CORPORATE FINANCE (BAFI 3184) ASSESSMENT TWO (40%) SEMESTER 1, 2024 I. General Guidelines You are required to complete this assignment on your own and it accounts for 40% of the course's final grade. All questions are compulsory. Please submit a soft copy of your work (with your student name and ID on the front page and word count) via Turnitin by 11.59pm Sunday, 28 April 2024 (Week 8). A penalty of 10% of the total possible mark (of the task) per day will apply to a late submission. It means that a penalty of 0.42% of the total possible mark (of the task) per hour will apply to a late submission. The unit for calculating late penalties is 'hour'. Any late submission received after the designated deadline, whether by 1 second or up to one hour, will be treated as a complete one- hour late submission, resulting in a penalty of 0.42% of the total possible mark. Weekend days (Saturday and Sunday) are considered when counting total late days for electronic submissions. You have only TWO attempts to submit your assignment. Check your documents carefully before submission. For every extra submission, your assignment will be deducted 30% of the marks awarded. The assignment should be typed. Any graphs should be drawn using MS Office tools. All calculations must be done using MS Excel. You are required to submit a report in a Word file. Please include Excel worksheets that show all of your calculations in your submission (use + Add another file function). The document should be formatted following the guidelines below and the RMIT presentation guidelines: Text: justified Character size: 12 point Font: Times New Roman Margin: 1 inch Maximum word count: 2500 words (excluding references, tables and figures), 10%. It is compulsory to specify the word count on the cover page. For every 100 words exceeded, your assignment will be deducted 5 points. Please note that using/attempting to use any tricks to reduce word count or gain academic advantages is considered academic misconduct II. Task Details In this assignment, you are required to apply your knowledge of capital investment evaluation techniques and provide your solutions to the given scenarios. FPT Digital Retail Joint Stock Company (FPT Retail - HOSE: FRT) is now an associate of FPT Corporation Viet Nam - one of leading multinational information technology companies of Vietnam. FPT Retail is established on March 8th 2012 and owns 2 retail chains: FPT Shop and F.Studio by FPT - The Apple Authorized Reseller in Viet Nam and a subsidiary named FPT Long Chau Pharmaceutical JSC. Now, FPT Retail's retail chains have stores in 63 provinces. The company is currently expanding to a country in the Southeast Asian region and considering two new product lines for its pharmaceutical retail business: (1) liquid multivitamins for infants; and (2) liquid multivitamins for young adults. The Board of Directors is deciding which product line they should invest in. As a specialist in the Department of Planning and Investment of FRT, you are required to provide a thorough report for both products in an assigned country (see the list of assigned countries in Section III). For your analysis, the Board of Directors provides the following information for the projects as below: 1. The projects are mutually exclusive. 2. The project start date is 1 June 2024. 3. Financial information is given in Exhibit 1. The company also considers how the prices and costs will change based on the inflation rate in the assigned country. 4. Also, in Exhibit 1, one unit refers to one 100ml bottle. 5. The company also expects to achieve growth in demand for the products in the assigned country. You need to research and propose an appropriate inflation rate and growth rate for the company that can be achieved in the assigned country during the period of the project. You should justify all your calculations and mention your assumptions. 6. All costs (fixed and variable) are paid in USD. 7. The corporate tax rate is 20%. Exhibit 1. Related Financial Data (currency: USD) Data Initial investment Initial working capital Expected unit to sell in year 1 Expected selling price per unit in year 1 Product (1) Product (2) Infants Liquid Multivitamins for Liquid Multivitamins for Young Adults $10,000,000 $12,000,000 $4,000,000 $5,000,000 200,000 150,000 10 15 RMIT Classification: Trusted Number of years for straight depreciation 15 16 Salvage value after the project ends $2,000,000 $1,500,000 Cost of goods sold per unit, excluding depreciation and delivery cost 3 Annual delivery cost 5.5 0.25% Gross Revenue Annual overhead cost % of Gross Revenue 5.5% 5.5% Annual advertisement cost % of Gross Revenue 5% 5% Project lifetime 15 years 16 years You need to conduct some research and determine the appropriate cost of capital (discount rate) for both projects and justify your assumptions. Requirements: a) Use relevant capital budgeting methods to evaluate both projects and select your preferred project based on each method. Explain your final decision based on these methods. (30 marks) b) Identify the business and financial risks associated with the selected project and propose solutions for the company to avoid these potential risks. The discussion must be supported by various academic and industry sources. (20 marks) c) Discuss qualitative factors such as environmental, social and governance factors that could potentially affect your selected project. Based on the discussion, provide strategic recommendations to the Board of Directors to help the company grow sustainably. Provide supporting data in the form of citations to academic research, graphs, and illustrations. (50 marks) III. List of assigned countries for investment decisions: For this assignment, students will be randomly assigned to the following countries in the SEA region: Philippines: Students with student IDs end with 1, 3, 5, 7, 9 Indonesia: Students with student IDs end with 0, 2, 4, 6, 8 GOOD LUCK! RMIT Classification: Trusted Assessment Two Grading Rubric Assessment Two Grading Rubric Criteria This criterion is linked to a Learning OutcomeAccuracy in application of technical knowledge to various valuation methods and calculate relevant capital budgeting methods. 30 to >23.99 pts HD Extensive evidence of ability to accurately and comprehensively apply appropriate technical knowledge leading to highly relevant insights. 23.99 to >20.99 pts DI Significant evidence of ability to accurately apply technical knowledge leading to relevant insights with some minor exceptions. Ratings 20.99 to >17.99 pts CR Clear evidence of ability to accurately apply a limited range of technical knowledge. 17.99 to >14.99 pts PA Some evidence of ability to accurately apply a limited range of technical knowledge. 14.99 to >0 pts NN Little or no evidence of ability to accurately apply technical knowledge. Pts 30 pts RMIT Classification: Trusted Criteria This criterion is linked to a Learning OutcomeDemonstrates an ability to effectively exchange information and ideas through the written word. Identify the business and financial risks associated with the selected project and propose solutions for the company to avoid these potential risks. 20 to >15.99 pts HD The supporting evidence is convincing and presented appropriately and accurately. Work is fully referenced according to accepted scholarly standards. Assessment Two Grading Rubric Ratings 13.99 to >11.99 pts 15.99 to >13.99 pts CR DI The supporting evidence is convincing and contains minor errors in referencing The supporting evidence is convincing but lacks proper structure and not fully referenced or contains errors in referencing. 11.99 to >9.99 pts PA The supporting evidence is not convincing and lacks proper structure. It is not fully referenced or contains some errors in referencing. 9.99 to >0 pts NN The supporting evidence is not convincing and lacks proper structure. It is not fully referenced or contains some errors in referencing. Pts 20 pts RMIT Classification: Trusted Criteria This criterion is linked to a Learning OutcomeEthical Global Citizens (#AoL1C Contribute to a more sustainable world through engagement with the sustainable development goals) Formulate and justify ethical practices in business decision- making (Aligned with SDG 16 - Peace, Justice and Strong Institutions). Depth of explanation of project selection and analysis of the qualitative factors affecting your selected project and explain to your Board of Directors how they will help the company grow sustainably 50 to >39.99 pts HD Demonstrates expertise in forging business decisions that are deeply ethical, sustainable, and promote ethical global partnerships. Assessment Two Grading Rubric Ratings 39.99 to >34.99 pts DI Routinely makes business decisions emphasising ethical partnerships and collaboration. 34.99 to >29.99 pts CR Considers ethics in networking, but may overlook the importance of transparent interactions. 29.99 to 24.99 pts PA Is developing an understanding of ethical practices in networking and the value of respectful engagements. 24.99 to >0 pts NN Neglects ethical considerations, often engaging inappropriately or insensitively. Pts 50 pts