FN380 – International Finance Assessment Brief

FN380 – International Finance Assessment Brief

Introduction:

This module is assessed by 100% coursework, which consists of three interlinked pieces of work.  The coursework is an applied project which should be worked on and researched individually. Overall, the intention is that you apply various aspects of the module to a proposed project, undertaken by a chosen MNE (Multi National Enterprise), in a country selected from the list on the following page.

Each student will therefore need to choose an MNE with its head office in any country, providing the financial statements can be accessed in English. You will then form a business idea (the project) that involves setting up a new enterprise in another country from the Country List below.

For example, Easyjet as the MNE with its head quarters in the UK, deciding to set up a cycle hire business in Latvia. Students are not allowed to have both the country and the MNE in common. You should therefore decide upon the MNE and country ASAP and inform Cath who will keep a record of the choices.

The assessment will include; evaluation of the motives of the MNE for engaging in the FDI greenfield idea when compared with theory; assessment of the political and country risk of the country chosen for investment; evaluation of sources of long and short term finance and of how finance will be structured; calculation of a discount rate and an explanation of the process; and a capital investment appraisal that will include international complexities, such as tax. More detail regarding assessment criteria and marking rubrics will be provided for each of the three parts.

Country List:

Argentina, Bahrain, Bulgaria, Chile, Columbia, Costa Rica, Croatia, Estonia, Haiti, Hungary, Indonesia, Kazakhstan, Latvia, Lithuania, Malaysia, Mexico, Morocco, Nigeria, Pakistan, Paraguay, Peru, Philippines, Qatar, Romania, Slovakia, South Africa, South Korea,  Sri Lanka, Taiwan, Tanzania, Thailand, Turkey, UAE,  Ukraine, Venezuela.

Other countries of a similar size and state of development will be allowed subject to clearance.

In order to make a sensible choice of country/project you will need to have thought about your MNE as well.  All MNE choices and country-investment choices should therefore be cleared with Cath before you start work.  You are encouraged to do this as soon as possible as countries and MNEs will be allocated on a first come – first served basis!

Learning outcomes being assessed:

• Recognise and analyse the benefits from imperfections in national markets for financial assets, factors of production and products

• Demonstrate understanding of the problems and issues of expansion for firms overseas via foreign direct investment, joint ventures or mergers and acquisitions

• Describe the global integration of money and capital markets and explain the potential benefits arising from the expanded opportunities for organisations that need to raise capital

• Critically analyse the global cost of capital for MNEs and foreign subsidiaries and evaluate capital structure theory in an international context

• Critically evaluate how investment appraisal is altered by the international environment and demonstrate understanding of how to incorporate the relevant international complexities within a net present value analysis

• Demonstrate the ability to locate, extract and analyse data from multiple sources, including the acknowledgement and referencing of sources

For the generic grading/marking criteria regarding classifications please refer to your Course Handbook

Assessment and Submission:

For each assessment, please follow the electronic submission procedures and requirements which are explained in your course handbooks and on studentcentral. You should ensure that you submit one copy electronically to studentcentral by each due date.

The deadline for submission is in line with the rest of the Business School which is 10am on the dates stipulated above. You are reminded that in accordance with University policy work submitted up to two weeks after the submission deadline may result in the mark awarded being capped. All marks and results are provisional and subject to confirmation by the relevant examination boards.

Please observe the word limit. The penalty for non compliance with the word limit is explained in your course handbook.

All work submitted should be presented in line with the guidelines provided in your course handbooks and referenced in accordance with the Brighton Business School Referencing Handbook, which is also available on studentcentral.

Assessment 1              Date due: Monday 11^th November 2019     30% of the overall mark

Part one of the assessment consists of the following components:

1a. Critically assess which theories of why companies invest in FDI are useful in explaining why your MNE is investing in your chosen country and project (1,250 words).

1b. Critically evaluate and summarise the political and country risks associated with your proposed project from the MNE’s perspective (1,250 words).

Total word limit = 2,500 words. You should write clearly separated answers to 1a and 1b but these should be submitted to studentcentral as one word document.

Assessment 2              Date due: Monday 3^rd February 2020          35% of the overall mark

Part two of the assessment consists of an evaluation of the financing requirements of setting up the project.

Specifically the following questions should be addressed within this part of the assessment:

• What proportion of the capital structure will come from debt or equity? Why?
• Will capital be raised locally or from head office? Why?

(1000 words for the two capital structure questions above)

• What are the working capital implications of the project? (500 words)
• What is an appropriate cost of capital for the project (this will provide your discount rate for part three of the assessment)?
• How was the cost of capital calculated? Explain your calculations. (500 words)

Part two of the assessment will therefore involve discussion and numerical analysis. You should decide upon the capital structure of your project in terms of proportions (%) and be able to evaluate and explain your decision. You should present clear calculations for your cost of capital along with an explanation and evaluation of your approach.

Total word limit = 2000 words.

Assessment 3              Date due: Monday 4^th May 2020                  35% of the overall mark

Part three of the assessment consists of producing a Net Present Value (NPV) investment appraisal of your project. You will need to establish estimate cash flows, estimate the outlay/investment required, and use your cost of capital calculated within part two of the assessment to discount the cash flows. You should ensure that your NPV fully reflects the international complexities associated with your proposed project, particularly any tax and transfer pricing implications, and that your evaluation explains clearly decisions regarding the exchange rates used.

Your submission for part three of the assessment should therefore include:

• A discounted NPV which clearly shows the cash flows estimated and how the international complexities have been incorporated
• An explanation of how the cash flows have been established and any assumptions made
• An evaluation of how the international complexities have been incorporated within the NPV

Total word limit (excluding calculations) = 1,500 words.

The module programme for FN380 provides details of all the taught sessions and of scheduled project supervision

You are reminded that I am available for consultation during the weeks where there is no taught element, and that I expect you to make full use of these sessions