Reference no: EM132075193

Guidelines:

For this assignment, you are encouraged to use the information provided on the firm's corporate websites together with the following sources:

OneSource: Global Business Browser

Australian Stock Exchange

Yahoo Finance

Reuters

News sources such as those secured through the Library's ANZ Newsstream and Factiva databases are also likely to be relevant.

Your report should include:

A brief executive summary.

Introduction.

Body (use appropriate headings and sub-headings as relevant sign-posts).

Conclusion

Required:

ARB Corporation Limited designs, manufactures, distributes, and sells off road motor vehicle accessories and light metal engineering works in Australia, the United States, Thailand, the Middle East, and Europe. The company operates approximately 61 ARB stores in Australia.

ARB Corporation Limited was founded in 1975 and is headquartered in Kilsyth, Australia. ARB is listed on the Australian Stock Exchange and reported total revenue for the 2017 financial year of almost $385 million.

As part of the finance team of ARB Corporation you have been tasked with reviewing and preparing a report on the capital structure of the firm and critique whether the firm has been successful in maximising wealth generation for shareholders.

Your report should be 1000 words and cover the following areas:

(i) Using data from the firm's 2017 financial year annual report and other sources assume that the firm ARB has a Beta of 0.89 (Reuters) and that capital return on the market for 2017 was 8.54%:

Categorise the firm's current capital structure into debt and equity.

Calculate the firm's after-tax Weighted Average Cost of Capital.

Using the CAPM calculate whether the firm is providing an appropriate return given its risk

(ii) Compare the firm's capital structure with at least one other firm operating within a similar industry.

(iii) Critically analyse other key financial ratios for ARB.

(iv) Outline any significant changes to have occurred to the firm's capital structure during the past three years.

(v) Critically evaluate the extent to which the firm has been successful in maximising wealth for shareholders in the past three years. In doing so discuss why it is important for the firm to minimise their cost of capital.

(vi) Recommend possible ways in which the firm could adopt an alternative capital structure and lower their cost of capital.