Asset Pricing

FINM2416 Asset Pricing                                                                                                                  Semester 1, 2021

You will be required to produce a report based on financial analysis and valuation of a company from the standpoint of a financial analyst. Overall you will provide an evaluation of the investment potential of the company’s shares.

Overview: The objective of this assignment is to assess student’s ability to value the equity of a company. Student may choose a publicly listed non-financial company in Australia which has at least last 3 years of annual reports available and has been making profit. Please note that (although it is not mandatory) one company is recommended to be chosen by one student. A blank editable Excel file will be uploaded in due course where students can enter their selected companies so that other students are aware of that.

Requirements:

  1. Provide a brief introduction of your selected company and your report. (5%)
  2. Use of standard ratios (provided in your formula sheet) to present and analyse profitability, liquidity, leverage and asset utilization. (20%)
  3. Value your chosen company using different methods like DDM and DCF (at least two).

(40%)

  1. If you need growth rate, there are different ways to calculate. State and justify your selection.
  2. If you need weighted average cost of capital (WACC) for valuation, assume corporate tax rate of 30%.
  3. If you need cost of equity, calculate using the capital asset pricing model (CAPM). You will need to make assumptions in regards to the CAPM components like risk free rate and the risk premium. State and justify these assumptions.
  4. Whatever method/numbers you use, justify your selection/calculations.
  1. Do some sensitivity analysis for the valuation and comment on the sensitivities you find. Justify “why you think the elements (at least two) you analyse are important for

the estimates?”                                                                                                                                             (10%)

  1. Critical Thinking: This includes four traits: identification, analysis, consideration & conclusion, and recommendation. Please see the detail rubric named “Rubrics

(Assignment) FINM2416 Semester 1 2021.pdf”.                                                                                                                                                   (10%)

  1. Professional writing: This includes three traits: structure, professionalism, and research

& referencing. Please see the detail rubric named “Rubrics (Assignment) FINM2416

Semester 1 2021.pdf”.                                                                                                                                                                                             (7.5%)

  1. Include excel output in the appendix (screenshots) and also separately upload a soft copy of your Excel workings. (7.5%)

 

 

 

 

 

 

 

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FINM2416 Asset Pricing                                                                                                                  Semester 1, 2021

Submission:

Excel:

Your Excel file should include all workings and calculations. Formulas for the calculations should have cell references wherever possible. If you have computed a number incorrectly and just typed that number into the spreadsheet (or typed a formula using numbers when cell references could have been used), you will not receive partial credit for any portion of your computation that is correct.

Written Report:

Please provide a written report (not exceeding 1500 words). The report should provide responses to the requirements specified above. This includes a detailed calculation of all results, discussion of assumptions made, justification of estimates relative to market value and its limitation, discussion of the sensitivity analysis, and recommendation to the investors. Please provide references where appropriate. References are not included in the word count.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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