Management Finance and Science

Submission details

For this assignment, you are required to submit:

  • a report as a Word (or similar) or PDF file.

Please refer to the ‘Assessment preparation’ area of the module for further guidance.

Learning Outcomes

CodeDescription
LO1Critically evaluate accounting systems that aid decision-making.
LO2Critically appraise the financial strength of a business using recognised and innovative techniques.
LO3Critically understand a range of statistical methods used by managers to concentrate (big) data and estimate the risk of specific industry projects.
LO4Critically interpret and communicate statistical information and financial results to support decision-making
LO5Critically synthesise aspects of scientific management for use in decision-making and risk analysis.

Scenario

Assume that you are a financial analyst working for Redrow plc, one of UK’s largest construction companies listed on the London Stock Exchange. The company specialises in housebuilding and construction.

The Investment Committee of Redrow plc has asked you to prepare a report to explain two different areas of interest to them, namely, the stock performance of the company’s shares (Task 1) and an appraisal of an investment they are considering (Task 2).

You are provided with the following links and information for both Tasks:

  • The average monthly close share price for 2020 (in pence) and the corresponding monthly returns in Table 1.

Table 1: Average monthly close share price and monthly returns for 2020 (in pence)

MONTH (YEAR 2020)CLOSE PRICEMONTHLY RETURNS
JAN795 
FEB746-6.16%
MAR360-51.81%
APR46128.29%
MAY4691.60%
JUN431-8.07%
JUL428-0.74%
AUG4566.64%
SEP404-11.45%
OCT4162.92%
NOV52025.00%
DEC57210.01%

Task 1 (approximately 1,500 words)

Using the information provided in the scenario and from your own research, write a report to the Investment Committee that includes the following:

  1. a calculation of the following descriptive statistics (range, mean, median, and standard deviation) based on the monthly closing returns.
  • a critical explanation of why the standard deviation of returns is a good measure of investor risk. Use the above statistics from part a. for Redrow plc to illustrate your case.
  • a critical evaluation of two appropriate scientific management methods covered in week 10 and week 14 in this module which can be utilised to aid future stock price forecasting.

Pick two of the following:

  • Correlation Coeffiecient
    • Regression Analysis
    • Linear Programming
    • Statistical Inference

Task 2 (approximately 1,500 words)

Redrow plc is currently considering investing in three new capital construction ventures, the projected details of which are shown below in Table 2. In this case the company can invest in only one of the projects.

Table 2: Projected details of three new capital construction ventures

ProjectReadingBathYork
 £m£m£m
Year 0-80-180-50
Year 1328028
Year 2296025
Year 331510
Year 410705
Year 5358012

Key assumptions:

  • The residual value for each project at the end of its life has been added to the year 5 net cash flows.
  • Ignore taxes and inflation.
  • Use the WACC method to calculate the discount rate and assume a Debt/Equity financing ratio of 30/70, 3% cost of debt, 20% cost of equity.
  • The table shows the net cash inflow or net cash outflow (-) for each project.

Using the information provided, include the following in your report to the Investment Committee:

  1. an investment appraisal of each of the three ventures using the Payback, NPV, and IRR methods.
  • an analysis of the investment appraisal data to explain which one of the possible investment choices (Reading, or Bath, or York) you would recommend as being the most economically feasible investment choice.
  • an assessment of the risks of the project based upon this data by explaining the choice of the discount rate.

An executive summary will be required.

Reference list and bibliography

You should include a reference list with a minimum of five separate relevant and appropriate sources that you have written about and cited within your work.

A bibliography of uncited sources is not required.

Further information to support you with this assignment is available within the study materials for this module on the UCEM VLE. If you have any questions about this assignment, please contact your Module Team using the Assignment forum in the relevant Assessment preparation week on the VLE.

References

Redrow plc (2021) Redrow Annual Report 2021 [online], Flintshire: Redrow. Available at: https://financialreports.redrowplc.co.uk/annualreport2021/ [accessed 9 December 2021]. Redrow plc (2022) Redrow home page [online]. Available at: www.redrow.co.uk/ [accessed 24 January 2022].

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