As ECC’s external consultant, you have an open mind on whether the company chooses to purchase an Indonesian Coal Mine
The subject name is: Financial Markets and Economic Principles and it is for a Masters degree program
Question (10 marks | Word limit: 1000 words)
Note: Refer to the case study on the assessment page before attempting this task.
As ECC’s external consultant, you have an open mind on whether the company chooses to purchase an Indonesian Coal Mine, and thus rebrand as IPC; or acquire the coal seam gas (CSG) company (ISC) via a takeover, and thus rebrand as ECR. Note that the CSG option will require investment in new equipment for the run-down Hunter Valley Mines.
Please note that the company is in a financial position to only pursue one alternative.
(a) James is very focussed on pursuing the domestic investment alternative of acquiring the Coal
Seam Gas (CSG) production company in Queensland, and as such he needs to convince David Murdoch, who is an ECC director on the Acquisitions and Expansions Subcommittee. Thus, James wants you to assess Australia’s key economic and financial indicators, such as economic growth, commodity price and interest rates. As well, James asks you to assess Australia’s place in global financial markets, which may affect the company’s performance.
You are to prepare a short summary explaining four (4) advantages and four (4) disadvantages of investing in the domestic option, including any financial market exposures.
Note: Use ‘dot points’ to illustrate your points in a clear, but brief, manner. (4 marks | 400 words)
(b) David Murdoch is very focussed on pursuing the Indonesian coal mine expansion and as such he is concerned about the outlook of the Indonesian economy over the next 12 months, as well as the inherent risks with doing business in Indonesia.
Thus, you are asked to prepare a brief report for David which should include:
• an outlook of the Indonesian economy over the next 12 months
• comments on the forecast of economic growth for Indonesia over the coming year • discuss both financial and non-financial risks that David should be aware of.
Note: Use ‘dot points’ to illustrate your points in a clear, but brief, manner. (4 marks | 400 words)
(c) Assume that ECC ended up pursuing the domestic option and become ECR. Given the Reserve Bank of Australia (RBA) have recently signalled that they will be looking to enter into a contractionary monetary policy phase, James wants you to prepare a compressive report regarding the potential impact on the company and the mining industry. As part of your report, you are planning to briefly explain the impact from the short-term money market and the longterm debt market. Thus, you must identify one intermediary each from short-term money market and long-term debt market and explain their role in Australian financial markets. (2 marks | 200 words)
Hints:
• There is no right or wrong answer as long as you use economic reasoning in your discussion. You are not required to submit a full reference list, however facts and figures presented in your answers must provide a Harvard style in-text citation as to where that information came from. For example: GDP growth in Iceland is expected to be 30% in 2050 (World Bank 2015).
• It is highly recommended that you compose your response in a Word document first and then copy and paste it into the box below. To copy and paste your response from a Word document, copy the text as normal and then use the keyboard short cut, Ctrl + v to paste it into the response box.
• You will be unable to submit responses that exceed the word limit.
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