MN7029 Summative Assessment 2 002 Individual Coursework 1 General Assessment Guidance This summative assessment is an individual coursework. The coursework should be delivered in the form of a professional report.
MN7029 Summative Assessment 2 002 Individual Coursework 1 General Assessment Guidance This summative assessment is an individual coursework.
The coursework should be delivered in the form of a professional report.
A total of 100 marks are available for this module assessment, which represents 70% of the total marks for the module.
You must include a reference list identifying all your sources and use citations, both using the Harvard Referencing system.
The University takes academic misconduct very seriously and always seeks to rigorously protect its academic standards. Plagiarism, collusion, and other forms of cheating constitute academic misconduct, for which there is an explicit range of graduated penalties depending on the particular type of academic misconduct. The penalties that can be applied if academic misconduct is substantiated range from a reprimand to expulsion in serious cases and for repeated instances of misconduct. Guidance on preventing plagiarism is available here: https://learning.londonmet.ac.uk/TLTC/learnhigher/Plagiarism/
2 Assessment Brief 2.1 Introduction The assessment assesses learning outcomes 2 and 3 of the 3 module learning outcomes of this module, which are that on successful completion of the module students will be able to:
Demonstrate an understanding and use of the appropriate analytical techniques to be applied to business case development and Investment appraisal; the raising of finance and the distribution of funds to investors; Communicate financial information, analysis, issues and recommendations clearly and concisely. 3 The Case Study Information 3.1 Background information Founded in 2015, EcoStyle Retail Plc. began as a small online boutique focused on ethically sourced clothing for young adults. Over the next decade, it grew into a national fashion retailer with 35 stores across the UK and a thriving e-commerce platform. Its brand promise—Style with Substance—centres on sustainability, fair labour, and transparency. EcoStyle’s customers are environmentally aware and value both quality and ethics in fashion. However, by 2024, competition has intensified as large fast-fashion brands launch ‘eco’ collections at lower prices. Rising costs and slower logistics have also begun to pressure profits.
3.2 Financial Summary (2023–2024) The following is an extract from the company’s most recent accounts
Item
2023 (£’000)
2024 (£’000)
Revenue
42,000
45,000
Cost of Goods Sold
24,000
26,500
Gross Profit
18,000
18,500
Operating Expenses
13,200
14,000
Operating Profit
4,800
4,500
Interest Expense
500
600
Profit before tax
4,300
3,900
Tax
1,000
900
Net Profit
3,300
3,000
Total Assets
25,000
28,000
Inventory
5,000
5,500
Accounts Receivable
3,000
3,500
Accounts Payable
2,500
3,000
Shareholders’ Equity
14,000
15,000
Long-Term Debt
5,000
6,000
Cash
1,000
1,500
Additional information: The company has 5,000,000 shares held by shareholders, and the market price per share at the end of 2024 was £4.50. The expected dividend for next year is £0.225 per share and it is expected to grow at 5% year on year in the future. Current market price remains £4.50.
3.3 Projected cash flow The company is preparing to launch a new product line made from recycled materials and wants to assess its short-term financial liquidity. They would like to see a six-month cash flow projection for Ecostyle Retail Plc, covering the period from January to June 2026.
Use the following information:
Opening cash balance (January 1, 2026): £20,000 Projected monthly sales revenue: January – £40,000 February – £45,000 March – £50,000 April – £55,000 May – £60,000 June – £70,000 Cash receipts: 60% of sales are collected in the month of sale, 40% in the following month. Purchases: Goods purchased each month equal 75% of that month’s sales; payments for purchases are made one month later. Operating expenses: £14,000 per month, paid in the same month, including £2,000 per month depreciation of assets. New equipment purchase: £15,000 in January (paid immediately). Marketing costs of £50k in Jan, Feb and March Loan repayment: £5,000 due in June. 3.4 Proposed Investment Project: “EcoStyle Expansion 2025” EcoStyle’s management team believes that future growth lies in continental Europe, where sustainable fashion is rapidly gaining traction. The company is evaluating a £6 million investment to open ten new stores in Germany and France, along with localized marketing and logistics hubs. The company has already spent £250k on a research project looking at the viability of the market in these jurisdictions.
Expected net cash inflows from this expansion are projected as follows:
Year 1
£1.2m
Year 2
£1.8m
Year 3
£2.0m
Year 4
£2.4m
Year 5
£2.5m
The company has previously used an estimated cost of capital of 10% for investment project appraisal. However the company suspects this may be out of date and would also like to calculate an up to date Weighted Average Cost of Capital. Currently the company’s capital structure consists of 60% equity and 40% debt. The after-tax cost of debt of 6%.
3.5 Contribution margin The company has a new range of organic T-shirts which it sells £25 each. The variable costs per shirt include £12 for materials and £2 for eco-friendly packaging. EcoStyle also donates £2 per shirt sold to environmental initiatives as part of its mission. The company has monthly fixed costs of £85,000, which include fair-wage manufacturing contracts, marketing expenses, and salaries. The management team want to understand the break-even point and the margin of safety if they sell 10,000 shirts as budgeted, and how many shirts they would need to sell to generate a monthly profit of £50,000 while maintaining its sustainability credentials.
3.6 Ethical Dilemma In 2024, an independent audit uncovered that one of EcoStyle’s textile suppliers was underpaying workers and failing to meet safety standards. The revelation triggered public backlash and a 5% decline in online sales. EcoStyle’s leadership now faces a critical choice: terminate the supplier contract—risking inventory shortages and increased costs—or invest £250,000 to help the supplier improve conditions and meet compliance standards.
3.7 Supply Chain Overview EcoStyle’s supply network is complex. About 70% of its materials come from Asia (India, Bangladesh, Vietnam) and 30% from Europe (Portugal, Turkey). Products are shipped by sea to the company’s distribution centre in Liverpool. Recently, shipping delays and a 20% rise in freight costs have increased operational risks. Management aims to reduce carbon emissions and improve reliability by shifting 50% of sourcing to Europe by 2026.
3.8 The Acquisition Offer In early 2025, EcoStyle received a £22 million acquisition offer from TrendWave plc, a leading fast-fashion conglomerate. The offer represents a significant premium over EcoStyle’s book value. TrendWave promises to maintain the EcoStyle brand but integrate logistics and online operations. Some board members view this as a lucrative opportunity, while others worry that partnering with a fast-fashion giant could undermine EcoStyle’s ethical image and alienate loyal customers.
3.9 Your task You have been taken on in a consultancy role to prepare a report for the Board regarding the investment. The Board have given you a detailed brief as follows:
Mark weighting
The report should have a clear and well written Executive Summary capturing the main points of the analysis. See below
Analyse the company’s performance comparing 2023 to 2024 using the following ratios:
(a) Gross profit margin
(b) Operating profit margin
(c) Return on Capital Employed
(d) Inventory days
Calculate the Earnings per Share (EPS) and Price Earnings (P/E) Ratio at 31 December 2024 and explain what the P/E ratio shows us and possible reasons it may change from year to year.
10%
Prepare a cash flow projection for Ecostyle Retail Plc. for the six months ending June 30, 2026. Analyse the results and suggest recommendations for the business in respect of this new line of clothes based on projected cash flow.
10%
Explain the 4 main methods of Capital Investment project evaluation. You should explain the process that is used in the method and the advantages and disadvantages of each.
5%
Calculate the Net Present Value (using a 10% Weighted Average Cost of Capital) and Payback Period of the project. You do not need to consider tax. Show all your workings. Explain why the project should or should not go ahead on the basis of the results of the NPV and Payback Period.
10%
Explain what WACC is, how it is used and how it is calculated. What are the implications to a business of incorrectly calculating their cost of capital?
10%
Calculate the company’s updated Weighted Average Cost of Capital. You should show the steps in calculating each part. Using this figure re-calculate the NPV with the new WACC. Does this change your decision as to whether the project should go ahead?
10%
The company will need £6m to undertake the capital investment project. They are already listed on the London Stock Exchange. Briefly explain the process for raising new capital via the exchange. What are the other alternatives for a company to raise long term funds and what are the benefits and disadvantages of these. Explain the general risk and return profiles attached to these different forms of funding.
10%
Contribution margin for new organic t-shirts:
What is the contribution margin per T-shirt? What is the monthly Break Even Point What is the margin of safety if the company sells 10,000 shirts If the company wants to sell enough T-shirts to generate a monthly profit of £50,000 while maintaining its sustainability commitments, how many T-shirts must it sell 5%
Regarding the ethical dilemma, What are the short-term and long-term implications of each option? How might shareholder and stakeholder theories require you to analyse the courses of action? Which would you recommend – give justification for your choice.
10%
Consider the risks and benefits of moving the supply chain closer to Europe and present the pro’s and con’s. How do foreign exchange movements affect an international business and how might these be managed? How does this impact working capital management, particularly inventory, for the company?
5%
Consider the M&A offer. What are the implications for the company of accepting? What type of M&A transaction does this represent. Why might a buyer pay more than book value for a company, as is the case here? Who are the stakeholders in the decision and how might each of these groups react to the potential acquisition?
5%
Presentation – professionalism, logical exec summary and conclusion. All workings shown either in report or Appendices
10%
PLEASE ENSURE YOUR SHOW ALL YOUR WORKINGS, EITHER IN THE BODY OF THE REPORT OR IN THE APPENDICES.
4 Level 7 General Marking Scheme Grade
Achievement level
Distinction 85-100%
Outstanding work showing extensive knowledge and understanding of an extensive range of relevant international business management trends, scenarios, issues, concepts, theories and data. Exceptional ability to analyse, synthesise, and evaluate.
Solutions and recommendations demonstrate strong ethical appreciation and deep understanding of the need for corporate responsibility.
Evidence of extensive reading, study and sense making beyond the course content, and of independent thought.
Writing that is fluent, clear, concise, and grammatically correct. Tables, diagrams, and other figures are highly effectively in supporting the text and presenting key messages.
Numeric analysis that is complete and free from errors with application of methods that may be insightful or original
A submission that is focused and relevant to the task, comprehensive, accurate, and presented in a very professional manner. Excellent use made of digital technology.
Demonstrates strong ability to pursue research at Doctoral Level.
Comprehensive, error free citations and reference list.
Distinction 70-84%
Excellent work showing extensive knowledge and understanding of a considerable variety of international business management trends, scenarios, issues, concepts, theories and data. Good analysis, synthesis, and evaluation.
Solutions and recommendations demonstrate ethical appreciation and awareness of the need for corporate responsibility.
Evidence of substantial reading, study and sense making beyond the course content and of independent thought.
Writing is fluent, clear, concise and grammatical. Strong use of tables, diagrams and other figures in supporting the text and presenting key messages.
Numeric analysis that is complete and mostly free from errors with appropriate application of methods.
A submission that is relevant to the task, comprehensive, accurate, and presented in a well-structured and organised manner. Good use made of digital technology.
Demonstrates the ability to pursue research at Doctoral Level.
Comprehensive citations, and correct use of the Harvard style in the reference list.
Merit 60-69%
Good work showing wide knowledge and understanding of an extensive range of relevant business trends, scenarios, issues, concepts, and theories. Some analysis, synthesis, and evaluation.
Ethics and corporate responsibility questions are considered.
Questions of ethics and corporate responsibility are addressed appropriately.
Reference made to relevant course material with evidence of some reading, study and sense making beyond the course content and some independent thought.
Writing is clear, mostly concise, and has few grammatical errors. Good use of tables, diagrams and other figures in supporting the text and presenting key messages.
Numeric analysis that is complete and mostly free from errors with relevant and effective application of methods.
A submission that is relevant to the task though less than completely comprehensive, is mostly accurate, and is well presented. Mostly good use of digital technology.
Effective use of citations and a complete reference list. Some minor errors in use of the Harvard style
Pass 50-59%
Adequate work showing reasonable knowledge and understanding of relevant business issues, concepts, and theories. Limited analysis, synthesis, and evaluation.
There is some clear but limited consideration of ethics and corporate responsibility.
Little or no evidence of reading, study and sense making beyond the course content and little or no independent thought.
Writing is less than clear, is not concise and has some grammatical errors. Some use of tables, diagrams and other figures in supporting the text and presenting key messages.
Numeric analysis that is mostly complete and free from significant or critical errors with appropriate application of methods
A submission that is mostly relevant to the task and reasonably accurate, but not very comprehensive and with some errors and shortcomings of presentation, structure and organisation. Basic use of digital technology in the creation and presentation of the work.
Adequate citation and reference list. Some errors in use of the Harvard style and some missing citations.
Fail 40-49%
A weak piece of work showing only limited knowledge and understanding of course content with substantial errors or omissions. Mainly descriptive with little or no analysis, synthesis and evaluation, and no independent thought.
Ethical and corporate responsibility issues are not considered.
Evidence of a range of sources but with reliance on inappropriate sources without critical evaluation.
Writing is not clear and has frequent grammatical errors.
Numeric analysis that is mostly complete but contains errors with significant effect, or methods that are applied inappropriately
Much of the submission is not relevant to the task. Lacking in professionalism, weak presentation, poorly structured and organised. Ineffective use of digital technology in the creation of the work.
Limited citation and reference list.
Fail 30-39%
A poor piece of work with extensive errors and omissions, badly written and ungrammatical. A little relevant material but poorly presented with little evidence of understanding. Weak use of digital technology.
Fail 0-29%
A very poor piece of work lacking in understanding and with serious errors and omissions but with evidence of some knowledge vaguely relevant to the question