BM5272: A Newly Appointed CFO, Who Attended Your Company’s Webinar a Few Weeks: Corporate Finance Analysis Assignment, NYP, Singapore

Assignment Outline

You are required to assume the role of a senior consultant and provide advisory to the Chief Financial Officer (CFO) of an STI listed constituent company. The CFO has sought your advice on how best to finance their organization’s projects via email.

You are required to evaluate the various types of financing methods (equity and debt) available, determine how the company’s dividend policy will be affected by the financing decision before providing a recommendation to the CFO on the appropriate financing method for his company in the form of an email reply.

This assignment is designed for you to demonstrate your research, reasoning, critical thinking, and analysis capabilities and requires a deep dive into the concepts of long term financing using debt and equity for financial management as well as its impact on companies’ dividend policy.

Learning Outcomes

After the completion of this assignment, learners will be able to:

1. Compare the differences between equity and debt financing
2. Analyze the advantages and disadvantages of the different methods of financing
3. Demonstrate relevant consideration for a suitable financing method with respect to real-world companies
4. Illustrate how dividend policy will influence a company’s financing decision

Requirements

A newly appointed CFO, who attended your company’s webinar a few weeks ago is seeking professional advice from your consultancy firm as per the email below. You are required to draft an email response to address his query.

From: george.cluny@<chosen STI constituent company.com>

Sent: Thursday, 12 June 2020 07:00 PM

To: consultant@gr8consultation.com

Subject: Financing Methods For Projects

Dear Sir/Mdm,

Having recently attended your webinar, I am most impressed by your sharing. I am writing to you as Chief Financial Officer of [chosen STI constituent company]. As I was newly appointed to this role, I would like a seek your opinion and perspective in various long term financing options.

My organization is currently in the final phase of discussion on some projects that requires the funding of approximately S$80 million.

I am considering between equity and debt (in particularly bond) financing to raise the required amount. However, I hope you can enlighten me on some of the following matters:

1. Provide a thorough explanation of equity and debt financing, their respective features, and how it is relevant to my organization.
2. With considerations to my organization’s existing capital structure, highlight the advantages and disadvantages of the two financing methods, paying special attention to the cost and corresponding legal liability
3. How would my organization’s dividend policy be affected by the financing decision? To highlight the issues that should be considered when setting dividend policy.
4. Provide recommendation on which of the financing method is more beneficial to my organization and highlight any other considerations that should be taken into account

Thank you.

George Cluny

Chief Finance Officer

[chosen STI constituent company]