Corporate Financial Decision-making

Corporate Financial Decision-makingSummative Assignment1000 wordsBriefing:The CEO of Next plc, a UK retail company is considering investing in a UK company in order to diversify Next investments. The options he has askedyou to investigate are buying shares in J D Wehttherspoon, listed under the General Retailers section on the London Stock Exchange, or in Scottish &Southern Electricity plc and energy company. In your role as the Financial Director, he has asked for your help in critically evaluating which orthese options would be a good investment for Next plc.Part B)You should attempt to evaluate whether or not the current share price of both options represents a ?fair? value. (1,000 words)Calculation of share value.Market value of shares ? under/over valued? Methods of share valuation?Helpful Hints:Whilst students are encouraged to be inquisitive and innovative in their approach as to what should be included in this report the following may beof some use in providing guidance as to what could possibly be included, although this is in no way meant to be prescriptive.The aim of the assignment is to help you understand how key areas of finance theory are demonstrated in practice by a quoted company. This mightinclude investigating topics from throughout the course; agency theory, market efficiency, investment appraisal, sources of finance, capitalstructure, dividend policy, risk, and so on. It is likely that different students will concentrate on different aspects of the course as they preparethe report.You may have to spend a significant amount of time on the initial analysis of the information available to you e.g. Financial Statements. A review ofthe Financial Statements of Wetherspoons/SSE plc over the last five years should help you to identify key areas that should be explored in greaterdeal e.g. capital structure, dividend policy and so on. This will then allow you to gather information to build a theoretical framework which canthen be applied to the company.With 4,000 words split over two sections you do not have a lot of room for long introductions to the companies and so on. Consequently you can assumeyou are writing to a sophisticated audience who has a good knowledge of accounting practices, finance theory and the operation of the stock market.Whilst the skills you should have previously learned such as analysing financial statements will be of use, this piece of work should NOT have suchanalysis as the main thrust of the work, but should only be used (if at all) to provide evidence to support your findings from your other analysis ofyour chosen company. Finally I would encourage you to make good use of graphs and tables to present key information and don?t forget to referenceeverything!Students who reproduce lots of financial information verbatim, or who include calculations in the body of the report will not score highly. Studentswho produce descriptive analysis rather than insightful and critical analysis will not score highly. An example of this that we often come across isstudents who have included a table or graph in the body of their work and then go on to describe the table or graph in words. E.g ?it goes up in thefirst two years, before going down in the third year, and then goes back up after that. It would be far more important (and hopefully interesting) toask the question WHY did it go down in the third year? You may not be able to come to a definitive answer, but asking the question is a good firststep.You will find lots of helpful information readily available to you on the internet at sites such as:http://www.londonstockexchange.comhttp://uk.finance.yahoo.com/http://www.jdwetherspoon.co.ukhttp://www.sse.co.ukhttp://www.Next.co.uk1. Evaluate the various sources of finance available to companies and select between them2. Investigate International financial markets3. Critically evaluate the methods used by financial managers in achieving the strategic goals of the organisation4. Assess the impact on management structures following takeovers, mergers and/or acquisitions

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