Business Finance (L6) September 2021 Mid-Module Assignment
 Business Finance is

Business Finance (L6) September 2021
Mid-Module Assignment

Business Finance is often associated with the maximisation of shareholder wealth and consideration of other stakeholder perspectives. Investors are constantly concerned about the future returns available and investment appraisal techniques have evolved to try and determine future outcomes from potential investments to assist management in decision making.
• You are required to critically evaluate the different methods of investment appraisal and consider if these methods are suitable for an ever changing business environment and whether they meet the needs of both investors and the wider stakeholder community.
• You should use examples to illustrate your points and a wide range of support from academic literature is also expected.
• Your response should be in the form of a written report in 2,000 words.
This assignment covers the following module learning outcomes:
• Critically analyse the role of finance in modern business
• Understand the conceptual framework of finance
• Understand the range and application of techniques used for capital investment appraisal
Module Background
Unit 3: Investment Appraisal in Practice
This unit builds on the previous one to consider investment appraisal in the real world, where businesses face complications from external factors such as taxation and inflation, or a shortage of finance available for investment. The second part of the unit considers investment appraisal in the context of strategic planning, and the concept of value-based management.
In this unit we shall:
• Consider the impact of taxation, inflation and a shortage of available capital on the investment decision
• Discuss investment appraisal in the broader context of a firm’s overall business strategy
• Introduce and discuss the concept of value-based management and the roles of Shareholder Value Analysis (SVA) and Economic Value Added (EVA)
On completion of this unit you will be able to:
• Understand and discuss the impact of taxation, inflation and capital rationing in carrying out investment appraisal
• Evaluate the importance of a business’s longer-term business strategy in making investment decisions
• Appreciate the relevance of value-based management and explain the main features and merits of Shareholder Value Analysis and Economic Value Added
Unit 3: Reading
Required Reading
For this unit you should read the following from the core text:
McLaney, E. (2017) Business Finance: Theory and Practice (11th Ed). FT Prentice Hall.
• Chapter 5 – Practical Aspects of Investment Appraisal
Additional Reading
Arnold, G. C. And Hatzopoulos, P. D. (2000) ‘The Theory-Practice Gap in Capital Budgeting: Evidence from the United Kingdom’ in Journal of Business Finance and Accounting 27 (5/6): 603. 
Block, S. (2007) ‘Are “Real Options” Actually Used in the Real World?’ in Engineering Economist 52 (3): 255–267. 
Unit 3: Lecturecast

Unit 4: Managing Risk and Uncertainty
In Unit 4 we will look at ways of incorporating risk and uncertainty into investment appraisal. We will also look at what individual shareholders can do to minimise the risks they face from investing in shares.
In this unit we shall:
• Consider the options for dealing with risk and uncertainty in investment appraisal, in particular sensitivity analysis and expected values
• Introduce the concepts of risk aversion and diversification
• Introduce Portfolio Theory and the Capital Asset Pricing Model (CAPM)
• Consider the use of CAPM in practice
On completion of this unit you will be able to:
• Apply and evaluate the results of sensitivity analysis and expected values
• Appreciate the significance of attitudes to risk, for both companies and their investors
• Discuss the importance of diversification and the principles underlying Portfolio Theory
• Understand and evaluate the relevance of CAPM in theory and practice
Unit 4: Reading
Required Reading
For this unit you should read the following from the core text:
McLaney, E. (2017) Business Finance: Theory and Practice (11th Ed). FT Prentice Hall.
• Chapter 6 – Risk in Investment Appraisal
• Chapter 7 – Portfolio Theory and its Relevance to Real Investment Decisions
Additional Reading
Fama, E. F. And French, K. R. (2004). ‘The capital asset pricing model: theory and evidence’ in Journal of Economic Perspectives 18 (3): 25-46. 
Sangster, A. (1993), ‘Capital Investment Appraisal Techniques: A Survey of Current Usage’ in Journal of Business Finance & Accounting 20(3): 307–332.
Writing Output
Writing should be in the form of a Written Report in 2,000 words in Harvard Referencing with Charts/Figures & Appendices.
Report format:
• Executive Summary
• Contents Page
• Introduction

• References
• Appendices
2,000 words (Word counts starts at Introduction and stops at References)
• You are required to critically evaluate the different methods of investment appraisal and consider if these methods are suitable for an ever changing business environment and whether they meet the needs of both investors and the wider stakeholder community.
• You should use examples to illustrate your points and a wide range of support from academic literature is also expected.
• Your response should be in the form of a written report in 2,000 words.
REMARKS:
Watch a short lecturecast designed to help you write the assignme