Reference no: EM131661038 , Length: word count:2000

Corporate Finance Assessment

Question 1 -

Obtain the financial statements for Woolworths and Telstra.

a) For each company, complete the following schedule with end-of-financial-year balances for the period of 2012 to 2016, respectively.

b) For each company, comment on (i) the differentials between debt/equity (BV) and debt/equity (MV); and (ii) whether debt/equity (BV) or debt/equity (MV) is the more appropriate measure when evaluating the debt policy of the company.

c) For each company, comment on (i) the differentials between dividend payout ratio (BV) and dividend payout ratio (MV); and (ii) whether dividend payout ratio (BV) or dividend payout ratio (MV) is the more appropriate measure when evaluating the return on stock investment in the company.

d) As the CEO of each of the two companies, explain and justify its debt policy from the perspective of

i) Characteristics of the assets;

ii) Asset utilization of asset (ROA);

iii) Profitability (ROE);

iv) Riskiness of the company (beta);

v) Dividend Payout Ratio (MV).

In another word, explain the appropriateness of the debt policy from each of the five factors, respectively.

e) Please explain, generally, whether the debt policy is largely similar or different between the two companies, based on your answer in d). In another word, would the debt policies adopted depend on the characteristics of the company? Please explain.

f) From your answers in d) and e), what factors and how they would affect the debt policy of a company generally? Please summarise.

Attachment:- Assignment File.rar