buildings with the
rest representing trucks acquired. 35% of the other operating cost represents shared-based compensations.
Setting up of a regional operation
Item Growth rate/inflation
Purchase price $98 million
Project duration $10 years
Cost of operation 30% of revenue 6% per year
Opportunity cost (years 1 to year 5) $120,000
Other operating cost (Year 1) $145,000 2.5% per year
Salvage value: Building
Truck
$1 million
$5.2 million
Applicable depreciation method:
Building
Truck
Prime cost
Diminishing value
Revenue (Year 1) $25 million 3% per year
Net operating working capital $250,000 10% per year
The purchase price includes $2.5 million spent on market survey and $27.5 million for land that was acquired. 30%
of the remaining amount represents the value of building with the remaining representing the value of trucks
acquired. Other operating cost is made of up of 20% non-cash expenses.
The tax rate is 30%. All cash flows are annual and are received at the end of the year. Both projects have weighted
average cost of capital 10%.
7
SCENARIO 2
Coastal Service Transport (CST) is considering two projects for its firm expansion strategy. As a company which
predominantly focuses on international freight services, the firm is seeking to make inroads into the local freight
services in Australia. In view of this, the firm is considering an investment in a door-to-door freight service as well
as a truck servicing operation. During the first board meeting, the financial manager presented the following
financial information for the proposed projects:
Door-to-door freight services
Item Growth rate/inflation
Purchase price $50 million
Project duration 10 years
Cost of operation 35% of revenue 7.5% per year
Opportunity cost (years 2 to year 5) $125,000
Other operating cost (Year 1) $95,000 5% per year
Salvage value:
Truck $9 million
Applicable depreciation method:
Truck Diminishing value
Revenue (Year 1) $12 million 3.5% per year
Net operating working capital $130,000 5% per year
Truck servicing
Item Growth rate/inflation
Purchase price (Equipment – 70% and building – 30%) $70 million
Project duration 10 years
Cost of operation 30% of revenue 5% per year
Opportunity cost (years 1 to year 4) $130,000
Other operating cost (Year 1) $70,000 4% per year
Salvage value:
Building
Equipment
$5 million
$3.5 million
Applicable depreciation method:
Building
Truck
Prime cost
Diminishing value
Revenue (Year 1) $11 million 10% per year
Net operating working capital $180,000 3% per year
12.5% of the purchase price relates to expenses incurred for market research conducted for the truck servicing
operation.
The tax rate is 30%. All cash flows are annual and are received at the end of the year. Both projects have weighted
average cost of capital 14%.
8
SCENARIO 3
Pack & Carry Group (PCG) is a truckload carrier which specialises in the hauling of large shipments for long distance.
Due to the highly competitive nature of this segment of freight services, the management of PCG is considering an
extension to its services to include either Four Axle Semi-Trailer Combination or Nine axle B-Double Combination.
Both trucks are expected to help increase the firm’s capacity to carry more loads across longer distances. Below
are the estimates of the financial information which relate to the two investments:
Four Axle Semi-Trailer Combination
Item Growth rate/inflation
Purchase price $95 million
Project duration 10 years
Cost of operation 40% of revenue 6% per year
Opportunity cost (years 1 to year 6) $160,000
Other operating cost per year $103,000
Salvage value:
Truck $2.5 million
Applicable depreciation method:
Truck Diminishing value
Revenue (Year 1) $35 million 3% per year
Net operating working capital $200,000 5% per year
Nine Axle B-Double Combination
Item Growth rate/inflation
Purchase price $110 million
Project duration 10 years
Cost of operation 35% of revenue 4% per year
Opportunity cost (years 2 to year 6) $190,000
Other operating cost per year $179,000
Salvage value:
Truck $20 million
Applicable depreciation method:
Truck Diminishing value
Revenue (Year 1) $40 million 3% per year
Net operating working capital $150,000 3.5% per year
$10 million which was spend on market survey for both projects are included the purchase price of both projects.
40% relates to the Nine Axle B-Double Combination project.
The tax rate is 30%. All cash flows are annual and are received at the end of the year. Both projects have weighted
average cost of capital 12%.
This assessment is an individual presentation that requires students to analyze long-term investment projects, present the results in a video, and submit the video together with PowerPoint slides using LEO through Turnitin. The tasks involve assessing the viability of proposed projects by analyzing their risk and reward profiles. Students must choose one of the three listed scenarios and, premised on the given background, apply the principles of capital budgeting and investment decision criteria to assess the viability of the selected projects.
The assessment requires students to develop critical and analytical thinking, ability to solve complex problems, confidence to learn independently, written communication skills, spoken communication skills, knowledge in the field study, and work-related knowledge and skills. The learning outcomes assessed include LO2, and the graduate attributes assessed include GA5 and GA7. The assessment criteria include analyzing the relationship between the projects, assessing relevant business strategy, determining the free cash flow, assessing the viability of the projects, and assessing the financial risk of the selected project.
The scenario provided involves Allied Express Group (AEG), a courier and freight company with operations that is primarily focused on providing transport services to clients located in the urban centers of Melbourne, Australia. The company aims to increase its market share of the transport sector, and management of AEG has proposed an expansion in business operation to boost its market share. The board of directors is currently considering two projects for investment: an acquisition of an existing regional freight company and/or the setting up of a regional operation. The CFO has presented financial data as reasonable estimates for the two projects based on reasonable assumptions.
