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Analysis of Market Capitalization Assignment PDF

   

Added on  2021-06-30

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Assignment 2

Contents Question 1 .............................................................................................................................. 3Question 2 .............................................................................................................................. 4What is the most recent stock price listed for Harvey Norman? ....................................... 4What is the market value of equity, or market capitalisation? .......................................... 4How many shares does Harvey Norman have outstanding?.............................................. 4What is the most recent annual dividend? ......................................................................... 4Can you use the dividend discount model in this case? ..................................................... 5What is the beta for Harvey Norman? ................................................................................ 6What is the yield on government debt? ............................................................................. 6What is the cost of equity for Harvey Norman using the CAPM? ...................................... 6Question 3 .............................................................................................................................. 6Question 4 ............................................................................................................................ 10Question 5 ............................................................................................................................ 12Bibliography .......................................................................................................................... 13

Question 1 The book value of debt is the total amount owed by the company, it is recorded in the books of a company. The book value of debt is used in liquidity ratios to determine if the company has sufficient resources to repay its debt. Notes payable + long-term debt + current portion of long-term debt = Book value of debt. (Bragg, 2020) The book value of equity represents the fund that belongs to the equity shareholders and is available for distribution to the shareholders. It is calculated as the net amount remaining after deducting all of the company's liabilities from its total assets. (Investopedia, 2021) From figure 1 it is possible to find the book value of debt and book value of equity. Total financial liabilities/debt is 654,862,000, therefore, the book value of debt is 649,613,000. Total financial assets are 955,338,000, therefore, the book value of equity is = 955,338,000 - 649,613,000 = 305,725,000. If Harvey Norman would pay of all their liabilities they would still have this amount left 305,725,000. Figure 2 from HVN annual reportFigure 1 from the HVN annual report

Question 2 What is the most recent stock price listed for Harvey Norman? A stock price is the current price that a share of stock is trading for on the market. The most recent stock price of Harvey Normal Holdings Limited is 5.93 Australian dollars. The open stock price is 6,03, the high is 6.09 and the low is 5.89. This information was collected on 22.03.2021 (@yahoofinanceau, 2021) What is the market value of equity, or market capitalisation? The total dollar market value of a company's outstanding shares of stock is referred to as market capitalization. It is calculated by multiplying the total number of a company's outstanding shares by the current market price of one share, which is commonly referred to as "market cap." (Investopedia, 2021) The market capitalisation for Harvey Norman is 7,39 billion. (@yahoofinanceau, 2021) How many shares does Harvey Norman have outstanding? It is possible to calculate the shares outstanding knowing the information on market capitalisation and the stock price. Like mentioned before shares outstanding is calculated: stock price * outstanding shares = market cap, therefore, it is possible to change the formula to market cap/stock price=shares outstanding. 7,390,000,000/5.93=1,246,205,733 It is also possible to gather the information online. Harvey Norman has 1,25 billion outstanding shares. (@yahoofinanceau, 2021) What is the most recent annual dividend? Dividend yield is the amount of money a company pays shareholders for owning a share of its stock divided by its current stock price and is shown as a percentage. (Investopedia, 2021) Harvey Normans most recent annual dividend is $0.38 per share and the forward market dividend yield is 6.51%. (Marketbeat.com, 2021)

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