The University of Sydney Business School

Finance Discipline

FINC 2011 Corporate Finance 1

Major Assignment

Due Date: 4pm Thursday 20 Oct 2016

ASX- listed Company Valuation Report

This report requires you to undertake a valuation exercise on an Australian Securities Exchange (ASX) listed company. You are required to use the models presented in the course to calculate a share price for the company and then critically evaluate the value you have determined.

Required:

1. Select a publicly-listed company on the ASX that has previously made dividend payments. The selected company should not be classified by the ASX as a ?Financial?, ?Metals and Mining? or ?Utilities? company.

2. Using appropriate historical data calculate a beta for the company you have selected. Compare your beta to those published by research houses (ie Morningstar etc) for your chosen company. Are the values different? Why?

3. Using the CAPM model determine an appropriate discount rate for your company. Use a market risk premium of 6.5% p.a. in your calculations..

4. Using a constant growth rate of 8% pa. (commencing immediately) in the constant dividend growth model, determine a current stock price for your company.).

5. Suppose that the previous dividend growth rate was only expected to apply for 5 years before reverting to a long-term growth rate consistent with the forecast inflation rate. Demonstrate the impact this would have upon your stock valuation.

6. Now disregard the previous growth forecasts. Using your own variables, determine a current stock price for the company that you think might represent something close to its fair value. Why do you believe the variables you have chosen give a more appropriate value than those used in questions 4 and 5? Discuss.

Formatting and Presentation:

a. The assignment should be no more than 12 pages, with 1.5 line spacing and size 12 Times New Roman or Arial Font. Marks will be reduced by 10% for each page that the assignment exceeds 12 pages. Hence your mark will be reduced to zero if the assignment exceeds 22 pages. Brevity and conciseness are key ingredients of a highly successful report. You will be penalised for inappropriate formatting..

b. Make sure you use proper referencing in your assignment. All essays must include a list of references in academic form using the author - date (Harvard) citation style. You will be penalised if you use inappropriate referencing.

c. Pay particular attention to presentation. A significant component of your mark will be based on presentation. Avoid overdoing formatting, and ensure that the assignment is very clear, logical and professional. Pay attention to grammar. Clear and logical presentation is a major challenge in assignment preparation. Preparing a concise assignment is another major challenge. Every part of the assignment should somehow add to the end result otherwise it is superfluous and distracting.

What?s included in the 12 page limit?

- Executive summary

- Assignment body

- Tables

- Diagrams

What?s excluded from the 12 page limit?

- Title page

- References

- Appendices

The University of Sydney Business School Finance Discipline FINC 2011 Corporate Finance 1 Major Assignment Due Date: 4pm Thursday 20 Oct 2016 ASX- listed Company Valuation Report This report requires you to undertake a valuation exercise on an Australian Securities Exchange (ASX) listed company. You are required to use the models presented in the course to calculate a share price for the company and then critically evaluate the value you have determined. Required: 1. Select a publicly-listed company on the ASX that has previously made dividend payments. The selected company should not be classified by the ASX as a 'Financial', 'Metals and Mining' or 'Utilities' company. 2. Using appropriate historical data calculate a beta for the company you have selected. Compare your beta to those published by research houses (ie Morningstar etc) for your chosen company. Are the values different? Why? 3. Using the CAPM model determine an appropriate discount rate for your company. Use a market risk premium of 6.5% p.a. in your calculations.. 4. Using a constant growth rate of 8% pa. (commencing immediately) in the constant dividend growth model, determine a current stock price for your company.). 5. Suppose that the previous dividend growth rate was only expected to apply for 5 years before reverting to a long-term growth rate consistent with the forecast inflation rate. Demonstrate the impact this would have upon your stock valuation. 6. Now disregard the previous growth forecasts. Using your own variables, determine a current stock price for the company that you think might represent something close to its fair value. Why do you believe the variables you have chosen give a more appropriate value than those used in questions 4 and 5? Discuss. Formatting and Presentation: a. The assignment should be no more than 12 pages, with 1.5 line spacing and size 12 Times New Roman or Arial Font. Marks will be reduced by 10% for each page that the assignment exceeds 12 pages. Hence your mark will be reduced to zero if the assignment exceeds 22 pages. Brevity and conciseness are key ingredients of a highly successful report. You will be penalised for inappropriate formatting.. b. Make sure you use proper referencing in your assignment. All essays must include a list of references in academic form using the author - date (Harvard) citation style. You will be penalised if you use inappropriate referencing. c. Pay particular attention to presentation. A significant component of your mark will be based on presentation. Avoid overdoing formatting, and ensure that the assignment is very clear, logical and professional. Pay attention to grammar. Clear and logical presentation is a major challenge in assignment preparation. Preparing a concise assignment is another major challenge. Every part of the assignment should somehow add to the end result otherwise it is superfluous and distracting. What's included in the 12 page limit? - Executive summary - Assignment body - Tables - Diagrams What's excluded from the 12 page limit? - Title page - References - Appendices