Based on the company Metcash Trading Limited (MTS), describe the following:
Identify non-marginal investors To assess a company, we need to consider the future cash flow of the business; its sustainability and profitability. This is an important element of the analysis work. However, future cash flows must be discounted using the appropriate rate. CAPM is often used as an approximation for the rate. However, when there is a significantly high percentage of non-marginal investors, other methods must be Page 4 of 1 employed. In this assignment, we are only going to compare CAPM with DGM. Your investigation into the type of investors of your company will assist in determining whether CAPM should be relied upon. Focus your attention on identifying non-marginal investors; founders, insiders, directors, related companies like suppliers. Provide evidence of your research. Individual names, family trusts, private companies (mostly), share plans and DRPs are all non-marginals. When there is a high percentage of non-marginal investors, other calculation methods (such as DGM) must be considered on top of CAPM. No marks are awarded for your effort in identifying marginal investors. It is the non-marginal investors that you need to identify and discuss. Nominees, custodians, banks and investment companies are all marginal investors; ignore them in your discussion. Make sure you create a table listing the percentage of marginal vs non-marginal and then discuss. Identify non-marginal investors To assess a company, we need to consider the future cash flow of the business; its sustainability and profitability. This is an important element of the analysis work. However, future cash flows must be discounted using the appropriate rate. CAPM is often used as an approximation for the rate. However, when there is a significantly high percentage of non-marginal investors, other methods must be Page 4 of 1 employed. In this assignment, we are only going to compare CAPM with DGM. Your investigation into the type of investors of your company will assist in determining whether CAPM should be relied upon. Focus your attention on identifying non-marginal investors; founders, insiders, directors, related companies like suppliers. Provide evidence of your research. Individual names, family trusts, private companies (mostly), share plans and DRPs are all non-marginals. When there is a high percentage of non-marginal investors, other calculation methods (such as DGM) must be considered on top of CAPM. No marks are awarded for your effort in identifying marginal investors. It is the non-marginal investors that you need to identify and discuss. Nominees, custodians, banks and investment companies are all marginal investors; ignore them in your discussion. Make sure you create a table listing the percentage of marginal vs non-marginal and then discuss
