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First part of the assignment
Question 1
You are an Italian manufacturer of leather goods and have currently signed a contract with a UK retailer. The contract is in GBP for £500,000 payable in one months’ time. Whilst there is no credit risk arising from contracting with the UK retailer there is still the exchange rate risk and that is why you have decided to hedge against currency movements.
In one months’ time the Italian exporter must pay its suppliers and employees in Euros.
How would you protect your business against an adverse currency movement using forward exchange contract?
In your answer please:
1. Define a forward exchange contract (no more than 200 words, based on financial literature) – 5 marks
2.
2. Explain why would you like to use this protection (no more than 300 words) and
– 10 marks
3. Clearly show your calculations and flow of transaction – 15 marks
The exchange rates are given below:
€ to £ £ to €
Spot €/£ 1.2028 – 1.2022
One-month forward rate €/£ 1.2026 – 1.2014
Question 2
Your uncle, an experienced engineer, is considering starting a new venture manufacturing blades for fans produced by larger firms. Your uncle has a clear technological advantage over competitors as he came up with a revolutionary galvanizing process for blades which offers huge cost savings, although it is not patented yet. He has also an extensive managerial/operational experience. What he lacks is the necessary funding to finance the new venture – and he hopes that you, as a UWL accounting & finance student, will be able to help him in his venture.
For a start, he asked you to write him a memorandum about start-up financing – how a small company is usually financed. He is particularly interested whether he will be able to borrow money from the bank from the very day of establishing his company. He also wants to learn if there are any differences between accessibility of finance for start-ups and for small companies which already have some business history.
Please prepare a memorandum to answer your uncle’s questions. In particular, in very clearly separated sections, please:
1. Identify the sources of finance in different growth stages of the company,
2. Describe banks’ preferences while lending to companies in general,
3. Assess the role which venture capital might play in his venture and in what stage it might become a realistic financing option and
4. Advice your uncle on steps he should take to make his venture successful.
Your uncle requires a fully referenced paper (using Harvard Referencing) so that he can check the original ideas behind your views. He expects about 2,000 words (+/_10%) in this memorandum – footnotes and appendices are NOT included in the
Second Part of the assignment
Appendix 2: Assignment 2 & 3 (Case Study Analysis)
International Business Finance 2017-18
Case Study assignment: 60% of the module grade
Tad O’Malley Case
Please review the attached case study and the two Powerpoint presentations (please exclude YCB, as you have already analysed it in Martin Smith Case).
As you read over the materials, please consider how Tad should structure his presentation at the partners’ meeting. Among the issues you may wish to consider are:
• • Which company should he recommend? Or should he refrain from recommending?
• • Which uncertainties should he highlight?
• • Are there valuation issues that he should point out?
• • What organisational issues are likely to influence the partners’ decision?
TASK A – Presentation (20 marks)
Working in your group you will prepare a 15 minutes presentation selecting one deal which your group would recommend to take. Presentation will be assessed based on following criteria (equally weighted):
• • Clarity of verbal expression.
• • Demonstration of group cohesion and equal participation (both in class and based on group site inspection on blackboard).
• • Validity of reasoning used to support strategic decisions.
• • Quality and level of evidence presented to support your group’s view.
• • Group’s ability to defend their views / arguments
TASK B – Written Paper (80 marks)
Using data gathered during presentation preparation, please submit an individual report elaborating on your presentation (or presenting another deal if you did not agree with your group). Your report should include a detailed analysis of pros and cons of the proposed transaction, taking into account both individual transaction merits and EIG’s situation – analysing also risks and merits of the transaction for you, Tad. In your analysis you need to present what type of a PE deal “your” transaction is.
This report should also contain about 500 words (included in the total count of 2,000) describing your key learning points acquired while working on this assignment. These learning points may also apply to your experience in working as a group, but should not be limited to it. You should use online and library resources. If relevant, please support your argumentation with examples from real life. You should carefully document your use of sources of information, applying Harvard referencing system. Your report should not exceed 2,000 words (attachments and footnotes are not included)