Assessment 2 Information
Subject Code: FINM4000
Subject Name: Finance
Assessment Title: Individual Assignment
Assessment Type: Assignment
Word Count 1500 - 2000 Words
Weighting: 30%
Total Marks: 50
Submission: Online (Turnitin)
Due Date: 17:55 AEST Friday of Week 11
Assessment Description
Assessment 2 consists of an individual assignment and has two parts. Part 1 is on company perspective and Part 2 is on capital budgeting.
Assessment Instructions
The assignment must be completed individually and submitted using Turnitin on the portal before the due date. Both Word and Excel files must be submitted.
When doing your assignment, you might like to consider the following points.
• Answer each question directly and fully, using the minimum number of words. You do not need to write an essay.
• Include all of your calculations in the Excel spreadsheet, and then report the final results in the Word document. Where necessary, make sure you explain your analysis in the Word document.
• Consult Academic Success Centre resources on the portal and on campus for assistance with referencing and plagiarism. You do not need to reference lecture slides and notes.
• Because the assignment is to be submitted using Turnitin, any plagiarism will be identified. It is possible that you could get zero for your assignment if you copy someone else’s work.
You will need to use the following two sources:
1. Lend Lease Limited (LLC) Annual Report 2023 https://www.lendlease.com/au/investor-centre/announcements/
2. Yahoo Finance
https://au.finance.yahoo.com/quote/LLC.AX/
Generative AI
• You may use generative AI to help you with understanding and assist you in completing this assignment.
• If you choose to use AI, you may ask ChatGPT, for example, to explain difficult concepts, generate ideas and draft your answers.
• You must not copy and paste any output you obtain and present it as your own work. You must always present your own answers. AI is only a support tool to help you, and you must always acknowledge using AI in your work.
• This assessment item is categorized as “Amber - Level 2”. See the guidelines for the use of generative AI in the table on the following page for additional details.

Part 1: Company Perspective (25 marks)
Consider the 2023 Annual Report for Lend Lease Limited (LLC).
1. Briefly comment on how LLC governance is organized. Do you notice any strategies in place to align manager and shareholder interests at LLC based on the Annual Report? Provide one example. (3 marks)
2. What is the net working capital for LLC in 2022 and 2023? What type of working capital management strategy is LLC probably pursuing? What are the advantages and disadvantages of this strategy? (3 marks)
3. Identify in the annual report two major risks that LLC faces. Are these risks systematic or unsystematic? Explain your answer. (2 marks)
4. Say you are trying to value LLC shares as of 30 June 2023. The closing LLC price for this day was $7.64. Assume that LLC will pay a dividend of $0.20 in 2024. You also estimate that for the next two years (2025 and 2026) dividends will grow at 15% per year. After this (starting in 2027) you estimate dividends will grow at a constant rate of 5% forever. Assume the Australian 10 year government bond has a yield of 4.0%, the market risk premium is 5.5% and the beta of LLC is 0.9. Based on your valuation, should you buy LLC shares? Explain your answer. (7 marks)
5. Consider a LLC bond issue on 30 June 2023 with a coupon rate of 4.7% and a 10 year maturity. Assume the bonds are semiannual, have a face value of $1,000 and the required rate of return for similar bonds in the market is 5.1%. Calculate the market price of the LLC bonds as of 30 June 2023. (5 marks)
6. Calculate the market capitalization of LLC on 30 June 2023. Assume that the total number of shares outstanding on this day is the same as that reported in the annual report. (2 marks)
7. What source of funding (non-current) is LLC primarily using to finance its operations? What are the advantages and disadvantages of this source of financing? (3 marks)
Part 2: Capital Budgeting (25 marks)
Consider the following information.
In order to satisfy a sharp increase in demand due to the end of the pandemic, LLC is evaluating investing in one of two major projects; these projects will be called Project A and Project B. In order to mitigate risk, LLC has asked Rachel Consulting Limited to conduct some market research. Rachel Consulting is being paid $2.5m as a fixed fee for her expert consulting services.
Project A has an initial outlay of $145 million and Project B has an initial outlay of $160 million.
Project A will generate additional revenues of $65 million starting in year 1 and ending in year 10. It will also have additional net working capital needs of $10 million immediately. This sum will be recovered at the end of the project.
Project B will generate additional revenues of $70 million starting in year 1 and ending in year 10. It will also have additional net working capital needs of $15 million immediately. This sum will be recovered at the end of the project.
The cash operating costs of both projects will be 40% of the revenues from years 1 to 10. Both projects will be depreciated on a straight line basis over ten years to zero book value. LLC has estimated that some assets involved in the upgrades can be sold at the end of year 10 respectively for $25 million (Project A) and $35 million (Project B). The tax rate is 30%. All cash flows are annual and occur at the end of the year. The cost of capital for both projects is 11% based on the overall risk of LLC.
1. Calculate the FCFs for each project. (10 marks)
2. What is the NPV for each project? (5 marks)
3. What is the discounted payback period for each project? (2.5 marks)
4. What is the IRR for each project? (2.5 marks)
5. Assume that the risk of investing in these projects is higher than the overall risk of LLC. What would happen to the discount rate and consequently NPV of the two projects if this was the case? Explain your answer. (2 marks)
6. Suppose that LLC has a payback rule of 8 years. Based on all of your analysis, which project should be chosen? Justify your answer. (3 marks)
Generative AI Traffic Lights
Traffic Light Amount of Generative Artificial Intelligence
(GenerativeAI) usage Evidence Required This assessment
(?)
Level 1 Prohibited:
No GenerativeAI allowed
This assessment showcases your individual knowledge, skills and/or personal experiences in the absence of Generative AI support. The use of generative AI is prohibited for this assessment and may potentially result in penalties for academic misconduct, including but not limited to a mark of zero for the assessment.
Level 2 Optional:
You may use GenerativeAI for research and content generation that is appropriately referenced.
See assessment instructions for details
This assessment allows you to engage with Generative AI as a means of expanding your understanding, creativity, and idea generation in the research phase of your assessment and to produce content that enhances your assessment. I.e., images. You do not have to use it. The use of GenAI is optional for this assessment.
Your collaboration with GenerativeAI must be clearly referenced just as you would reference any other resource type used. Click on the link below to learn how to reference GenerativeAI.
https://library.kaplan.edu.au/referencing -other-sources/referencing-othersources-generative-ai
In addition, you must include an appendix that documents your GenerativeAI collaboration including all prompts and responses used for the assessment.
Unapproved use of generative AI as per assessment details during the content generation parts of your assessment may potentially result in penalties for academic misconduct, including but not limited to a mark of zero for the assessment. Ensure you follow the specific assessment instructions in the section above.
?
Level 3
Compulsory:
You must use GenerativeAI to complete your assessment
See assessment instruction for details
This assessment fully integrates Generative AI, allowing you to harness the technology's full potential in collaboration with your own expertise.
Always check your assessment instructions carefully as there may still be limitations on what constitutes acceptable use, and these may be specific to each assessment.
You will be taught how to use generative AI and assessed on its use.
Your collaboration with GenerativeAI must be clearly referenced just as you would reference any other resource type used. Click on the link below to learn how to reference GenerativeAI.
https://library.kaplan.edu.au/referencing -other-sources/referencing-othersources-generative-ai
In addition, you must include an appendix that documents your GenerativeAI collaboration including all prompts and responses used for the assessment.
Unapproved use of generative AI as per assessment details during the content generation parts of your assessment may potentially result in penalties for academic misconduct, including but not limited to a mark of zero for the assessment. Ensure you follow the specific assessment instructions in the section above.
Important Study Information
Academic Integrity and Conduct Policy
https://www.kbs.edu.au/admissions/forms-and-policies
KBS values academic integrity. All students must understand the meaning and consequences of cheating, plagiarism and other academic offences under the Academic Integrity and Conduct Policy.
Please read the policy to learn the answers to these questions:
• What is academic integrity and misconduct?
• What are the penalties for academic misconduct?
• How can I appeal my grade?
Late submission of assignments (within the Assessment Policy)
https://www.kbs.edu.au/admissions/forms-and-policies
Length Limits for Assessments
Penalties may be applied for assessment submissions that exceed prescribed limits.
Study Assistance
Students may seek study assistance from their local Academic Learning Advisor or refer to the resources on the MyKBS Academic Success Centre page. Further details can be accessed at https://elearning.kbs.edu.au/course/view.php?id=1481
Page 6 Kaplan Business School Assessment Outline T2 2024