BS220/5158 Managerial Finance

Assignment S2 2016

This assignment requires students to apply concepts covered in the course to the analysis of any publicly listed Australian company. To be completed in groups, the assignment also incorporates a structured group work component.

General instructions:
• The assignment is due by 5 pm Friday of week 11.
• The assignment is to be undertaken in groups of 3 students.
• You are required to check your assignment with Turnitin software for plagiarism purpose.
• The assignment has a word limit of 3000 words (+/- 15%). This excludes the reference list and you can assume a financially literate audience.
• You will need to access and interpret publicly available information from sources such as the Australian Securities Exchange, the Australian Financial Review, the Australian, online databases (such as DatAnalysis, Reuters, Dow Jones, Bloomberg, IBIS World), stock broker research reports, business publications and periodicals.
• Please document sources for any information used in your assignment. Any text taken directly from another source should be clearly identified and referenced.

Assessment criteria:

Content
In assessing this aspect of the assignment, the following will be taken into consideration:
• Scope, depth and relevance of analysis
• Accuracy and currency of information used
• Reasonableness of assumptions made
• Application of appropriate techniques

Structure, formatting and presentation
In assessing this aspect of the assignment, the following will be taken into consideration:
• Consistency in formatting (including such things as font types and sizes, paragraph indentation and the alignment of text)
• How clear and easy to follow your work is for the reader
• How the various parts of the assignment have been prioritised
• Aesthetic impact (ie how good it looks!)

You might like to consider whether any of the following may enhance the presentation of your work:
• Table of contents
• Executive summary
• Headings
• Tables and/or graphs
• Appendices

Expression, punctuation and spelling

In assessing this aspect of the assignment, the following will be taken into consideration:
• Clarity and simplicity of expression
• A high standard is expected in terms of spelling and grammar (use of the spell checking function and careful proof reading should minimise any problems in this regard)

Peer Assessment
Each group member is required to submit a peer assessment form upon completion of the assignment. See Appendix 2 for a copy of this form. Peer assessment forms are to be completed and submitted on an individual basis, not as a group.

As a general rule, all group members will receive the same mark. However, adjustments may be made to the marks of individual group members in situations where their contribution has been inadequate. Any such adjustments will be based on consideration of the peer assessment forms of the group, and (if necessary) discussions with group members.

Content requirements:

1. Give a brief historical overview of your chosen company. Research beyond the company website / annual report is required and focus on issues related to managerial finance.
2. Describe the current business activities.
3. Complete the table in Appendix 1 to summarise the recent financial history of the company.
4. How has capital structure changed over the past five years? This should include identification and description of any changes in the capital structure, related to your description of activities and history in 1 and 2.

5. Identify and discuss the major investment decisions made by the company over the past five years (including divestment decisions).
6. Briefly describe how the major investments you have identified were funded (referring back to sections above where appropriate).
7. Analyse the dividend policy over the past five years.
8. Estimate the ordinary equity beta. Explain any assumptions you make and identify the sources(s) of any information used in your calculations.
9. Use the Capital Asset Pricing Model (CAPM) to estimate the cost of ordinary equity for the company. Explain any assumptions that you make and identify the source of any information used in your calculations.
10. Estimate the (nominal after-tax) Weighted Average Cost of Capital (WACC) for the company. Explain any assumptions that you make and identify the source of any other information used in your calculations.
11. Use the dividend discount model to estimate the value per ordinary share for the company as of 30/09/2016. Justify any assumptions that you make. How does your estimate compare to the prevailing share price of G8 Education as of that date? What factors might account for any difference?
12. For each of the five financial period-ends considered in section 3, calculate the PE ratio at which the company was trading (based on the EPS for the year ending on that date). What does this indicate about the market’s assessment of the company?
Appendix 1: Historical financial information

Financial year ended 2011 2012 2013 2014 2015

Financial performance
EBITDA
Depreciation and amortisation
EBIT
Net interest
Net profit before tax
Income tax expense
Net profit after tax
OEI share of net profit
Net profit after tax attributable to members
Financial position (closing)
Cash
Other current assets
Non-current assets
Total assets
Short-term debt
Other current liabilities
Long-term debt
Other non-current liabilities
Total liabilities
Preference share capital
Ordinary shareholders equity
OEI
Total equity
Market capitalisation
Number of ordinary shares (closing)
Ordinary share price
Market value of ordinary shares (A)
Number of preference shares (closing)
Preference share price
Market value of preference shares (B)
Market capitalisation (A+B)
Ordinary share dividends
Interim dividend (cents per share)
Ex-dividend date
Payment date
Final dividend (cents per share)
Ex-dividend date
Payment date
Total ordinary share dividends
Earnings per share
Weighted average number of shares
(used for basic EPS calculation)
Basic EPS
* Half-year period only