Assignment on Fundamentals of Asset Valuation

Fundamentals of Asset Valuation
(FIN202)
Assignment
Total marks: 100
Student No: 10683346
I have read the Assignment Guide in the ‘General assessment information’ and have
applied the word count principles to my work.
My word count for this
assignment is:
[Enter your word count]
words
Your assignment should be loaded into KapLearn by 11.30 pm on the due
date.
All times are based on AEDT/AEST time zones.
Refer to ‘Time remaining’ on the ‘Assignment’ page in KapLearn to ensure
you submit your assignment by the specified due date and time.
Checklist
 I have completed my assignment using Word and Excel.
 I have completed my assignment using Calibri, Arial, Times New Roman or
Verdana fonts.
 I have added my Student No. on this page.
 I have added my word count on this page.
 I have added my Student No. in front of the filename in the footer on the second
page.
 I have saved the file to be uploaded as StudentNo_FIN202_AS_v10A3.
 Each question of my assignment is within the word limit guidelines for that
question as per the ‘General assessment information’ (Assessment  Assignment
 General assessment information).
 My assignment file size is no larger than 2 MB.
 If tables were required, they are visible as text, not as links or images.

 I have not removed the marking grid from the footer.
 I have submitted my assignment as per the instructions in KapLearn.
For office use only
Section A 1a 1b 2a 2b 3a 3b 4a 4b 5a 5b 5c 5d 5e
Max 5 5 3 3 2 4 6 6 3 4 2 3 4
Awarded
Section B 1a 1b 1c(i) 1c(ii) 1c(iii) 2a 2b 2c 2d
Max 2 3 2 1 2 3 1 2 4
Awarded
Section C 1a 1b 2a 2b 3a 3b 3c 4a 4b TOTAL
Max 2 3 3 3 6 1 3 4 5 ** Expression is faulty **
Awarded ** Expression is faulty **
StudentNo_FIN202_AS_v10A3 2 © Kaplan Higher Education

Marker feedback
Comment on overall performance:
For marker use only.
For office use only
Section A 1a 1b 2a 2b 3a 3b 4a 4b 5a 5b 5c 5d 5e
Max 5 5 3 3 2 4 6 6 3 4 2 3 4
Awarded
Section B 1a 1b 1c(i) 1c(ii) 1c(iii) 2a 2b 2c 2d
Max 2 3 2 1 2 3 1 2 4
Awarded
Section C 1a 1b 2a 2b 3a 3b 3c 4a 4b TOTAL
Max 2 3 3 3 6 1 3 4 5 ** Expression is faulty **
Awarded ** Expression is faulty **
StudentNo_FIN202_AS_v10A3 3 © Kaplan Higher Education

Instructions to students
• This assignment covers Topics 1 to 6 and accounts for 40% of your final grade.
• There are three (3) sections in this assignment:
– Section A comprises five (5) questions worth a total of 50 marks.
– Section B comprises two (2) questions worth a total of 20 marks.
– Section C comprises four (4) questions worth a total of 30 marks.
You should answer
all questions.
• All numbers should flow through your model, but for the purposes of the
assignment:
– show
all percentages to one (1) decimal place
– show your forecasts to the nearest $.
• This assignment is designed to test your ability to interpret information and apply
your knowledge of the issues involved in asset valuation. The data you have been
provided with is intended to allow you to build a simplified but realistic model.
• For Section A, you have been provided with an Excel answer template. Use this
template to answer the relevant questions.
Note: Some questions also require a
written response in the Word document. Do
not copy your spreadsheet answers
into your Word document.
• The overall word limit for the assignment is 3,000 words. Marks will only be
awarded for answers up to the word limit (plus 10%) for each question.
Any material written after this will not be counted towards your mark for that
question. Headings, quotes and references within the body of the answer are
included in the word count. Numerical tables, calculations, and reference lists are
not included. For more information on word counts and their rationale, go to
Assessment  Assignment  General assessment information.
• Refer to the Criteria-based Marking Guide for guidelines on what is expected for
each question.
• The ‘General assessment information’ section in KapLearn contains information
about format and presentation, word limits, citations and referencing, collusion,
plagiarism and other policies, useful resources, submitting your assignment and
accessing your results.
• Full workings must be shown for all calculations. Show
all calculations in the text of
your assignment and NOT attached as an appendix. Appendices to assignments will
not be read.
• Answers are to be in your own words. Reference and cite all your sources (within
the text of your answer) when quoting or using material from external sources.
Include a reference list at the end of your assignment. Refer to the ‘Referencing and
For office use only
Section A 1a 1b 2a 2b 3a 3b 4a 4b 5a 5b 5c 5d 5e
Max 5 5 3 3 2 4 6 6 3 4 2 3 4
Awarded
Section B 1a 1b 1c(i) 1c(ii) 1c(iii) 2a 2b 2c 2d
Max 2 3 2 1 2 3 1 2 4
Awarded
Section C 1a 1b 2a 2b 3a 3b 3c 4a 4b TOTAL
Max 2 3 3 3 6 1 3 4 5 ** Expression is faulty **
Awarded ** Expression is faulty **
StudentNo_FIN202_AS_v10A3 4 © Kaplan Higher Education

Citations Guide’ available from the ‘Library Learning Hub’ in KapLearn for further
information on referencing.
• Indicative weightings are noted beside each question. Use these weightings to
assist you with your allocation of time and resources. The weightings indicate the
relative importance of each question.
• State
all assumptions used in providing your answer.
• Requests for special consideration or information pertaining to special consideration
written in the body of the assignment will not be considered by the marker. Refer to
the ‘special consideration’ section of the Assessment Policy on Kaplan’s website for
more information.
•
Please note: As with most post-graduate, take-home assessments, this
assignment will require students to carry out a reasonable level of independent
research and enquiry. The majority of concepts covered in the assignment will be
found within the subject’s topic notes and required readings, however, there will
likely be a need to look beyond these resources in order to achieve an exceptional
overall result.
Learning outcomes (LO) mapping Marks
1. Explain the concept of valuation and the purpose of valuing assets. 30
2. Construct a valuation based on the discounted cash flow valuation
technique. 25
3. Explain capital market theory and other pricing theories. 15
4. Analyse the determinants of the pricing of debt securities. 21
5. Analyse how hybrids provide flexibility for management. 9
6. Explain the basic principles in pricing futures and options. 0
7. Evaluate valuation techniques for real estate assets 0
Total marks 0
For office use only
Section A 1a 1b 2a 2b 3a 3b 4a 4b 5a 5b 5c 5d 5e
Max 5 5 3 3 2 4 6 6 3 4 2 3 4
Awarded
Section B 1a 1b 1c(i) 1c(ii) 1c(iii) 2a 2b 2c 2d
Max 2 3 2 1 2 3 1 2 4
Awarded
Section C 1a 1b 2a 2b 3a 3b 3c 4a 4b TOTAL
Max 2 3 3 3 6 1 3 4 5 ** Expression is faulty **
Awarded ** Expression is faulty **
StudentNo_FIN202_AS_v10A3 5 © Kaplan Higher Education

Criteria-based Marking Guide
The Criteria-based Marking Guide provided at the end of each question is designed to
assist students to understand what is expected of them in each question and to let
them know how their performance will be judged. It provides advice about the criteria
used in the marking of the question and what discriminates between an excellent,
satisfactory and unsatisfactory answer.
For office use only
Section A 1a 1b 2a 2b 3a 3b 4a 4b 5a 5b 5c 5d 5e
Max 5 5 3 3 2 4 6 6 3 4 2 3 4
Awarded
Section B 1a 1b 1c(i) 1c(ii) 1c(iii) 2a 2b 2c 2d
Max 2 3 2 1 2 3 1 2 4
Awarded
Section C 1a 1b 2a 2b 3a 3b 3c 4a 4b TOTAL
Max 2 3 3 3 6 1 3 4 5 ** Expression is faulty **
Awarded ** Expression is faulty **
StudentNo_FIN202_AS_v10A3 6 © Kaplan Higher Education

Section A — Undertake a net present value
analysis (50 marks)
Instructions to students
There are five (5) questions in this section. Answer
all questions.
You are required to build a DCF model from a template of Excel worksheets provided
in KapLearn under ‘Assignment’.
DO NOT change the layout of the financial model in any way. Do not create new rows
or columns.
Formulas must be used in your Excel spreadsheet to create the model. Hard
entered or typed numbers will be penalised.
Within Excel, ensure you install the ‘Analysis ToolPak’ and ‘Analysis ToolPak — VBA’
under ’Tools — Add-Ins’.
Submit the Excel answer template via KapLearn along with your Word answer
template.
The suggested methodology for building the model is as follows:
• in the ‘Assumptions’ worksheet, enter all the relevant financial information and
discount rate assumptions in the blue shaded cells, and base calculations in the
grey shaded cells
• the remaining worksheets contain yellow and grey shaded cells
• the yellow cells should be linked to other cells in the workbook
• the grey cells require a formula to be entered based on the other cells in the
workbook.
For office use only
Section A 1a 1b 2a 2b 3a 3b 4a 4b 5a 5b 5c 5d 5e
Max 5 5 3 3 2 4 6 6 3 4 2 3 4
Awarded
Section B 1a 1b 1c(i) 1c(ii) 1c(iii) 2a 2b 2c 2d
Max 2 3 2 1 2 3 1 2 4
Awarded
Section C 1a 1b 2a 2b 3a 3b 3c 4a 4b TOTAL
Max 2 3 3 3 6 1 3 4 5 ** Expression is faulty **
Awarded ** Expression is faulty **
StudentNo_FIN202_AS_v10A3 7 © Kaplan Higher Education

Introduction
Section A of the assignment requires you to undertake a Net Present Value analysis of
a project.
Case study: Saratoga Lake Taxis
Saratoga Lake Taxis (SLT) is a water ferry service provider for transport on rivers,
lakes and other small bodies of water. They have over 400 ferries and water taxis in
operation in several major cities and key tourist locations. You currently work as the
company’s finance manager and are interested in replacing some older boats with
new, autonomous water vehicles (AWVs). The solar-powered AWVs are able to
decrease trip times by 20% and also reduce labour costs.
SLT is currently a profitable business with positive cash flow. Furthermore:
• the business is projected to turnover $42 million for the forthcoming financial year,
representing approximately 10 million fares.
• revenues, which is a function of passenger numbers and ticket prices, have grown
at the inflation rate of 3.0% p.a.
• the gross profit margin is typically 40%.
The details of the proposed upgrade are as follows:
• the purchase of six (6) new AWVs at a cost of $1,150,000 each, to be paid at the
start of the project
• the new AWVs will service the 6 top routes, with existing ferries to be used to open
up three (3) new minor routes.
• the expected economic life of the AWVs is 10 years, which is also the life for
taxation purposes. At such time the vehicles will be retired to a minor route or sold.
The expected salvage value for the vehicles is $150,000 each, and depreciation on
the AWVs will be calculated under the straight-line methodology
• the AWVs are expected to affect earnings as follows:
– reduce ferry operator wages by $130,000 per year (increasing with inflation)
– new AWV service costs of $70,000 per year per AWV plus $60,000 per year for
upgrade to systems for the six AWVs
– reduce fuel costs by $90,000 per year
– increase annual passenger trip numbers on the new minor routes from 0 to
60,000 at an average fare price of $3.25 trip
– increase annual passenger trip numbers on the major routes from 2,900,000
(expected) to 3,000,000. The price of these trips will also increase from an
expected level of $5.20 per trip to $5.40
For office use only
Section A 1a 1b 2a 2b 3a 3b 4a 4b 5a 5b 5c 5d 5e
Max 5 5 3 3 2 4 6 6 3 4 2 3 4
Awarded
Section B 1a 1b 1c(i) 1c(ii) 1c(iii) 2a 2b 2c 2d
Max 2 3 2 1 2 3 1 2 4
Awarded
Section C 1a 1b 2a 2b 3a 3b 3c 4a 4b TOTAL
Max 2 3 3 3 6 1 3 4 5 ** Expression is faulty **
Awarded ** Expression is faulty **
StudentNo_FIN202_AS_v10A3 8 © Kaplan Higher Education