Overview
This is a group assignment. There are two parts.
- Part 1 is based on a case study and will assess your research, analytical and written skills as well as your understanding of share valuation techniques. The topic draws from material covered in Week 6 - Chapter 10 Share Valuations. All questions weredeveloped from your prescribed textbook, Managerial Finance - Principles and Applications by Titman et al. (2016).
Important Note: To compete part 1 you will need to purchase a recent copy of the Australian Financial Review [i.e. not less than 3 months old].
- Part 2 requires you to consider the approach Warren Buffet uses to do a share valuation Additional resources may be uploaded to FINC20018
- Part 3 requires you to compare Warren Buffet's approach to share valuation and the share valuation methodology in Chapter 10 and recommend which approach you prefer and why.
Specific task requirements are detailed in Section 3 - Task Requirements and Marking Criteria.
What is a Group?
- For campus students: a group can be a group of 1 or 2 students.
- For distant learning (FLEX) students: while a group of 1 is likely to be more practical, you also have the option of forming a group of 2 students.
- Important Note 1: Students working as a group, only one member of the group will submit the assignment online by uploading it in Moodle.
Task Requirements
The task is based on a real-world case study and as stated, there are three parts.
You are required to present answers to some questions in a single report.
To demonstrate in-depth of understanding of share valuation techniques, it is expected that you extend your research beyond the prescribed textbook when making comparisons about share valuation techniques.
The Case Study
Obtain or purchase a recent [i.e. less than three months old] copy of the newspaper Australian Financial Review or access the information online.
Refer to the page that provides details of shares currently traded on The ASX.
TASK 1
Just like an investor, select ten listed ordinary share companies from and create a portfolio. For instance, select 3 shares from list of Information Technology, 4 shares from Energy and 3 from Financials
1. Using equity valuation methods taught in Week 6 and described in Chapter 10 calculate the value of each selected ordinary share investment in terms ofyour required rate of return.
Hint: To answer the question, you will need to calculate the value of the companies selected, and to do that you need to demonstrate that you have learnt something about equity valuation. In your analysis, consider valuing the shares using the ordinary share discounted dividend model and then the comparable approach to valuing ordinary shares. Consider the principles that will determine the value of a company in your report.
2. Rank the ten investments in order of desirability. Explain why you have ranked them in this way.
3. Which investment of the ten would you select? Why?
TASK 2
According to Warren Buffet, "Intrinsic value is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised. Two people looking at the same set of facts, moreover--and this would apply even to Charlie and me--will almost inevitably come up with at least slightly different intrinsic value figures."
Warren Buffet is one of the richest men in the world.
Research and summarise some interesting facts about Warren Buffet that you can relate to the companies you have selected from the Financial Review to analyse.
There are several YouTube featuring interviews and/or commentary by Warren Buffet about how to invest wisely. Below are three to get you started. Skip the ads, watch them and summarise the key points that he makes in relation to investment.
- Warren Buffet Best Advice on Successful Investing
- Warren Buffet on Why He'll Never Sell a Share of Coke Stock
- Warren Buffet Financial Rules to Live By
TASK 3
- Compare Warren Buffet's approach to share valuation and the share valuation methodology in Week 6 - Chapter 10 and recommend which approach you prefer with one reason why.
Important Information:
- Response to case study must be in report format and include an executive summary, table of contents,introduction, body with suitable headings and sub-headings,conclusion and wide variety of references.
- Report fonts must be either Arial or Times Roman 12 pt and 1.5 spacing for narrative, 16 pt bold for major headings and 14 pt bold for sub-headings.
- Inclusion of diagrams and tables to support the response is strongly encouraged.
- All supporting material must be properly referenced using APA in-text referencing formats
- Support for the response should draw from the Warren Buffet You Tube clips and/or related websites
- Word count is 1,350 words maximum (i.e. 6pages maximum) excluding in-text referencing, diagrams and tables.