Based on the companies Westpac Banking Corporations, Australia New Zealand Bank, Band of the South Pacific, provide details of the following:

i From the audited financial reports of the above three companies using the year Financial statements from calculate using the formulas learned in AF the following ratios for each of the three companies in your portfolio over the five years do not copy ratios from the financial reports:

a Liquidity: any two ratios

b Profitability: return on assets ROA; return on equity ROE

c Asset management: any two ratios

d Financial leverage: any two ratios

e Market values: price per share PPS market price; earnings per share EPS; price

earnings ratio PE

f Dividend payout ratio; retention ratio; internal growth rate; sustainable growth rate.

ii Evaluate and interpret the ratios calculated in

i Discuss and rank each company in your portfolio in terms of investment prospect based on the ratios

calculated.

ii Explain clearly the reasons for your ranking. look at the trends over the years and discuss growth

potential

iii. Compare, evaluate and discuss the ratios for your portfolio of firms selected against the industry

averages. If industry averages are not available, just compare the ratios of the firms in your portfolio

iv Which of the ratios calculated provides the best measure of the valuation of a firm? Clearly explain

reasons for your answer.

v Discuss problems if any with financial analysis eg is the data for determining the ratios available; do

the ratios reflect the true performance of the company evaluate both qualitative and quantitative

information; were you able to identify earnings management from the data provided and your analyses,

etc

vi Using dividend information provided in the audited reports of each firm in the portfolio:

i calculate the rate of change in dividend per share ie dividend growth dividend per share yr dividend per share yr dividend per share yr over the fiveyear period.

ii Is the dividend growth rate constant for each firm over the year period? Explain.

iii Calculate the average change in dividend over the fiveyear period average growth rate cumulative change in dividend# of years

Important: make sure that all three companies you select pay dividends ie dividend information is shown in the audited report.

vii. Using the appropriate dividend model eg dividend growth model, zerogrowth model, nonconstant

growth model and the average growth rate for the fiveyear period determined in :

i calculate the equity valuestock price of each firm in your portfolio over the past years DIVre gd

Note: use dividend per share rather than dividend amounts Use the average industrys current rate of return ie discount rate and if that is not available then assume a rate of return of over the past years.

viii. Plot the equity values for each of the firms in your portfolio for the years on the same graph.

i Show the curves for each firm clearly.

ii Evaluate the trends in share value for each firm over the fiveyear period and comment on those

trends.

ix Calculate for each firm in the portfolio the future dividends for the next years. Use the most recent

dividend amount paid and the average growth rate determined in Formula: Dt D gdt; where

D is dividend per share in prior year, gd is dividend growth rate, and t is the number of periods being determined

x Using the appropriate dividend model, calculate the equity value for each of the firms in your portfolio

for the next five years DIVre gd Note: use dividend per share rather than dividend amounts Use

the average industrys current rate of return ie discount rate If this is not available, assume a rate of

return of for the next five years.

xi Rank each of the firms in the portfolio based on calculations in to

i Explain clearly the reasons for your ranking include macroeconomic and industry factors, internal

business factors, risks and strategies for mitigation, etc

ii Provide evidence where necessary.

Using your calculations from above ratios and share valuation:

i provide recommendations as to whether to invest in or two of the three, or all three firms, giving clear and logical reasons for your selection. Take into consideration the relationship between risk and return.

ii What are the future prospects for each of the firms in your portfolio? Clearly explain the assumptions

if any the assessment of future prospects are based on