Learning Outcomes:
a) Analyze financial information and evaluate financial performance of a business.
b) Apply time value of money to the valuation of a variety of cash flows, securities and projects leading to sound investment and financing decisions.
c) Analyze risk and return associated with investments.
d) Apply various capital budgeting techniques to investment decision making.
e) Analyze the cost of capital and explore its link to the capital structure of an organisation.
f) Analyze working capital and payout policies and their impact on the liquidity position of a business.
Context: You are expected to prepare a Report based on the following case.
The Case Analysis requires students to apply their knowledge of key finance concepts such as financial statement analysis, risk and return, capital structure and valuation of shares to an analysis of two companies that are listed on the Australian Securities Exchange (ASX). Your facilitator will allocate to you two companies from the same sector drawn from the ASX100 list of 1 October 2019 (list of companies provided at the bottom). These are the top 100 Australian companies by market capitalization as of that date.
Instructions:
(a) Using annual reports perform a comparative financial statement analysis of the two companies over the period 1 January 2014 to 31 December 2018. You are expected to calculate the Profitability, Liquidity and Investment ratios.
(b) Using information for each of the five years (2014 to 2019) examine the capital structure of the two companies and comment on how the capital structure has changed over the period.
(c) Determine a historical weighted average cost of capital (WACC) for each of the years for each company.
(d) Using qualitative and quantitative information, some from previous calculations, and any other relevant information perform a valuation of the two companies' shares using the following techniques:
(i) Discounted cash flow approach - any one technique.
(ii) Relative valuation which is based on a market to book value ratio.
(e) Assuming you inherited $7 500 000 from your late aunt, which of these two companies' shares would you invest in? Justify your answer using information from above and also taking into account the dividend policy followed by each of the companies.
In addition to the above, you will also be assessed on the following: (see Learning Rubric at the end for more description of expectation).
(f) Content, Audience and Purpose.
(g) Critical reasoning, presentation and defense of an argument and/or position.
(h) Analysis and Application with synthesis of new knowledge.
(i) Use of academic conventions and sources of evidence.
(j) Effective communication.
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Attachment:- Managing Finance.rar