Describe the profile of your company. In your discussion, you should include: nature of the business, industry and age of your company.

 

INDIVIDUAL ASSIGNMENT

You are required to use Microsoft Excel for all computations and Microsoft Word for the written submission. It is important that you start working on your assignment early and do not leave commencing this assignment until near the due date of assignment.

Important: Before conducting the assignment, you will need to select one company from the list of ASX companies.

The Assignment task involves three parts.

PART ONE: COMPANY BACKGROUND (4 MARKS)

You are required to discuss the background and setting for your selected company to be valued in the subsequent parts.

You should address the following issues using publicly available information:

1.1. Describe the profile of your company. In your discussion, you should include: nature of the business, industry and age of your company. (1 mark)

1.2. Provide an evaluation of the current state of the economy, business confidence levels and future outlook of the economy moving forward. (1 mark)

1.3. Identify the key business segments and how they contribute to profitability. (1 mark)

1.4. How is the company positioned in its industry? (1 mark)

PART TWO: CAPITAL STRUCTURE (8 MARKS)

2.1. Graph the company’s total liabilities to total assets ratio over the last 3-5 years, and provide trend and peer analyses. (3 marks

2.2. What do you think about the target capital structure of the company? Do you think it would be beneficial for the company if it raised more or less debts than its current debt level? (1 mark)

2.3. Estimate the company’s cost of capital. (4 marks)

In performing your estimation, you will need to clearly state and justify all assumptions made.

PART THREE: VALUATION (8 MARKS)

You are required to estimate the intrinsic value of a common stock of your selected company on the end date of the last available fiscal year using the Free Cash Flow to the Firm method.

You have access to large amounts of publicly available information about the company which you have selected. This publicly available information includes, but is not limited to, annual reports, information releases to the ASX, and publicly available analyst reports.

In performing your analysis, you will need to clearly state and justify all assumptions made. They might include the assumptions behind the financial forecasts, the length of the forecast period, the estimation of terminal value, etc. Failure to do this will result in a poor overall grade for this component of the assignment.

Within your analysis, you need to document and explain what you are doing at each step. Next, carry out some form of sensitivity analysis. As we know from our previous studies, there is no “correct” or “model” answer when it comes to valuing a company. It is imperative to perform sensitivity analysis to examine how sensitive your valuation is to key drivers of the company value.