Financial Analysis of Integrated Media

This assignment delves into a comprehensive financial analysis of Integrated Media Technologies Ltd., examining its profitability, capital structure, and market position. It evaluates key financial ratios, including debt-to-equity, and compares the company's performance to industry averages. The analysis also considers current economic conditions and provides recommendations for improving the company's capital structure and investment strategies.

RUNNING Head: Financial analysis of Integrated Media Technologies Ltd
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Name of the student
Topic- Financial analysis of Integrated Media Technologies Ltd
University name

Financial analysis of Integrated Media Technologies Ltd
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Executive summary
This report has shown the clear understanding on the capital structure of the company and
how company could maintain effective capital structure. It is evaluated that there are several
financial tools which could be undertaken for evaluating the business functioning and growth of
business.

Financial analysis of Integrated Media Technologies Ltd
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Table of Contents
Executive summary............................................................................................................4
Introduction.......................................................................................................................5
Answer to question-1.........................................................................................................5
Short term and long term debts of company...................................................................5
Consistency of debt structure of company.....................................................................6
Company and industry operates its debt to influence the proportion of short-term to
long-term debts.......................................................................................................................... 6
Computation of cost of debt...........................................................................................7
Answer to question no-2....................................................................................................8
Company’s cost of equity...............................................................................................8
Evaluate and discuss your company’s revenue, earnings, EPS, dividends and growth
Expectations...............................................................................................................................8
Growth expectation of company....................................................................................9
Computation of PE ratio.............................................................................................. 10
Comparable value........................................................................................................ 10
Additional data and information would be preferred to value of the assets..................11
Answer to question no-3..................................................................................................12
Computation of weighted average cost of capital.........................................................12

Financial analysis of Integrated Media Technologies Ltd
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Explanation of tax rate in relation to WACC...............................................................12
Why there is difference in cost of debt and cost of equity............................................12
Should current liabilities be included in cost of capital?..............................................13
Major value of the WACC calculation.........................................................................13
Integrated Media Technologies Ltd has used WACC in investment decision..............13
Capital structure of company with the relevancy of the industry.................................14
Capital structure and what economic circumstances....................................................14
Answer to question-4.......................................................................................................16
Market analysis............................................................................................................16
Current literature search...............................................................................................16
Uniqueness of Integrated Media Technologies Ltd......................................................16
Conclusion........................................................................................................................17
References....................................................................................................................... 18
Integrated........................................................................................................................ 18

Financial analysis of Integrated Media Technologies Ltd
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Financial analysis of Integrated Media Technologies Ltd
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Introduction
In this report, financial analysis and computation of weighted average cost of capital has
been taken into consideration. There are several points which are included by company while
evaluating its business performance and optimum capital structure.
Present details of Integrated Media Technologies Ltd
Integrated Media Technologies Ltd is a technologies investment, product development and
distribution company. This company has been running its business on international level
Answer to question-1
Short term and long term debts of company
After evaluating the annual report of company, it is considered that Integrated Media
Technologies Ltd was not having short term debts in 2015 and after that it increased its short
term debt to AUD $ 4 million. However, company has maintained AUD $ 3 million short term
debt as compared to industrial average debt (Integrated Media Technologies Ltd, 2016).
Particular 2015 2016 Industrial average debt
AUD in
Million AUD in Million AUD in Million
Short term debts 0 4 7
Long term debts 24 21 27

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Consistency of debt structure of company
The debt and equity structure of company is very viable and has increased its total debt by
approximately AUD $ 1 million in one year. In addition to this, equity capital of company has
also increased through the time. Company has lower equity capital as compared to industrial
average debt. However, debt to equity consistency of company is not effective and company has
high financial leverage (Integrated Media Technologies Ltd, 2016).
Particular 2015 2016 Industrial average debt
$"00
0 $"000
Total debts 24 25 34
Equity share capital 11 14 20
Total capital 35 39 54

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Company and industry operates its debt to influence the proportion of short-term to
long-term debts
Integrated Media Technologies Ltd has zero level of short term debt in 2015 which increased to
AUD $ 4 million in 2016. However, company still has maintained low level of short term debts
as compared to its industrial average debt. In addition to this, to match with the industrial
average debt, company should have increased its long term debt but due to high financial
leverage company has reduced its long term debt to AUD $ 21 million (Integrated Media
Technologies Ltd, 2016).
Particular 2015 2016 Industrial average debt
$"00
0 $"000 $"000
Short term debts 0 4 7
Long term debts 24 21 27
Computation of cost of debt
Computation of cost of debt is 6%
Computation of cost of debt Amount

Financial analysis of Integrated Media Technologies Ltd
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Interest payment 8
Long term debt and short term
debt 227
Tax payment 30%
Cost of debt 3%

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Answer to question no-2
Company’s cost of equity
Cost of equity – It is the amount of payment which is required to be made to equity investors for
their capital. It could be computed as below (Rau and Spinler, 2017)
Cost of equity= RF+(RM-RF)Beta
(Integrated Media Technologies Ltd, 2016).
Computation of cost of equity of company
CAPM
Risk free rate 1.58%
Market rate 15%
Beta 0.04591625
CAPM 2.20%
(Bloomberg, 2017).

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Evaluate and discuss your company’s revenue, earnings, EPS, dividends and growth
Expectations.
The revenue of company has increased by 100% in 2016 as compared to last year data. In
addition to this, company has also increased its earning to ADU $ 4 million which is 100 % more
as compared to last year data. There is only .17 points changes in its EPS in 2016 as compared to
2015. This has shown that company has increased its business efficiency with a view to increase
its overall earning.
Particular (AUD in million) 2015 2016
Revenue 7 14
Earning 2 4
EPS 1.2 1.37
Dividend 0 0
(Integrated Media Technologies Ltd, 2016).

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Growth expectation of company
Integrated Media Technologies Ltd has shown increasing trend of its revenue. On the basis of
past data, company has expectation of increase in its revenue to AUD $ 31.8 million in 2020
(Kundakchyan and Zulfakarova, 2014).
Growth Expectation
Amount of revenue based on
trend
2014 0
2015 1
2016 1
2017 7
2018 14
2019 14.8
2020 18.2
2021 21.6

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2022 25
2023 28.4
2024 31.8
Computation of PE ratio
Computation of PE ratio
EPS of the company 1.37
MPS of Company 0
PE ratio 0
Note= PE ratio has been computed on the basis of MPS and EPS of company. It has been
evaluated that there is no dividend paid to the shareholders so is there no growth rate. Company
will have zero level of PE ratio.

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Comparable value
PE ratio of industry is undertaken on the basis of PE ratio of industry. Therefore, market
price of company would be AUD $ 54.8.
PE Mutiple Valuation
PE ratio of Competitor 40
EPS of the company 1.37
MPS of Company 54.8
Computation of market price of share by following DGM model method
-D1/KE-G
Computation of Market price of the share Amount
D1 0
Ke 2.20%
G 0

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Market price of the share 0
Note- There is no dividend payment and no growth for the company therefore; market price of
company would be zero in the market.
Additional data and information would be preferred to value of the assets
There are various information’s which could be used by company to value of the assets such as
goodwill, impairment test, applicable international rules and regulations, revenue and market
price of company.

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Answer to question no-3
Computation of weighted average cost of capital
Particular Weights Cost
Weighted
cost of
capital
Debt 46.778% 2.8% 1.3%
Equity 53.222% 1.4% 0.8%
WACC 2.1%
Explanation of tax rate in relation to WACC
Tax rate is the amount of rate which reduced the cost of debt by the amount of benefit
available for company by using debt interest. Therefore, set tax rates should be used by company
to reduce the cost of debt by the certain tax rate (Yahoo finance, 2017).
Why there is difference in cost of debt and cost of equity
Cost of debt or expenses paid to rise debt funding is tax deductible expenses. In addition
to this, cost of equity is comparatively set high due to high expectation of shareholders. Interest

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on debt is the charge on the profit. Therefore, the cost of debt should be set low as compared to
cost of equity computed by company for its equity investment.
Should current liabilities be included in cost of capital?
Current liabilities are not included while computing cost of capital of company. It is
evaluated that WACC only assign weight to long term debt and equity capital while computing
weighted average cost of capital.
Pros Cons
Company will have low cost of capital
comparatively while computing WACC
method.
It results to increase in overall return of capital
employed.
It becomes cumbersome to find the true value
of cost of capital.
Major value of the WACC calculation
In WACC the major values are Tax rate, long term debt and equity capital would play
important role. In addition to this, debt assigned to debt and equity will also be taken into
consideration.

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Integrated Media Technologies Ltd has used WACC in investment decision
There are several investment decisions made by company by using weighted average cost of
capital. However, company has reduced its overall cost of capital by increasing its debt portion
and reducing its equity capital investment. In addition to this, company has invested its money in
its other business units after using WACC method to determine whether the accepted project
would give higher return as compared to its project cost of capital (Yahoo finance, 2017).
Capital structure of company with the relevancy of the industry
Particular 2015 2016 Industrial average debt
$"00
0 $"000
Total debts 24 25 34
Equity share capital 11 14 20
Total capital 35 39 54
Integrated Media Technologies Ltd has zero level of short term debt and total AUD $ 24
million in 2015 which increased to AUD $ 24 million in 2016 with a view to match with the

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industrial total average debt. However, company still has maintained zero level of short term
debts as compared to its industrial average debt. In addition to this, to match with the industrial
average debt, company should have increased its long term debt but due to high financial
leverage company has reduced its total debt to AUD $ 25 million (Rau and Spinler, 2017).
Capital structure and what economic circumstances
Company has not maintained effective capital structure. It has to reduce its overall cost of
capital and reduced its financial leverage. Company should raise capital for its business through
share capital and also reduce its debt portion by redeeming its debt holders due. Company should
hold 30 to 7- debt to equity ratio. In this 70% of equity and 30 % would be debt.

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Answer to question-4
Market analysis
Company has increased its overall earning and market price. In addition to this, company
has to identify all the internal and external factors before implementing proper level of strategic
planning. Company has increased its overall earning but as compared to its market Player
Company has shown less increment in its market price and profit earning (Yahoo finance, 2017).
Current literature search
The main current news of company is related to showing
Uniqueness of Integrated Media Technologies Ltd
The main uniqueness of company is to sell its cost effective and unique products in market to
satisfy its clients’ needs and demand. Company is having effective strategic alliance and made
effective communication between all of its business units. Company has developed shareholders

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Conclusion
After evaluating various factors and data of the company, it is evaluated that company
could use WACC and cost effective method to identify the best possible investment options. Now
in the end it could be inferred that, reducing debt of the company will simultaneously decrease
the overall financial leverage of company.