Aim
The assignment is designed to test your understanding of corporate finance and explores a number of areas within the module by applying your learning to a real company. There is no perfect answer and therefore you should state your assumptions clearly and make good use of appendices. Remember, this is not a strategy or marketing assignment, so focus on the finance!
Assignment task
Select a company listed on an internationally recognised and well-established Stock Exchange (see below for choice of company):
Discuss how successful the company has been at delivering value to its shareholders over the past 5 years. At a minimum this will require an EVA analysis and an analysis of historical TSR compared to appropriate benchmarks.
Undertake a current valuation of the equity in this company, using the following methods:
• Net Asset Value.
• Comparable Ratios (e.g. P/E, P/B, EV/EBITDA). You will need to look at both past results and comparable firms to analyse and justify an appropriate valuation.
• Discounted Free Cash Flow. You will need to forecast each component for at least 5 years of forecast cash flows and estimate a terminal value, and then discount them back at the appropriate cost of capital. Make sure to justify all of your assumptions.
Attempt to reconcile any differences in value that you obtain by using these different methods and state (with reasons) what value you think is correct for the company.
You must clearly explain all of your assumptions used in the valuations.
Choice of company
Choose a listed company on a recognised stock exchange (e.g. London, New York, Tokyo, Mumbai) for which you can access the share price data over the past 5 years. Do not choose financial firms since these are generally much more complicated to work with. Large companies will provide financial data on the websites, often under a section titled ‘investors'. More information on choosing an appropriate company can be found in the formative assessments. You will see throughout the module that BCE in Canada is used as an example, so you may not choose this company either.
Guidelines
The report should include:
• a key point summary of your conclusions
• graphical illustration, where appropriate
• a bibliography of sources of information used and references to texts or other material drawn upon
• detailed tables, extracts or copies of financial information should be placed in the appendices if they are necessary to understand your report. You should refer to them in the body of the report.
Financial data available includes the FAME (Financial Analysis Made Easy) database maintained in the Bradford University School of Management library. You should request this information from the librarian or go to the ‘How To' resource selection and consult the ‘How To' library section for further information. Other special reports, for example, Company Focus, are available from the Financial Times Share Service, or brokers' circulars issued from time to time by the broking arm of numerous finance houses. Data can also be found online from the company websites, yahoo.com, Bloomberg.com and other internet sources.
No Of Pages/Words : 2000 words