Finance Case Study : Assignment
Added on -2020-07-22
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FINANCE CASE STUDY
TABLE OF CONTENTSEXECUTIVE SUMMARY.............................................................................................................1Comparison of profit of firms..........................................................................................................1Computation of intrinsic value of shares.........................................................................................3Intrinsic value of bond.....................................................................................................................3Capital structure ratios.....................................................................................................................4Weigthed average cost of capital.....................................................................................................4CONCLUSION................................................................................................................................4REFERENCES................................................................................................................................6Table 1Net profit after tax for Macro..............................................................................................1Table 2Profit after tax comparison of firms....................................................................................1Table 3Expected holding period return of Macro............................................................................1Table 4Expected holding period return of M&S.............................................................................1Table 5Expected holding period return of Next plc........................................................................2Table 6Expected holding period return of KGF..............................................................................2Table 7Mean, standard deviation and covariance of firms..............................................................2Table 8Fair value of firms shares....................................................................................................3Table 9Input value of bond..............................................................................................................3Table 10Value of bond....................................................................................................................3Table 11Debt equity ratio of Macro................................................................................................4Table 12Income gearing ratio..........................................................................................................4Table 13Input for WACC................................................................................................................4Table 14Calculation of WACC.......................................................................................................4
EXECUTIVE SUMMARYThis report examines the performance of the Macro and other firms in terms of variedparameters. Report main findings are that profit after tax valued at 98000000 and it is earningvery less amount of profit in its business relative to peer firms. Low rate of return is expected tobe earned on Macro then other peer firms. However, shares of Macro are underpriced but moreaffected by slight change in index. It is also identified that firm needs to restructure its capitaland need to reduce portion of debt in capital structure.Comparison of profit of firmsTable 1Net profit after tax for MacroPBIT140000000Corporate tax rate0.3Tax amount42000000Profit after tax98000000Net profit after tax value is 98,000,000 and in this regard corporate tax percentage valueis subtracted from profit before income tax and by doing so profit after tax is computed in thereport (Next plc, 2017).Table 2Profit after tax comparison of firmsMacroKGFM&SNext plcPAT98000000610,000,000117,000,000635,000,000It can be observed from the table give above that profit after tax is high in case of nextplc and KGF. Apart from ths, in case of Macro and M&S profit value is 98 million and same is117 million in case of these firms. It can be said that Next plc and KGF are much profitable thenother firms. Table 3Expected holding period return of MacroRFR2%Beta0.0016Return of market14%Expected holding period return2%Table 4Expected holding period return of M&SM&SRFR2%Beta1.0647053761 | P a g e
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