Requirements:

Students must select any TWO of the three questions within the assessment. Each question attempted has a marking allocation of 50%.

The assignment has been designed to cover the following learning outcomes associated with successful completion of the module:

Knowledge K1. Critical understanding of the key strategic decisions that a business may have to make and appreciated how accounting and finance can assist in making and evaluating those decisions.

K2. Critical understanding of specific analytical skills in key decision areas within strategy and finance at local and international level.

K3. Critical understanding of the limitations of the current state of financial theoryin making strategic business decisions.

Skills

S1. Competence in applying the key valuation concepts and methodologies of financial decision making in order to contribute to the wider decision making of the organisation

The managing directors of Hazard PLC are considering what value to place on Bale PLC, a company they are planning to take over in the near future. Hazard PLC's share price is currently 3.68, and the company's earnings per share stand at 21p. Hazard's weighted average cost of capital is 8%.

The board estimates that annual after-tax synergy benefits resulting from the takeover will be 2m, that Bale's distributable earnings will grow at an annual rate of 3% and that duplication will allow the sale of 4.5m of assets, net of corporate tax (currently standing at 25%), in a year's time. Information relating to Bale PLC:

Financial Position Statement of Bale PLC.

m Non-Current Assets108 Current Assets4

112 Equity: Ordinary Shares (1)60 Reserves3

63 5% Bonds32 Current Liabilities17 Total Liabilities112

Statement of Profit or Loss Extracts

m Profit before interest and tax14.2 Interest payments2.2 Profit before tax12.0 Taxation3.0 Distributable Earnings9.0

Other Information:

Current ex-dividend share price1.94 Latest dividend payment21.3p Past four years' dividend payment19.2p, 19.9p, 20.2p, 20.8p Bale's Equity Beta1.46 Treasury bill yield2% Return of the market7%

Required:

(a) Given the information above, calculate the value of Bale PLC using the following valuation methods:

i. Price / Earnings Ratio. (using Hazard's P/E ratio)(5 marks) ii. Dividend valuation method.(5 marks) iii. Discounted cash flow method.(5 marks)

Required:

(b). Mergers and acquisitions are seen as playing a pivotal role within the field of strategic corporate finance as a mechanism of external growth, where internal growth opportunities may be restricted. An extensive and wide body of academic research is evident within this area although provides conflicting evidence as to whether mergers and acquisitions actually do indeed benefit the acquiring firm's shareholders. Critically evaluate whether mergers and acquisitions are aligned with the fundamental financial objective of shareholder wealth maximization, ensuring the response incorporates a range of relevant academic findings.(35 marks)

Within this section of the assessment students should demonstrate understanding, knowledge, and an ability to critically evaluate whether merger and acquisition activity is aligned with the fundamental corporate financial objective of shareholder wealth maximization. The evaluative element of the assessment should clearly demonstrate evidence of wider reading that is sensibly and logically integrated and in-text referenced within the work as per Harvard referencing requirements. Although the main focus of the response should address the impact of mergers and acquisitions upon the acquiring company's shareholders wealth, other concepts that can be considered include the motives for mergers, how mergers are financed, the merger process, and the key beneficiaries of mergers. The response could also incorporate practical, real-life business examples, addressing whether mergers have been successfully implemented, along with accessing empirical findings regarding who benefits from the merger process.