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Assignment Task:

LEARNING OUTCOMES 
This assignment is designed to develop and assess the following learning outcomes: 
1. Understand the scope of decisions required to develop an integrated financial strategy that supports organizational objectives; 
2. Apply appropriate analytical techniques to evaluate trade-offs between strategic alternatives and support financial strategy recommendations; 
3. Understand how to assess the impact of risk on the design of corporate financial strategy; 
4. Demonstrate an ability to understand issues involved in how the corporation interacts with financial markets. 

ASSIGNMENT TASK 
For this assignment, you are required to do a post-audit of the decision to issue equity to fund the acquisition, and answer the question: “Did WorleyParsons’ management take the best course of action for their shareholders by undertaking the equity issue, and the way it was structured?” 
In answering this question you should address the following issues: 
1] Describe the strategic background to WorleyParsons’ situation at the time of the equity issue. What company actions and/or industry conditions prompted them to consider the possibility of an equity issue? In answering this question, you should consider what external scenarios WorleyParsons may have been anticipating in the (then) future, as well; 
2] Critically evaluate the rationale put forward by WorleyParsons’ management and their Board as to why they needed to do this issue. You should attempt to support this with any financial analysis tools you consider appropriate. In answering this question, you should consider the equity raising in the context of an overall integrated financial strategy. As part of this answer, you should prepare summary pro-forma financials to help demonstrate the impact of the equity issue. 
3] Do you consider there were other viable alternatives available, and critically evaluate these alternatives relative to WorleyParsons’ actions. In answering this you should incorporate the various criticisms raised in the media or by analysts; 
4] Describe the details of the equity issue and evaluate the structure used by WorleyParsons and its underwriters to undertake this raising. In light of the transaction outcome, where there any other alternative transaction structures they should have considered? 
5] Analyse the market reaction to the announcement, both around the immediate announcement / issue date, and in the period subsequent to this. This should involve an analysis of WorleyParsons’ share price movements. This data should be available via Capital IQ; 
6] Do you consider the equity issue achieved its strategic and financial objectives. In answering this question, you should use subsequent financial and other results? 
7] Refer to the article by Graham and Harvey entitled “How do CFO’s make Capital Budgeting and Capital Structure Decisions”, which is on the ilearn site. How does the action by WorleyParsons align with the motivations for equity issuance described in this article? 
8] Present your overall judgment on this transaction, and any recommendations you may have for an alternative course of action. In answering this question please remember you have the benefit of hindsight. 
9] What insights did you gain from your analysis of this transaction? 

ASSIGNMENT TASK 2
For this assignment you are expected to describe and critically evaluate BHP Billliton’s financial strategy from financial year 2011 to the present day, with particular emphasis on how each element contributes to an integrated financial strategy. 
Your answer should address the following issues: 
1] Describe the key elements of BHP Billiton’s financial strategy. This description should include: 
(a) key metrics used to describe each of the individual financial strategies. This data can be 
sourced from Annual Reports or S&P Capital IQ, and 
(b) a (brief) description of the rationale(s) put forward by BHP Billiton management for each 
individual financial strategy; 
2] Critically evaluate BHP Billiton’s financial strategy over Financial Years 2011 to the present day. This assessment should include the following: 
o assessment of actual financial strategy outcomes; 
o comment on linkages and trade-offs between the individual elements of BHP’s financial strategies. 
o how has BHP Billiton’s financial strategy complemented, or otherwise, BHP Billiton’s strategies 
for growth and operating performance; 
[Note: a year by year analysis is not necessary, but look at the whole period, and major changes and shifts in their strategy, and major themes that might underlie their strategy] 
3] On 23rd February 2016 BHP Billiton announced a revised dividend policy. Describe the new policy and management’s rationale for the change. In answering this question prepare summarized (one year out) Pro-forma financials, for the 2017 and 2018 financial years, demonstrating the impact of this change on funding requirements. 
Analyze the market reaction to the announcement, both around the immediate announcement/issue date and in the period subsequent to this. This should involve an analysis of BHP Billiton’s share price movements. This data should be available via Capital IQ; 
4] On 17th April 2017 BHP Billiton published its response to proposals from Elliott Management (see https://www.fixingbhp.com). How do Elliott’s proposals, and BHP Billiton’s response, reflect the various models of financial strategy discussed in this unit? 
5] Critically evaluate BHP Billiton’s response to the Elliott proposals, both in terms of the actual decisions made and the manner in which they dealt with an activist investor. 
6] Refer to the article by Graham and Harvey entitled “How do CFO’s make Capital Budgeting and Capital Structure Decisions”, which is on the ilearn site. How do BHP Billiton’s financial strategies align with the motivations for various financial strategies described in this article? 
7] What insights did you gain from your analysis of BHP Billiton’s financial strategy?

Assignment 3: Financial Model 
Topic 3 includes a discussion of the Heine and Harbus model, which is a sophisticated tool to address capital structure and risk management strategies for individual companies. In this assignment, you are required to construct a model along the lines of the Heine and Harbus model, and prepare financial strategy recommendations for the company. You will be required to use @risk software to develop the simulation analysis. This is available for download from the unit’s learning site, for the Monte Carlo simulation. 
This assignment will involve the use of a valuation model such as WACC or, preferably, the Adjusted Present Value model discussed in class and explained in the Corporate Finance core course. 
This is a difficult financial modeling assignment. You should not undertake it unless you are confident with your basic financial modeling and valuation skills. The modeling has two steps: 
firstly, model set-up, described in Steps 1 – 7 in the Heine and Harbus Appendix. The assumptions to be used in the model, as per Steps 1 – 7, are outlined below. Questions about other assumptions that may be required should be addressed via the course forum; and secondly, complete the financial analysis, described in Steps 8 – 9 in the Heine and Harbus 
Appendix.
 

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