2020

Subject Outline – PART A

Subject Name Corporate Finance

Subject Code CO5109

Study Period SP81

Study Mode JCU ONLINE

Subject Coordinator David Robinson

Subject Lecturer David Robinson

We acknowledge the Traditional Owners of the lands and waters where our University is
located and actively seek to contribute and support the JCU Reconciliation Statement,
which exemplifies respect for Australian Aboriginal and Torres Strait cultures, heritage,
knowledge and the valuing of justice and equity for all Australians.

© Copyright 2019

This publication is copyright. Apart from any fair dealing for the purpose of private
study, research, criticism, or review as permitted under the Copyright Act, no part may
be reproduced by any process or placed in computer memory without written
permission.
Contents
1 Subject Staff Contact Details .............................................................................................................. 2
2 Subject calendar .................................................................................................................................... 3
2.1 Key dates ............................................................................................................................................ 7
3 Subject details ........................................................................................................................................ 8
3.1 Subject description .............................................................................................................................8
3.2 Subject learning outcomes .................................................................................................................. 8
3.3 Learning and teaching in this subject .................................................................................................. 8
3.4 Student participation requirements .................................................................................................... 9
3.5 Feedback on student learning ........................................................................................................... 10
3.6 Subject resources and special requirements ..................................................................................... 10
3.7 Student Support ............................................................................................................................... 10
4 Assessment details ............................................................................................................................. 11
4.1 Requirements for successful completion of subject........................................................................... 11
4.2 Assessment tasks .............................................................................................................................. 11
4.3 JCU assessment policy ...................................................................................................................... 15
4.4 JCU assessment support ................................................................................................................... 15
5 Rubrics ................................................................................................................................................... 16

1 Subject Staff Contact Details

Educational Consultation
Staff member Room Phone Email
Support team times*

Subject
David Robinson By appointment
Coordinator

Lecturer David Robinson By appointment

Tutor 1 Jason Eales [email protected] By appointment

Learning Advisors The Visit Learning

The Learning
Learning 07 4781 5500 Online contact form Advice desk –
Centre
Centre JCU Library

Mon-Thu
Student Success
Online Online 1300 535 423 [email protected] 0900-1730
Advisor
Fri 0900-1700

Business Online
[email protected]
Team

*Other consultation times by appointment only.

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2 Subject calendar
Please note, the sequence of some topics may change due to staff availability, resourcing, or due to unforeseen circumstances.

Week/Topic and date Relationship to

Workshop Topic(s) Student Activity Readings/Preparation
(Mondays) assessment

O week Complete the O-week student exercises

Read the LearnJCU materials (readings, text
and activities) set this week.

The activities in week 1 focus on

understanding the context and importance of
financial decision making and the
fundamental building blocks needed to Chapters 1 and 2 of Berk
address the investment, financing, and J., Demarzo P., Harford J.,
dividend decisions. Ford G. & Mollica V., 2017,
Fundamentals of Corporate
You will address the financial objective of the Finance (3rd edn), Pearson
firm which is to maximise the wealth of Australia, ISBN By the end of this
shareholders. This objective is the primary 9781488611001 topic you will
• Key financial decisions in business, criteria for financial decisions however, it Chapter 2 will not be have all the
needs to be reconciled with other objectives covered in this subject but information and
• The objectives of the firm,
a firm may pursue. This needs to be assessed there is basic accounting tools to complete
• The role of capital markets and within the context of good governance and language that may assist in Assessment 1. At
1
financial institutions, executive remuneration. your understanding. the end of Topic 4
there is a video
• Time value of money, and
The most fundamental valuation method is that gives an
• Interest rates and inflation presented to show the interaction between The material covered in example of how
value and cash flows and is followed up with week 1 is essential to be to complete part
a detailed analysis of the time value of able to understand the B of Assessment 1
money. materials in later weeks.
Topic 1 Chapter 1 Problems 1, 4, 5, 6,– Page While not all the material is
22 relevant to the first
Topic 3 Chapter 1 Problems 10, 13, 14, 15 – Assessment item, it is
Page 23 necessary for later weeks.

Topic 4 Chapter 3 Review questions 1, 4, 5, 7,

8 and 9

– page 85

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Week/Topic and date Relationship to
Workshop Topic(s) Student Activity Readings/Preparation
(Mondays) assessment

Read the LearnJCU materials (readings, text

• Identify cash flow patterns, including and activities) set this week.
single amounts (lump sum), varying A solid
cash flows per period ordinary The focus of the activities this week is to
understanding of
annuities, annuities due, and ensure that you are fluent in the fundamental
this content is
perpetuities present value and future value principles for
vital for you to be
individual cash flows and annuities.
• Apply discounted cash flow techniques able to complete
The application of these principles allows us
(DCF) to translate one cash flow your tasks in
to value of bond instruments and to the value
2 pattern to another Assessment 1 and
of shares. The facility with these calculations
Assessment 2 and
• Apply DCF techniques to value the allows the reverse engineering to calculate
for all
valuation of bonds and shares desired investment periods and rates of
applications of
returns
• Describe the investment decision- the investment
making process and the types of decisions made
Topic 1 Chapter 4 Problems 3, 4 and 5 – page
investment decisions – share and bond by a firm
117
valuation. Topic 3 Chapter 6 Review questions 1 to 5 -
pages 179 to 180
Read the LearnJCU materials (readings, text
• Describe the investment decision- and activities) set this week. Topic 3 is directly
making process for capital investment relevant to
decisions The activities this week cater for students to Assessment 2
competently apply and evaluate a range of though topics 1
• Apply DCF techniques to share
techniques used to evaluate the investment and 2 are the
valuation
opportunities available to modern necessary
• Explain, rank, apply, and evaluate corporations. building block for
3 capital budgeting techniques this equivalent-
The methods we will evaluate this week are: annual-cost
• Evaluate projects with differing lives
• the NPV rule application. A
• Identify and estimate the cash flows • the internal rate of return (IRR) rule structure of
of a capital budgeting proposal • the payback method Assessment 2 is
• the present value index (PI) also provided,

You are encouraged to complete and

understand the worked example of a pump

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Week/Topic and date Relationship to
Workshop Topic(s) Student Activity Readings/Preparation
(Mondays) assessment
replacement particulars applies to
Assessment 2.

Knowing what cash flows to include in any

investment project is covered in Topic 4 and
is an essential part of any capital-budgeting
process.

Topic 2 Chapter 8 Review Questions 1, 7, 10,

Problems 16, 20 and 22.
Topic 3 Chapter 8 Problems 26, 28, and 32
Topic 4 Chapter 9 Problems 24, 25, and 26
• Define the relations between risk and
return and measure investment risk Read the LearnJCU materials (readings, text
Students should
and return and activities) set this week.
be ready to
• Explain how portfolio diversification submit
Replicate cost of equity example problem
reduces risk Assessment 2.
Topic 1 Chapter 11 Review Questions 3, 4, 6,
• Explain the concepts of unsystematic 9, 11, and 13 – page 347 – 348, Problems 5, 7,
4 and systematic risk within the context and 18 – pages 348 - 350
This week’s
of the efficient market hypothesis Topic 2 Chapter 12 Review questions 1 and 2
activities will
Page 378, Problems 10, 11, and 12 Page 379
• Estimating Beta risk and the cost of assist you in
Topic 3 Chapter 12 Review questions 4, 5, and
equity - explain and apply the Capital building towards
6, Problems 21, 24 and 26.
Asset Pricing Model to determine the the skills required
cost of equity capital and Interpret, for Assessment 3.
evaluate and use beta

In Week 5, we develop the Weighted Average

Cost of Capital as the required rate of return for Read the LearnJCU materials (readings, text
all investment and project assessment. and activities) set this week.

Because a firm’s wealth is increased when Replicate WACC example problem.

5 investments and capital projects are chosen
with a positive Net Present Value (NPV), the Topic 2 Chapter 13 Review questions 1, 3 and
WACC is essential as the appropriate rate of 4 - page 407.
return to be used in NPV calculations. Problems 2, 3, 5, 8, 9, 13 and 14 - page 408.
In this week we will look at the impact of
leverage, the use of debt in a firms financing

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Week/Topic and date Relationship to
Workshop Topic(s) Student Activity Readings/Preparation
(Mondays) assessment
mix and examine theories that suggest the
financing mix has no impact on value. We will
looks at some counter arguments a to the value
irrelevance theory
The content this week will have you
• The Firm’s Capital Structure:
• Weighted Average Cost of Capital,
• Factors influencing capital
structure choice, and
On completion of this week, you will be able to
complete Assessment 2.

This is the final week of the subject. In weeks 6

you address the last of the three key financial
decisions facing the firm, the dividend decision.
In addition we will address a forth decision that
is growing in importance to the modern firm.
This is the risk management decision.
The topic addressed in this week are:
• Dividends, share buy-backs, bonus
issues and stock splits
Read the LearnJCU materials (readings, text
• Dividend irrelevance theory and activities) set this week.
6 • Risk management with options
and futures and Complete question on reducing the exchange
rate risk when purchasing a Tesla
• Risk management with insurance
and options and future.

The dividend decision is a controversial area

with the dominant academic theory arguing the
decision has no impact on value and a plethora
of research that suggests that shareholders
may value dividends. The pros and cons of
these points if view are discussed.

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Week/Topic and date Relationship to
Workshop Topic(s) Student Activity Readings/Preparation
(Mondays) assessment
This week also addresses the issues of risk
management. When projects are evaluated,
products sold, or expenses incurred, there are a
number of product and financial risks that can
impact these corporate actions. Modern firms
may use a range of derivative instruments such
as options, futures contracts, and interest rate
swaps to add more certainty to future
outcomes.
Results
publication

2.1 Key dates

Key dates Date

Census date See

Last date to withdraw without academic penalty See

Assessment task 1: Research report 20% Due: end of week 2 at 11.59pm

• Part A – Research Report – Firm Objectives 10%
• Part B – Presentation – Meaning of Present value –

Complete template and explain (400-500 words)

10%

Assessment task 2: Report - project evaluation 40% Due: end of week 5 at 11.59pm

Assessment task 3: Report – Weighted Average Cost of Due: Wednesday of Week 7 at 11.59pm
Capital 40%

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3 Subject details
3.1 Subject description
This subject provides learning opportunities that foster basic concepts of finance; establishes a "finance mind-set"
with value creation as a central concept for financial planning and decision-making in a complex world. Financial
markets are places where investors (suppliers of capital) and firms (consumers of capital) meet and trade. The
first part of this subject examines the theories and techniques that both investors and firms use to deal with cash
flows that occur at different points in time; we look at valuation problems across several types of capital markets.
The second part of this subject introduces the concept of uncertainty and theories of risk that are central to an
understanding of finance. It introduces a measure of risk and develops a model of how this risk measure
corresponds to a level of expected return on an asset or project. We integrate this model of risk and return with
the valuation of cash flows through time and consider the evidence on how prices in financial markets are related
to value. Finally, we introduce options, discuss how they are valued, and consider applications of option
valuation.

3.2 Subject learning outcomes

Students who successfully complete this subject will be able to:

• identify and differentiate the financial dimensions of business decision making;

• critically analyse and apply theoretical finance concepts to business;
• evaluate and apply finance concepts for value creation in corporate planning and decision making;

These outcomes will contribute to your overall achievement of course learning outcomes. Your course learning
outcomes can be located in the entry for your course in the electronic JCU Course and Subject Handbook 2019
(click on ‘Course Information’ bar/ select ‘Undergraduate Courses’ or ‘Postgraduate Courses’/ select relevant
course/ scroll down to ‘Academic Requirements for Course Completion’, ‘Course learning outcomes’).

3.3 Learning and teaching in this subject

This subject design has you as the student in mind, and with attention to the process of learning finance. Finance
is, at its core, a logical and structured body of knowledge about corporate decision making in capitalist
economies. Being oriented to efficient resource allocation and productive resource use, finance lends itself to
quantitative approaches.

The focus is on practical application of finance to corporate decision-making. There are two key knowledge areas
for this introductory postgraduate subject: capital project evaluation and capital structure. These two topics are
arguably not only necessary to maintaining solvent companies, but also the most important financial
management decisions to maximise firm value.

This subject will be delivered online using the LearnJCU online delivery platform. This subject uses a ‘blended
learning’ model, therefore there are a variety of technologies utilised to enhance your learning. Students are
required to have internet access to access the subject online learning community, complete learning tasks, submit
assessments and access online resources. There are a number of discussion activities that are designed to
broaden your perspective on financial decisions. Regularly read the text and attempt as much of the tutorial
material as possible. This will ensure your time in tutorial sessions is the most productive possible.

Key subject activities When Room/Location

Study period commences 06 January 2020 Online

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 Online via LearnJCU
Interactive meet and greet and Q&A Time
subject site

Online tutorial sessions – refer to Subject Outline Part

B page 5. Note you have to use the latest version of
Google Chrome or Mozilla Firefox web browsers and
have a reliable broadband internet connection (with a Online via LearnJCU
reasonable download speed). subject site

Please email [email protected] if you

require assistance

Other NIL NIL

Other mandatory attendance requirements:

This subject is activity based. Students are expected to actively and frequently participate in the LearnJCU discussion
boards and online learning activities for the entirety of the subject duration. The discussion boards give you a place to
interact with staff and other students about subject content and topics, and help students to clarify and extend their
understanding of key content. These are a forum for students to present their thoughts/ideas in an online version of an in-
person classroom discussion and therefore the same courtesy rules apply.
• While attendance in the Subject Room (Collaborate tutorial) sessions is not mandatory, it is highly recommended.
These sessions will provide you with the opportunity to have synchronous (at the same time) conversations with
your Subject Coordinator (or your tutor) and with your fellow students from across the subject, to have your
questions answered and to receive further clarification about any concerns or questions you may have.

Refer to Subject Outline Part B for links to Class Registration and Timetable information. Subject Outline Part B is
available on the subject site in the Subject Outline menu item.

3.4 Student participation requirements

The Carousel model delivery is an intensive mode of delivery. To be successful in this type of delivery you need to
ensure that you have allocated the required time for the subject allowing for the unexpected in terms of your
work/family/other commitments. It is recommended that you draft a calendar covering the size (6) weeks of the
subject and plan for contingencies before you commence the subject.

During the subject – each week you are expected to (1) complete all of the activities (2) contribute to the
discussion board (3) attend and participate in the tutorials (4) complete all of the assessment tasks. Working
problems is an integral part of understanding the material. By undertaking the different kinds of questions in the
study guide, and checking your answers against the solutions that are provided on LearnJCU, you will be given
immediate feedback on your understanding of the content of the course.

Upon completion of the subject – you are expected to reflect upon your learning and identify what is new and
what you can take with you to assist you in your MBA and post-graduation workplaces.

The JCU Learning, Teaching and Assessment Policy (4.3) indicates that, “a 3 credit point subject will require a 130
hour work load of study-related participation including class attendance over the duration of the study period,
irrespective of mode of delivery”. This work load comprises timetabled hours and other attendance
requirements, as well as personal study hours, including completion of online learning activities and assessment
requirements. Note that “attendance at specified classes will be a mandatory requirement for satisfactory
completion of some subjects” (Learning, Teaching and Assessment Policy, 5.10); and that additional hours may be
required per week for those students in need of English language, numeracy or other learning support.

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3.5 Feedback on student learning
You will have the chance to interact with other students and regularly share understandings and [mentally and
verbally/in print] to compare your own understandings and learning progress with others. Receiving peer
feedback on your learning is done via class discussions, structured discussion boards, small group work,
occassional quizzes – not weighted, recommended readings, sharing notes on the subject site.

3.6 Subject resources and special requirements

Prescribed text

Berk J., Demarzo P., Harford J., Ford G., Mollica V. (2018), Fundamentals of
Corporate Finance (3rd edition)ed). Pearsons, ISBN. 9781488611001

The textbook is available for purchase from The Co-op Bookshop for
approximately $130.00.

All subject readings and resources, including journal articles, book chapters, websites, videos, print and
eTextbooks, are available to view online from your Readings list via your LearnJCU subject site. Textbooks listed in
your Readings list include links to Co-op Bookshop purchasing details and library holdings. The JCU Library has
limited print copies of prescribed textbooks for two-day loans, and options for viewing available eTextbooks
online.

Additionally, you can find the most appropriate library subject resources, including a dedicated MBA Global
Libguide, relevant databases and access to library services and staff through the Your Library tool, in your
LearnJCU subject site.

3.7 Student Support

Business Online responds to requests for assistance with all learning technology and associated issues. Support is
provided for LearnJCU, Pebble Pad, Blackboard Collaborate, recording presentations, Respondus LockDown
Browser and Monitor, online exams, and other learning technologies. Help and Support is available 7 days a
week, 8.30am - 8.00pm weekdays and emails checked by 3.00pm weekends. Contact: [email protected]

For more student support services and related information look for Student Support Services in the Help and
Support menu item on all CBLG LearnJCU subject sites.

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4 Assessment details
4.1 Requirements for successful completion of subject
• Achieve an overall percentage of 50% or more;
• Submit a credible attempt at all assessment items within this subject. Students who have completed less
than 100% of the assessment will be subject to review by the College Assessment Committee which could
result in an ‘X’ grade (Fail (did not sit for exam/s or did not complete at least 80% of assessment
requirements or deferred exam not granted))
• Demonstrate regular attendance and engagement with the content of this subject in accordance with
student participation requirements as outlined above, including but not limited to any mandatory face to
face attendance or online session participatory attendance.

4.2 Assessment tasks

ASSESSMENT TASK 1: PORTFOLIO

• SLO1. Critically analyse and apply theoretical finance concepts to business.

Aligned subject learning
outcomes • SLO2. Evaluate and apply finance concepts for value creation in corporate planning
and decision making.

Group or individual Individual

Weighting 20% (Part A 10%, Part B 10%)

Due date End of week 2 at 11.59pm

ASSESSMENT TASK 1: DESCRIPTION

Overview

The goal of finance is to increase the shareholders' wealth. Your text and other readings present shareholders'
wealth maximisation as being the best way to increase the utility of individual shareholders. However, your
readings also suggest that firms have other objectives. The purpose of this task is for you to see the value-
maximisation objective within the context of other objectives a firm may pursue.

The objective of this assessment is to:

• identify and differentiate the financial dimensions of business decision making by the multiple goals
a firm may pursue including, the maximization of shareholder wealth and to critically evaluate the
goal of shareholder wealth maximization goal with what may appear to be, or in fact are, the non-
shareholder maximization goals with the
• apply the concepts of the present value and future value of future cash flows and convert a present
value to equivalent annual amounts (annuity) and
• explain what present value means in terms of its equivalence to a set of future cash flows.

This assessment has two parts.

1. Part A of this assessment task requires you to:

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 • Read through the marking rubric for this assessment.
• Complete a research report (approximately 2000 words, business format but double spaced)

PART A – Research report

1. Choose two companies from different industries that are listed on the Australian Stock Exchange (ASX).
2. Write a report on your analysis of the company objectives including wealth maximisation,
profit maximisation, environmental issues, ethical suppliers, employees, gender equality and social
responsibility.
3. Assess the relevance of shareholder wealth maximisation to these companies and reconcile the objectives
with shareholder wealth maximisation or state why the objective(s) cannot be reconciled.

In completing this task you will need to:

• Obtain the Company objectives annual reports from the company website using an internet search or
other relevant information sources.
a. This may require a careful examination of the company website. There is usually
an investor centre on most companies’ websites where you may find the information you
seek. On other websites this information is more difficult to find. For
example, Qantas’ ‘Principles, beliefs and values’ are found under ‘Our governance’ by clicking
on the 'Qantas Group Business Practices' document. To get to the governance portion of the
website, one first has to click on 'Qantas Group' located at the very bottom of the
Qantas home page.
• Determine whether shareholder wealth maximisation is an explicit objective of the company.
• Analyse the company objectives, contrast these with the objective of wealth maximisation and, if
possible, state how you believe these objectives are reconcilable with wealth maximisation.
a. For example, if a company states it has an objective of maintaining employee safety, this may
be reconciled with wealth maximisation through the reduction of working days lost and
reduced workers' compensation insurance premiums.

Part B of this assessment task requires you to:

1. Calculate the present value of the two cash flows for Investment A and Investment B presented in
the assignment template, Part B Assessment 1 Template.xlsx, downloadable from your LearnJCU
subject site under the assessment task 1 tab
2. Calculate the future value of each of the cash flow streams
3. Explain why the present value of the cash flows for 'Investment A' are greater than the cash flows for
'Investment B'
4. Convert the present value of the cash flows to an equivalent annual amount
5. Explain how the present value of the cash flows from 'Investment A' are equivalent to the annual cash
flows. Hint: Show how if you invested the present value of the cash flows in a bank account at 10 per
cent interest, that you could extract the same yearly cash flows as 'Investment A' and demonstrate
this quantitatively.
6. Explain the importance of the interest rate (required rate of return) in estimated present and future
values.

Submission

Upload the following completed documents for Part A and Part B to the Assessment Task 1 dropbox

• PART A – Research report

• PART B – Assessment task 1 spreadsheet

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ASSESSMENT TASK 1 RUBRIC: See Section 5 Rubrics

_____________________________________________________________________________________________

ASSESSMENT TASK 2: CRITICAL REVIEW

• SLO1.identify and differentiate the financial dimensions of business decision making

Aligned subject learning • SLO2. critically analyse and apply theoretical finance concepts to business
outcomes • SLO3. evaluate and apply finance concepts for value creation in corporate planning
and decision making

Group or individual Individual

Weighting 40%

Due date End of week 5 at 11.59pm

ASSESSMENT TASK 2: DESCRIPTION

Aim

The aim of this report is to apply appropriate valuation techniques for choosing between two investments based
on the relevant operating costs and capital costs. You should apply the present value analysis to value of future
cash outflows and convert a present value to equivalent annual amounts (annuity). The results of the analysis
should be communicated for review by the CHL Board. At the completion of this assessment students should
have demonstrated the ability to:

a. Identify relevant information required and the source of that information

b. Calculate present value
c. Calculate equivalent annual costs/benefits of a project
d. Interpret the analysis and recommend, in a report, the decision you believe is the value adding
course of action.

Instructions

1. Read through the marking rubric for this assessment.

2. Read the memo from I.M Boss, CFO CHL Health located in LearnJCU Assessment menu. His request is
for you to evaluate two possible options for executive motor vehicles, Tesla Model X 100D ($144, 300
optioned to approx. $160,000, 8 year 160,000km warranty) and a BMW 6 Series 640i x Drive ($159
000 equivalent cost).
o The specific vehicles optioned to no more than $160,000. It must be the current model and
please include a scanned brochure as an appendix to your report
o The full purchase cost (including details of any fees and charges)
o Maintenance costs each year over the life of the vehicle (this should be readily available from the
dealer)
o Other variable costs related to period of use that the company will incur (e.g. petrol/electricity,
insurance, security, cleaning and vehicle age related taxes if any)
o The return on trade-in/sale when we dispose of the vehicle – this is something you will have to
estimate using the trade-in guides provided by companies such as “Redbook” (a search of the

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 web will undoubtedly yield a site that details current car values. To estimate the future trade-in
value of your car, apply the rates of decline apparent for older models of the same car. For Tesla
you might use the decline rates for a Prius, remembering that Tesla is in the luxury car bracket so
you will lose the luxury tax that when the car goes out the door.)
o Assume your current vehicle if traded in is common to all alternatives and therefore can be
ignored for this exercise.

Given the information you collect in relation to the above items, and a discount rate (Weighted Average Cost
of Capital) prepare a spreadsheet (see suggested starting point over the page) that shows:

1. The optimal time to hold the vehicle for, before we replace it (assume replacement of an equivalent
vehicle will be made in the future; limit your analysis to no more than five years)
2. How sensitive your analysis is to any of your assumptions and/or the discount rate (you can assume
the vehicle will travel 20,000 kms per year, but a sensitivity analysis should be undertaken).
3. Prepare a short business report (2000 words) that details your recommendations and contains all
supporting input data and analysis. Email me your report, appendices and spreadsheet. You should
scan supporting third-party documents or extracts thereof and include these in your appendices. Be
sure to include all supporting materials (with appropriate references) so that I can fully evaluate your
analysis and proposal.

Submission

Upload your two (2) documents to the dropbox “Assessment task 2 – “CHLH Vehicle Project”:

ASSESSMENT TASK 2 RUBRIC: See Section 5 Rubrics

_____________________________________________________________________________________________

ASSESSMENT TASK 3 WEIGHTED AVERAGE COST OF CAPITAL (WACC) ESTIMATION

• SLO1. identify and differentiate the financial dimensions of business decision

making;
Aligned subject learning
• SLO2. critically analyse and apply theoretical finance concepts to business;
outcomes
• SLO3. evaluate and apply finance concepts for value creation in corporate planning
and decision making.

Group or individual Individual

Weighting 40%

Due date Wednesday of week 7 at 11.59pm

ASSESSMENT TASK 3: DESCRIPTION

Aim

The aim of this assessment task is to apply finance theory and concepts to the practical estimation of a firms cost
of capital and provide a report to management.

Instructions

1. Read through the marking rubric for the assessment.

2. Develop a business report that includes:

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 a. Choose data relevant to the evaluation for calculating a firms weighted average cost of capital. In
particular choose the most appropriate data from competing data sets.
b. Evaluate the appropriate costs that need to be calculated
c. Calculate the beta of a given company, the return on equity, the cost of debt before and after tax.
d. Apply the appropriate weighting to the sources of funds used by a company and calculate the
weighted average cost of capital
e. Communicate your findings to management clearly identifying when and where this cost of
capital has use.

Submission

1. Upload the spreadsheet and report to the dropbox “Assessment task 3 – “CHLH WACC”:

ASSESSMENT TASK 3 RUBRIC: See Section 5 Rubrics

____________________________________________________________________________________________

4.3 JCU assessment policy

Subject Outline Part B offers important information about Referencing and Plagiarism, Submission and Return of
Assessment. Please refer to Subject Outline Part B in the ‘Subject Outline’ menu item on your LearnJCU subject
site.

4.4 JCU assessment support

Please see the Current Students web page for links to all student resources and support services to optimise your
academic and personal success.

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5 Rubrics
Assessment Task 1: Objectives and Present Value (20%)

Criteria HD 100% D 80% C 70% P 55% N 40%

PART A Able to find multiple Student multiple Student gathered multiple Information gathered There is no evidence the
objectives for the objectives from a variety objectives from a limited lacked relevance to the student consulted either
Source information companies including those of sources, both print/PDF range of sources and topic: the web site or the
relevant to assessment that are legally prescribed, and electronic and student made little effort company Annual Report or
objectives / purpose e.g. QANTAS / Modern information is relevant to to evaluate the quality of Failed to investigate web paper may be plagiarized
Slavery Act 2015 Section the task the sources site thoroughly
10% of the total grade
54(1)
Failed to investigate other
sources included the
Annual Report

PART A Compares nature of Compares nature of Limited comparison of the Compares objectives with Makes a rudimentary
objectives between the objectives between the nature of objectives wealth maximization but comparison between
Critical analysis selected two companies selected two companies between the selected two makes no attempt to wealth maximization and
and reasons the relevance and reasons the relevance companies. Discusses the evaluate the relationship the objectives of the
30% of the total grade of those objectives. of those objectives. Some relevance of those between objectives and companies. Shows little
Critically evaluates and evaluation of the objectives. Little wealth maximization. insight into the interaction
explains their conformity
objectives. Draws some evaluation of the between objectives.
with or opposition to
conclusions without a full objectives. Draws limited
shareholder wealth
maximization. Draws critical analysis of the conclusions. No critical
conclusions about the appropriateness of the analysis of the
appropriateness of the wealth maximization appropriateness of the
wealth maximization objective wealth maximization
objective objective to the
companies

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 Writing Style and All key structural elements All key structural elements All key structural elements All key structural elements Key structural elements of
Conventions: of the report are present of the report are present, of the report are present of the report are present. the report are not present
and completed to a high completed to a high and flow logically. The The document is and/or presented with
Write a professional standard. Logical flow and standard and flow document is presented presented professionally errors evident. The
business report transition between logically. The document is professionally with some with some headings and document is not
sections. The document is presented professionally, headings and visuals. visuals. presented professionally,
presented professionally, using with limited use of
using informative informative headings and headings and visuals
Weight: 10% headings and visuals visuals where appropriate lacking appropriate style.
where appropriate in the in the correct style. APA referencing is used APA referencing is used Limited or no APA
correct style. Accurate with some errors. with some errors referencing with errors.
APA referencing used for Minor errors in APA
any external sources and referencing used for any
visuals. external sources and
visuals.

PART A Always uses appropriate Mostly uses appropriate Mostly uses appropriate Language used is Terminology used is not
terminology, correct terminology, correct terminology. Some occasionally not clear, but clear and/or does not
Control of Syntax and punctuation, punctuation, grammatical errors that do the meaning is still convey meaning to
Mechanics: grammatically correct and grammatically correct and not interfere with conveyed to the reader. readers. It contains
Sentence construction, good sentence structure good sentence structure meaning. Limited spelling Some grammatical errors grammatical errors that
grammar, punctuation & that conveys meaning to that conveys meaning to errors are present. that do not interfere with interfere with meaning.
spelling readers with clarity. No readers with clarity. Paragraphs are well meaning. Paragraphs Paragraphs seem
Weight: 10% spelling errors are present. Limited spelling errors are constructed and support support the overall disjointed, and/or follow
Paragraphs are well present. Paragraphs are the overall structure of the structure of the report and poor organisation.
constructed and flow well constructed and flow report. mostly discuss one main
logically. logically. idea.
10% of the total grade

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 Criteria HD 100% D 80% C 70% P 55% N 40%

PART B Application of the time Application of the time Application of the time Application of the time Application of the time
value of money: value of money: value of money: value of money: value of money:
Application of the time
value of money: Able to calculate the Able to calculate the Able to calculate the Able to calculate the Unable to calculate the
present value of future present value of future present value of future present value of future present value of future or
35% of the total grade cash flows and able to cash flows and able to cash flows and able to cash flows but unable to future value of set of cash
calculate the future value calculate the future value calculate the future value calculate the future value flows.
of set of cash flows of set of cash flows of set of cash flows. of set of cash flows.

Able to quantitatively Able to quantitatively Or

demonstrate the demonstrate the
Able to calculate the
equivalence of a present equivalence of a present
future value of future cash
value with a set of cash value with a set of cash flows but unable to
flows flows calculate the present value
of set of cash flows.
Able to quantitatively
demonstrate the
equivalence of a present
value with a set of cash
flows

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 PART B Always uses appropriate Mostly uses appropriate Mostly uses appropriate Language used is Terminology used is not
terminology, correct terminology, correct terminology. Some occasionally not clear, but clear and/or does not
Explanation and Control punctuation, punctuation, grammatical errors that do the meaning is still convey meaning to
of Syntax and Mechanics: grammatically correct and grammatically correct and not interfere with conveyed to the reader. readers. It contains
Sentence construction, good sentence structure good sentence structure meaning. Limited spelling Some grammatical errors grammatical errors that
grammar, punctuation & that conveys meaning to that conveys meaning to errors are present. that do not interfere with interfere with meaning.
spelling readers with clarity. No readers with clarity. Paragraphs are well meaning. Paragraphs Paragraphs seem
Weight: 10% spelling errors are present. Limited spelling errors are constructed and support support the overall disjointed, and/or follow
Paragraphs are well present. Paragraphs are the overall structure of the structure of the report and poor organisation.
constructed and flow well constructed and flow report. mostly discuss one main
logically. logically. idea.
15% of the total grade

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Assessment Task 2: Motor Vehicle Project (40%)

Criteria HD 100% D 80% C 70% P 55% N 40%

PART A Information on operating Able to find all operating Able to find most of the The student gather some The student is unable to
and capital cash flows and capital cost applicable operating and capital cost information on operating formulate the problem
Source information including the Trade-in to the investment applicable to the and capital cash-flows but and thus cannot find the
relevant to assessment estimate applicable to the problem, include this investment problem, is unable to justify the information on cash flows
objectives / purpose investment problem. information at the include this information at relevance of that needed for the analysis
Appropriate sources of appropriate place in the the appropriate place in information. Usually has
10% of the total grade used a guess for some
information are identified analysis and but does not the analysis and but does
information particularly
and acknowledged or justify all the major pieces not justify all the major
trade-in values
explained (if estimated). of data or support the pieces of data with some
relevance of all this minimal support the
The data chosen does not information relevance of all this
favour one investment information
over the other. Gives an estimate of the
trade in value but no Gives an estimate of the
quantitative support trade in value but no
quantitative support

PART A A comprehensive analysis A comprehensive analysis A solid analysis and Completes a mechanical Analysis is incomplete and
and synthesis is and synthesis is synthesis is undertaken. analysis of present values contains errors of
Critical analysis undertaken. Present undertaken. Present Present values and but makes errors in the calculation and of
values and equivalent values and equivalent equivalent annual costs of calculation of equivalent application of principles of
30% of the total grade annual costs are annual costs are the information collected annual cost. . investment analysis.
appropriately calculated appropriately calculated although not all relevant
for each of the three year for each of the three year data has been collected.
projects. projects and based on the Calculations for each of
data collected. Some the three year projects
errors in calculation occur and based on the data
but errors are applied collected have
inconsistent or consistent
errors in but these are not

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 consistently between catastrophic to the
investment options. analysis.

Draw judicious Not only developed a Having selected from Considers and rejects less Considers and rejects less The conclusion is not
conclusions, justify results, logical, consistent among alternatives, acceptable approaches to acceptable approaches to based on the analysis or is
and explain reasoning approach to solve develops a logical, solving problem. solving problem. based on the analysis that
problem, but recognizes consistent plan to solve Conclusion is logically tied Conclusion is logically tied has significant defects. No
consequences of solution the problem. Conclusion is to the analysis (because to the analysis. implications are
and can articulate reason logically tied to a range of information is chosen to Implications are not considered
for choosing the solution. information, including fit the desired conclusion); identified and other
Conclusions and related opposing viewpoints; some related outcomes considerations besides the
outcomes (consequences related outcomes (consequences and technical analysis are not
and implications) are (consequences and implications) are identified considered
logical and reflect implications) are identified clearly.
student’s informed clearly.
evaluation and ability to
place evidence and
perspectives discussed in
priority order.

Writing Style and All key structural elements All key structural elements All key structural elements All key structural elements Key structural elements of
Conventions: of the report are present of the report are present, of the report are present of the report are present. the report are not present
and completed to a high completed to a high and flow logically. The The document is and/or presented with
Write a professional standard. Logical flow and standard and flow document is presented presented professionally errors evident. The
business report transition between logically. The document is professionally with some with some headings and document is not
sections. The document is presented professionally, headings and visuals. visuals. presented professionally,
presented professionally, using with limited use of
using informative informative headings and headings and visuals
Weight: 10% headings and visuals visuals where appropriate lacking appropriate style.
where appropriate in the in the correct style. APA referencing is used APA referencing is used Limited or no APA
correct style. Accurate with some errors. with some errors referencing with errors.
APA referencing used for Minor errors in APA
any external sources and referencing used for any
visuals. external sources and
visuals.

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 Control of Syntax and
Mechanics: Always uses appropriate Mostly uses appropriate Mostly uses appropriate Language used is Terminology used is not
Sentence construction, terminology, correct terminology, correct terminology. Some occasionally not clear, but clear and/or does not
grammar, punctuation & punctuation, punctuation, grammatical errors that do the meaning is still convey meaning to
spelling grammatically correct and grammatically correct and not interfere with conveyed to the reader. readers. It contains
Weight: 10% good sentence structure good sentence structure meaning. Limited spelling Some grammatical errors grammatical errors that
that conveys meaning to that conveys meaning to errors are present. that do not interfere with interfere with meaning.
readers with clarity. No readers with clarity. Paragraphs are well meaning. Paragraphs Paragraphs seem
spelling errors are present. Limited spelling errors are constructed and support support the overall disjointed, and/or follow
10% of the total grade Paragraphs are well present. Paragraphs are the overall structure of the structure of the report and poor organisation.
constructed and flow well constructed and flow report. mostly discuss one main
logically. logically. idea.

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Assessment Task 3: Weighted Average Cost of Capital (40%)

Criteria HD 100% D 80% C 70% P 55% N 40%

PART A Information on operating Able to find all operating Able to find most of the The student gather some The student is unable to
and capital cash flows and capital cost applicable operating and capital cost information on share formulate the problem
Source information including the Trade-in to the investment applicable to the prices and an appropriate and thus cannot find the
relevant to assessment estimate applicable to the problem, include this investment problem, market index but does not suitable data of the share
objectives / purpose investment problem. information at the include this information at match the dates with price, market index, the
Appropriate sources of appropriate place in the the appropriate place in those of the market Index. cost of debt or the risk
25% of the total grade The student uses an
information are identified analysis and but does not the analysis and but does free rate.
estimate of the cost of
and acknowledged or justify all the major pieces not justify all the major
debt without justification.
explained (if estimated). of data or support the pieces of data with some Does not correctly
Student is able to find a
relevance of all this minimal support the risk free rate of guesses a calculate the returns
The data chosen does not information relevance of all this rate without justification.
favour one investment information
over the other. Gives an estimate of the
trade in value but no Gives an estimate of the
quantitative support trade in value but no
quantitative support

PART A A comprehensive analysis A comprehensive analysis A solid analysis and Completes a mechanical Analysis is incomplete and
and synthesis is and synthesis is synthesis is undertaken. analysis of present values contains errors of
Critical analysis undertaken. Present undertaken. Present Present values and but makes errors in the calculation and of
values and equivalent values and equivalent equivalent annual costs of calculation of equivalent application of principles of
35% of the total grade annual costs are annual costs are the information collected annual cost. . investment analysis.
appropriately calculated appropriately calculated although not all relevant
for each of the three year for each of the three year data has been collected.
projects. projects and based on the Calculations for each of
data collected. Some the three year projects
errors in calculation occur and based on the data
but errors are applied collected have
inconsistent or consistent
errors in but these are not

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 consistently between catastrophic to the
investment options. analysis.

Draw judicious Not only developed a Having selected from Considers and rejects less Considers and rejects less The conclusion is not
conclusions, justify results, logical, consistent among alternatives, acceptable approaches to acceptable approaches to based on the analysis or is
and explain reasoning approach to solve develops a logical, solving problem. solving problem. based on the analysis that
problem, but recognizes consistent plan to solve Conclusion is logically tied Conclusion is logically tied has significant defects. No
25% of total mark consequences of solution the problem. Conclusion is to the analysis (because to the analysis. implications are
and can articulate reason logically tied to a range of information is chosen to Implications are not considered
for choosing the solution. information, including fit the desired conclusion); identified and other
Conclusions and related opposing viewpoints; some related outcomes considerations besides the
outcomes (consequences related outcomes (consequences and technical analysis are not
and implications) are (consequences and implications) are identified considered
logical and reflect implications) are identified clearly.
student’s informed clearly.
evaluation and ability to
place evidence and
perspectives discussed in
priority order.

Writing Style and All key structural elements All key structural elements All key structural elements All key structural elements Key structural elements of
Conventions: of the report are present of the report are present, of the report are present of the report are present. the report are not present
and completed to a high completed to a high and flow logically. The The document is and/or presented with
Write a professional standard. Logical flow and standard and flow document is presented presented professionally errors evident. The
business report transition between logically. The document is professionally with some with some headings and document is not
sections. The document is presented professionally, headings and visuals. visuals. presented professionally,
presented professionally, using with limited use of
using informative informative headings and headings and visuals
Weight: 10% headings and visuals visuals where appropriate lacking appropriate style.
where appropriate in the in the correct style. APA referencing is used APA referencing is used Limited or no APA
correct style. Accurate with some errors. with some errors referencing with errors.
APA referencing used for Minor errors in APA
any external sources and referencing used for any
visuals. external sources and
visuals.

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 PART A 100% 80% 70% 55% 40%

Control of Syntax and Always uses appropriate Mostly uses appropriate Mostly uses appropriate Language used is Terminology used is not
Mechanics: terminology, correct terminology, correct terminology. Some occasionally not clear, but clear and/or does not
Sentence construction, punctuation, punctuation, grammatical errors that do the meaning is still convey meaning to
grammar, punctuation & grammatically correct and grammatically correct and not interfere with conveyed to the reader. readers. It contains
spelling good sentence structure good sentence structure meaning. Limited spelling Some grammatical errors grammatical errors that
Weight: 10% that conveys meaning to that conveys meaning to errors are present. that do not interfere with interfere with meaning.
readers with clarity. No readers with clarity. Paragraphs are well meaning. Paragraphs Paragraphs seem
spelling errors are present. Limited spelling errors are constructed and support support the overall disjointed, and/or follow
Paragraphs are well present. Paragraphs are the overall structure of the structure of the report and poor organisation.
5% of the total grade constructed and flow well constructed and flow report. mostly discuss one main
logically. logically. idea.

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Subject outline preparation
This subject outline has been prepared by Ray McNamara for the College of Business Law and Governance, Division of
TES James Cook University.

Q1. This subject is offered across more than one campus and/or mode Yes No
and/or teaching period within the one calendar year.

Subject outline reviewer

Name Colleen Hodgins

Position Subject Developer/CDPO

Date reviewed 23/4/2019

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