Evaluate the adequacy of standard deviation

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Reference no: EM132170584 , Length: word count:2000

Case Analysis - Individual

Learning Outcomes

b) Analyse financial information and evaluate financial performance of a business.

c) Apply time value of money to the valuation of a variety of cash flows, securities and projects leading to sound investment and financing decisions.

d) Analyse risk and return associated with investments.

e) Apply various capital budgeting techniques to investment decision making.

f) Analyse the cost of capital and explore its link to the capital structure of an organisation.

g) Analyse working capital and payout policies and their impact on the liquidity position of a business.

Instructions:

(a) From the list of ASX200 companies below choose any 2 companies NOT from the same sector. Evaluate the capital structures of the two companies over the most recent 5 years and discuss how similar or different they are from their industry average capital structures. Critically comment on what factors could have influenced the capital structures of both firms over the period. What theory of capital structure do you think closely describes the capital structure of each of the companies?

(b) Having examined the capital structures, determine the weighted average cost of capital (WACC) of the companies.

(d) You have inherited $5 million from your late grandfather and are considering investing in shares of one of the two companies. Perform a valuation of the two stocks using two approaches, a discounted cash flow approach and the other a relative valuation approach.

(e) Using the results of the valuation above, together with an analysis of how the two companies have fared with regards to risk and return over the most recent 5 years, decide which one to invest in. You should use more than one metric of risk and return in your analysis.

(f) Would your decision change if you consider other factors (qualitative or otherwise) that pertain to these companies?

(g) Critically evaluate the use of standard deviation as a measure of risk of investing in shares. From your research suggest better methods than standard of measuring risk.

In addition to the above you will also be assessed on the following:
(h) Content, Audience and Purpose

(i) Critical reasoning, presentation and defence of an argument and/or position

(j) Analysis and Application with synthesis of new knowledge

(k) Use of academic conventions and sources of evidence

(l) Effective communication

Attachment:- ASSESSMENT.rar

Reference no: EM132170584

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Reviews

len2170584

11/19/2018 3:47:45 AM

This assignment must adhere to the following: 1. This assignment must be prepared and submitted individually. 2. You must prepare a Business Report in a Word Document with Excel workings embedded into the Word document. The instructions to embed the Excel workings are as follows: INSTRUCTIONS TO EMBED AN EXCEL FILE INTO A WORD DOCUMENT A. Open your Assignment in Word and Click the “Insert” tab. B. Click the “Object” button on the Text section of the ribbon. Click “Object” from the small drop- down menu. C. When the Object window opens, click the “Create from File” tab. Browse to the Excel file containing your analysis in the directory where it is located and double-click it to embed it into the Word document. Ensure that you have ticked the box that allows you to embed the Excel file as an icon. 3. The Word document must be properly referenced using the APA referencing style. Wikipedia and Investopedia not acceptable academic sources. Note that the Reference list, appendices and calculations are not included in word count.

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