Discuss how successful the selected firm has been at delivering value to its shareholders

Based on the systematic comparative appraisal of the selected firm’s historical performance: Discuss how successful the selected firm has been at delivering value to its shareholders.

 

Corporate Finance & Crowdfunding

Description

see assignment_brief.pdf for full assignment brief and assignment_support_notes.pdf for guidance

The assignment is designed to test your understanding of corporate finance concepts and principles. Always remember that this is not a strategy or marketing assignment so focus mainly but not exclusively on the finance.

You will need to submit an essay-style report with a maximum word count (excluding tables figures references appendices etc) of 3000 words. In your submission you must also submit the supporting Excel (.xlsx) file showing your calculations as a separate file.

Any numbers used should be rounded to a sensible level such as 1dp

References approx. 25 compromising of journals books and reliable websites

Review PowerPoint file: ‘assignment support notes.pdf’

Assignment Task

Select a company listed on an internationally recognised and well-established Stock Exchange (such as London New York Tokyo Mumbai). It is important that historical share and stock index price data and financial statements for the selected firm and its competitors is available for a minimum of 5 years. It is preferable to select a firm operating in a single industry but not the financial industry since their accounts are more complicated and are regulated through central bank oversight.

Introduction to the selected organisation (what it is who its key competitors are how it operates its industry sector) must be included

Part 1 – historical performance (over past 5 years)

Based on the systematic comparative appraisal of the selected firm’s historical performance:

  • Discuss how successful the selected firm has been at delivering value to its shareholders
  • Analyse the historical total shareholder return (TSR) and economic value

added (EVA) for the selected firm and its principal competitors (or appropriate benchmarks). You can also pursue or discount SVA / MVA and define you own value drivers based on the organisations annual statement. To estimate EVA: estimate cost of capital x how much capital it has compared to what they actual earn this explains whether they are creating more or less value then the cost of capital indicates; TSR – note down any significant events changes in price up or down price return plus dividends; choose an appropriate benchmark • Although a full ratio analysis for the company is not required and will not be assessed you may find a ratio analysis supplemented by analysts’ and journalists’ reports on the company helpful in analysing its past performance and as a guide to future performance. you can consider net asset value (total asset minus total liabilities) how has it changed; comparable ratios (price to earnings enterprise value etc…). when looking at evaluations it is good to look at relative evaluation. This should be compared with competitors and previous history data.

For comparisons you should look at other firms within the same industry as your selected firm to comment on the firms performance using certain financial values and ratios.

Part 2 -prospective performance

Evaluate the current shareholder value of the selected firm.

  • Apply discounted flow techniques (DCF) to the selected firm’s projected free cash flow (FCF) performance to determine its current shareholder value. This is derived from the selected firm’s projected financial statements (Profit & Loss account Balance Sheet and Cash Flow statement).
  • Your projections including the firm’s terminal value must be based on realistic and plausible assumptions that can be fully justified. The projection horizon should be a minimum of 5 years.
  • The current shareholder value is obtained by discounting the future FCFs at the weighted average cost of capital (WACC) which should be estimated from the raw data.

• A full sensitivity analysis on the more significant assumptions should be conducted. As part of the discussion you should comment on what influenced the share price the most

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