Your task for this part of the assignment is to describe the company’s financial situation. One
place to find the company’s financial statements is investing.com (select your company, and
click on Financials). Investigate which events have affected your company’s financial
situation during the past couple of years, and explain what we can expect for the coming years.
Your analysis should be based on at least 3 recent business publications from reputable
sources (which are NOT publications of the company itself).
Part C: Bond Analysis (1 – 2 pages)
The topic of this part of the assignment is covered in Week 3. Your task is to analyse one of
the firm’s outstanding bonds. First, compute the credit spread of this bond, by calculating the
yield-to-maturity on this bond, and comparing it with the yield on Treasury bonds of
comparable duration. (For information on AUS treasury yields see the RBA website and look
for “Capital Market Yields – Government Bonds – Monthly”. For current US treasury yields,
go to Yahoo Finance, and type “treasury yield”.) Second, estimate the bond’s price one year
from now (assuming that interest rates will remain constant), and comment on the reason
behind the expected price change (if any) from the current price of the bond. Finally, explain
which credit rating you expect your company to receive from the credit rating agencies, based
on yur analysis of the company bond, as well as your analysis in Part B.
Part D: Share Analysis (1 – 2 pages)
The topic of this part of the assignment is covered in Week 4. The task is to analyse your
company’s shares. First, provide a graph and comment on the company’s stock price changes
in the previous three years. Explain what factors have caused the stock price to develop as it
did, and link this investigation to your analysis in Part B of the assignment. Secondly, provide
an overview of the firm’s dividend payments during the previous 5 years. If your company paid
dividends more than once a year, sum up all dividends to find the total yearly dividend. Using
the dividend discount model, estimate the return that investors currently require for holding
your company’s stock. You can assume that the firm’s dividends will continue to grow
indefinitely at the same rate as the average dividend growth rate in the previous five years, or
you can make alternative assumptions on the future dividend payments, as you see fit.
Part E: Risk Analysis (1 page)
The topic of this part of the assignment is covered in Week 7 and 8. Estimate the amount of
systematic risk in the shares of your company, and compare the systematic risk in your stocks
to the stocks of two competitors. Your discussion should include an explanation of which
factors could possibly explain the differences and similarities in systematic risk of these
shares.
Part F: Payout policy (1 – 2 pages)
This topic is covered in Week 10. In this part of the assignment, you will provide an overview
of the company’s payout policy in recent years. Which percentage of the company’s earnings
was distributed to investors as dividends? Which percentage of earnings was reinvested in
the company? Did the company engage in dividend smoothing? Did the company do any
share repurchases in recent years? (One way to find out about share repurchases is to investigate any changes in number of outstanding shares on the company’s balance sheets
between different years). Why did the company make these decisions?
Part G: Cost of Capital and Capital Structure (1 – 2 pages)
The topic of this part of the assignment is covered in Week 9 and Week 11. First, find out what
the capital structure of your firm looks like, and use this information, plus your results in the
previous parts of this assignment, to estimate your company’s weighted average cost of capital
(WACC). Second, compare the capital structure of your firm with two competitors. What factors
could possibly explain the similarities/differences in capital structure between these
companies?
