Company chosen: Barratt Developments plc (LSE:BDEV)

Company chosen: Barratt Developments plc (LSE:BDEV)

This is an individual assignment and carries 15% of the module mark. There are going to be 4 portfolio tasks that will be set throughout the semesters.

Deadline: There is no individual deadline for each portfolio task. Only one deadline for your final submission of all four tasks, which is 04th May 2021 by 11.55 pm (23:55).

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Submission Date: 04th May 2021 by 11.55pm (23:55)

Note:

Following the IT issues at the University the submission deadline for the Financial Management Module portfolio task has been extended to Tuesday 18 May 2021 at 23:55 hours UK time.

Submission Hand in Arrangements: Students are required to submit their coursework via Turnitin on the module Moodle site.

Your portfolio should:

• Be written in a plain style, using subheadings and lists where appropriate.

• Be properly referenced acknowledging all the sources you have used, and only the sources you have used, in the body of the text and at the end in a section headed ‘References’.

• The filename submitted should be of the following format: Student_Number

Example: 789101

•The work should be word-processed 1 ½ line spaced with (approx.) 4 cm margins all around. Your student number and Module name only on the cover sheet.  There are no extra marks for excessive presentation; for example elaborate graphics on the cover sheet.

There are mark penalties for late hand in –  (Corruption of computer files is not an adequate excuse for late hand in, as work should be adequately backed up.)

PLEASE NOTE that the deadline for submission is 11.55pm on the submission date – this means that your assessment must be fully uploaded by 11.55pm.  Assessments uploaded after 11.55pm or later will be marked as late.  Students should submit in advance of the final deadline wherever possible.  Computer uploading delays and other IT difficulties are not accepted as extenuating circumstances.

If there is a problem with Moodle at the time of submission students should email their coursework to submissions@port.ac.uk with the following details:

Student Number

Module Name / Module number

Course name that you are studying

Screenshot of the error

Plagiarism: Students must avoid plagiarism in all assessments.  The University Regulations describe plagiarism as:

the incorporation by a student in work for assessment of material which is not their own, in the sense that all or a substantial part of the work has been copied without any adequate attempt at attribution, or has been incorporated as if it were the student’s own when in fact it is wholly or substantially the work of another person or persons.

Any student suspected of plagiarising will be referred to the BaL Student Assessment and Assessment Regulations Lead and an Academic Misconduct Hearing will be arranged. 

Referencing requirements: Students must reference all sources using the APA 7th  Edition. Guidance on this method of referencing can be found at

https://library.port.ac.uk/referencing. Reference should be made to the primary source, except when the primary source can no longer be obtained.  Poor citation of sources will result in a loss of marks.

Referencing is required to give intellectual credit to your source, help your reader recover your source easily and to avoid being accused of plagiarism.

Students are reminded that the University will not tolerate academic dishonesty in any form. This is cheating.

Feedback: Marking will be done in accordance with the guidance set out below and the University of Portsmouth grading criteria for UG level 5. Marks for the portfolio assessment are due for release within 20 working days after the submission deadline date. If there is any delay in the processing of marks, the module coordinator will communicate this to you.

Link to Grade Criteria (Levels 4–8) – General criteria applicable to essays, reports and aspects of projects and dissertations

Useful guidance

  • Portfolio task 2:
  • The calculation is not required for exercise 1
  • Normal return:
  • The normal rate of return can be an expected return based on the model. For example, the CAPM model


We can rewrite the above equation:

Abnormal return:

Abnormal rate of return is the return generated by a given stock (company) or portfolio over a period of time which is higher than the return generated by its benchmark or the expected rate of return using a model i.e the CAPM model.

Portfolio task 1

Portfolio Task #1 – Financial Management function and environment

Individual Task

Instructions

1. Choose a company from the list on Moodle.  https://moodle.port.ac.uk/mod/groupselect/view.php?id=1491918

2. Identify a maximum of five potential stakeholders and briefly discuss their interest in the selected business.

3. List a maximum of three objectives that have been identified by you.

4. Identify & critically evaluate 3 KPI (Key Performance Indicators) for the selected company uses to help meet their objectives

Useful tips

Tip 1: Search your selected company on Capital IQ

Tip 2: Use the most recently available information, for example, the most recent annual report.

Tip 3: As an example of a company objective, please read case study 1.1 on Experian by clicking this Perlego link.

Please note the following

1. A maximum of 10 (ten) students may choose the same company.

2. Use the Moodle link to reflect your company choice.

Available marks

·   5 marks for correctly identifying company objectives

·  10 marks for correctly identifying and critically evaluate KPI uses to meet objectives.

·   10 marks for correctly identifying company potential stakeholders and a brief discussion

Word limit: 250 words

Portfolio task 2

Portfolio Task 2: Capital asset pricing model (CAPM)

Individual Task

‘The Capital Asset Pricing Model (CAPM)’ has dominated academic literature and greatly influenced the practical world of finance and business for almost half a century; as a way to measure systematic risk. Researchers in the 1980s and 1990s have questioned the relationship between systematic risk, measure beta, and returns on securities. Despite heavy criticism of the model from the academic community, CAPM has reached new heights of popularity in the outside world (Arnold pp 269). Hundreds of thousands have studied the CAPM in universities and now hold key positions ready to make decisions based on the model.

Excercise1: CAPM model:

The following equation is derived from the CAPM model:

Using the equation:  identify and briefly define the following (Calculation is not required for exercise 1):

a.    The stock’s risk premium

b.   The excess return of the stock

c.   Abnormal return (also known as risk-adjusted return)

·  1 mark for correctly identifying risk premium

·  1 mark for correctly identifying excess return

·  1 mark for correctly identifying abnormal return

·  2 marks for briefly define

Exercise 2: Using Capital IQ, find and disclose the beta (1 year) for companies operating in your selected company’s industry/sector. Find the simple average beta of the companies, compare with your selected company beta, and briefly comments on the results.

·  2 mark for correctly identifying companies beta

·  2 mark for correctly calculating average beta

·  3 marks for comparing beta and brief comments on the results

Exercise 3: Use the appropriate beta for your selected company (beta you have used in exercise 2) and calculate the company’s expected return on the assumption that the CAPM holds.

Tip 1: use S&P Global 1200 (^SPG1200) as the benchmark/proxy for market return. Use the index value from 02/01/2020 to 31/12/2020 to calculate the expected market return.

Tip 2: use UK government Treasury bill rate as a risk-free rate

·  1 mark for correctly identifying company beta

·  3 mark for market return proxy and justify the proxy

·  2 mark for correctly identifying risk-free rate proxy and justify the proxy

· 2 marks for correct calculation of company expected return

Total 20 marks

Word limit: 200 words


Portfolio task 3

Portfolio task 3:  Capital structure

Part 1:

For this portfolio task, you are going to consider the gearing ratio (capital gearing) using data from Capital IQ. There are alternative measures of calculating capital gearing. Choose one measure and be consistent when you compare it with the gearing ratio of competitors. Choose 5 competitor company gearing ratios including your target company (the company you selected for the first task) and disclose the results.  Briefly comment on the results by comparing your selected company’s gearing ratio to the competitor company’s gearing ratio.

Part 2:

We cannot scientifically establish the best debt to equity ratio. Many complicating factors determine the actual gearing levels adopted by the firm. Some firms are under the influence of particular factors to a greater extent than other firms. Some firms may have very low borrowing capacity while others may have management keen on signalling confidence in the future. List the dominant factors for your selected company (a maximum of five) and briefly explain each factor’s influence on determining the gearing levels. Discussions should be supported by capital structure theory and by making reference to journal articles. Please use one relevant capital structure theory and a maximum of two journal articles.


Tip 1 for requirement part 1: On the capital IQ home screen, search for your company using the search box and select “quick comps”. You can tailor your search by clicking the “add/edit” display column and add the company icon.

Watch Exercise 2 videos in the useful guidance section: how to add criteria and company using add/edit function.

Word limit: 250 words

The 250-word limit  excludes your reference list

•             5 marks for correctly selecting the five company gearing ratio

•             5 marks for brief comments

•             15 marks for identifying and discussing factors (five factors*3 marks each)

Portfolio task 4

Portfolio task 4:  Dividend policy

In a letter to Berkshire Hathaway Inc shareholders in 1984, Warren Buffet made the following statement:

Dividend policy is often reported to shareholders, but seldom explained. A company will say something like, “Our goal is to pay out 40% to 50% of earnings and to increase dividends at a rate at least equal to the rise in the CPI.” And that’s it – no analysis will be supplied as to why that particular policy is best for the owners of the business. Yet, allocation of capital is crucial to business and investment management. Because it is, we believe managers and owners should think hard about the circumstances under which earnings should be retained and under which they should be distributed.’

                                                                                                                                (Arnold 5th Ed pp 821)

Part 1

Using the company selected for the first task that is listed on the FTSE 100 index, your discussion should outline the following:

  1. Identify the company dividend policy with brief comments
  2. Provide a critical discussion of the company’s dividend policy. You will be required to provide supporting evidence. The discussion should be supported by dividend policy theory. Please use one relevant theory only and make reference to a maximum of two journal articles.

Part 2

Task1:

Find and disclose 5 publicly listed companies on the FTSE 100 index with the largest dividend yield figure and briefly comments on the results.

Tips: Capital IQ dash board> screening > company screening > equity details > indices> choose FTSE 100 index (^UKX) and add criteria> search dividend yield> latest> add criteria> view results

Task2:

Find and disclose your selected company and competitor’s latest dividend yield and briefly comments on the results.

Tips: Capital IQ dash board> Search your company> quick comps> add/edit display column and add company icon

Watch Exercise 2 videos in the useful guidance section: how to add criteria and company using add/edit function.

·   5 marks for being able to identify the selected company dividend policy with brief comments;

·  15 marks for a critical discussion of company dividend policy;

·   5 marks for correctly selecting companies in the FTSE all-share index with the largest dividend yield and brief comments;

·  5 marks for correctly selecting and brief comments on your chosen companies and competitors with the largest dividend yield.

Total 30 Marks

Word limit: 300 words

The 300-word limit  excludes your reference list