代写 BAFI 1045 Investment Company Valuation Assignment

BAFI 1045 Investment Company Valuation Assignment

BAFI 1045 Investment Company Valuation Assignment

Semester 2 2016

Company: To be advised by local lecturers

Submission Date: Friday 23 rd September 2016, 7:00 PM (Singapore Time)

[Syndicate (Group) Assignment – minimum 3/maximum 6 students per

syndicate]

For this assignment you are required to use publicly available information to analyse a

publicly listed company and prepare a report which provides an assessment of the

company’s current position and future prospects, and which incorporates the use of a

range of valuation models to arrive at an estimate of the company’s share price. To

provide structure the assignment should include the points listed below:

The final submission of the Group Assignment should include the following:

Part 1: Financial Performance and Current Issues (10%)

In this section, students are expected to provide:

• An evaluation of the company’s brief recent history and financial performance

over time and also include peer group analysis.

• Conduct ROE for the company following the DuPont ROE approach and

include peer group comparison.

• An analysis of the current issues facing the company, the industry it operates

in, and explain the impact of the issues on the company’s future earnings.

Part 2: Valuation Models (25%)

The second part/section of the assignment should contain the estimation of the value

of the company’s share using:

? Dividend valuation model (DDM)

? Free Cash Flow to Equity model (FCFE)

? Price/Earnings Ratio model (P/E)

? Price/Book Value Ratio model (P/B)

You areexpected to use the Capital Asset Pricing Model (CAPM)- discussed intopic 3

- to estimate the required rate of return or discount rate needed for each model. For

CAPM estimation, you are required to calculate the following:

1. Beta: You cannot pick a beta value estimated elsewhere (e.g.,

Bloomberg) and use it in your report. Follow topic 3 lecture notes and

relevant chapter (chapter 8) of the prescribed textbook to estimate the

beta of the company and attach details of your work as an appendix.

Also adjust the raw beta using appropriate methodology (refer to topic

3 lecture notes).

2

2. Risk-Free Rate: Use10 years Govt. Bond Yield as a proxy for the

risk-free rate. Indicate any advantages or disadvantages if there are

any.

3. Market Risk Premium: The estimation of the expected market risk

premium is crucial. You must carefully explain what you do and any

assumption you make while estimating market risk premium.

• Risk Premium Estimation

To estimate the risk premium, first, you have to estimate the expected

market return. Assume that expected return on the market portfolio is

related to a Macroeconomic variable, e.g., GDP. Then use the expected

changes in the macroeconomic variable, with appropriate possible

returns and appropriate probabilities (assume these returns and

probabilities based on your analysis of current economic condition) to

estimate expected return on the market portfolio. Then, subtract the

RFR from the expected market return and arrive at your market risk

premium.

Once you estimate these three figures (1-3) you will be able to estimate the

required rate of return or discount rate following CAPM that can be used in

valuation models.

代写 BAFI 1045 Investment Company Valuation Assignment

代写 BAFI 1045 Investment Company Valuation Assignment

Important points to be covered in Part 2:

• Explain any assumptions made in implementing the models.

• Where appropriate, explain how you arrived at the variables

you are using. E.g., it is not enough to say you are assuming a 2

percent growth rate. You would be expected to provide

justification/motivation of how you arrive at 2 percent growth

rate.

• Provide an indication of the sensitivity of your valuations to

changes in the assumptions. E.g. perform sensitivity analysis

for each model.

Part 3: Evaluation/Discussion of the value/price of the company (5%)

Comment on your valuations from part 2, including a discussion of possible

explanations of why your valuations differ from the current/recent share price. If

appropriate, discuss why some of the above models may be unsuitable for valuing the

company.

Maximum word limit for the Company Valuation Assignment is 10,000 words.

Assignment will be marked by 100 then will be scaled down to 40.

3

Note:

Every single member of the syndicate is expected to do a part of implementing the

valuation models. That is to say, there should not be the situation where a member

only does the history and financial performance of the company without any input in

the actual implementation of valuation model.

The focus of this assignment is on the valuation, specifically generating the inputs

into the valuation process and applying valuation models to these inputs to arrive at a

range of share price estimates. The requirements outlined above have been designed

to aid this process.

For the discounted cash flow valuation models the primary requirement is to produce

the appropriate expected return measures and discount rates to use in the models. For

the relative valuation techniques the focus is on estimating the appropriate ratio

multiples.

It is important that forecasts of expected returns reflect the impact of the factors

identified as current issues facing by the company. A common mistake is to identify a

range of issues which will impact on the company’s future earnings or cash flows, but

then produce a set of return forecasts which are simply extrapolations of historical

returns, ignoring the impact of the factors identified as current issues. The

development of return estimates requires judgement; it is not simply a statistical or

mathematical forecasting exercise.

代写 BAFI 1045 Investment Company Valuation Assignment

代写 BAFI 1045 Investment Company Valuation Assignment

References/Resources for group assignment

Reilly, Frank K. and Keith C, Brown, Investment Analysis and Portfolio Management

(10 th Edition), Thomson South-Western (2012): Chapters 10, 11, 12, 13, and 14.

[Much of the material in these chapters is covered in earlier courses and these

chapters should be used for revision purposes].

Search Bloomberg, Yahoo! Finance, Google Finance site for business and financial

market news. These deliver world economic news, stock futures, stock quotes, &

personal finance advice.

Damodaran, Aswith, Investment Valuation [2 nd Edition], available online at:

http://pages.stern.nyu.edu/~adamodar/

Assignment submission procedure

All assignments must be submitted online through the course Blackboard. They must

be accompanied by an assignments cover sheet and submitted through Turnitin on the

blackboard, a plagiarism checking tool. For information on Turnitin see:

Student FAQ, http://www.rmit.edu.au/academicintegrity/studentfaq

Student procedures and account setup (pdf),

http://www.rmit.edu.au/academicintegrity/studentprocedures

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Turnitin student information page,

Student Quick Guide - How to submit an assignment through Turnitin available from

the ADG webpage; http://www.rmit.edu.au/bus/adq

Turnitin will assess your work in approximately one minute, and return a colour

coded response for the originality of the text.

Penalties for late submission

All assignments will be marked as if submitted on time then the mark awarded will be

reduced by 10% each day (or part of a day) it is late. Assignments that are late by 7

days or more will not be marked and will be awarded zero marks.

Presentation of Report

The report is to be presented in the form of a business report. It should have an

executive summary, outlining the main findings, at the beginning. The remainder can

be structured in line with the above points. Calculations should be included in

appendices.

Reports are to be typed in Arial/Times new roman with a font size 11 in single or one

and one-half space on A4 paper. Reports are to be stapled with two staples down the

left-hand side, or secured with a fold-back clip. Do not attach information you have

used in compiling the report, i.e. annual reports, newspaper articles etc., to the report.

Syndicate Composition

Syndicates are strictly limited to a minimum of three (3) and a maximum of six (6)

students. Experience has shown that numbers either smaller or larger than these are

dysfunctional. Syndicate composition is to be finalised by week 2.

All groups are expected to include a CONTRIBUTION STATEMENT detailing, in

exact terms, what each person in the group has done, when you submit the

assignment.

Please note that all students are expected to participate and contribute to the

group assignment. Free riding would not be rewarded. As such students would

be given a zero mark if it is shown that s/he did not contribute enough to the

final output.

代写 BAFI 1045 Investment Company Valuation Assignment

代写 BAFI 1045 Investment Company Valuation Assignment