Financial Analysis Sample Assignment
Added on 2021-06-15
21 Pages3623 Words80 Views
Running Head: Valuation method and investment decision0Valuation method and investment decision
Financial Analysis of the Companies1Executive SummaryWith the increasing number of the companies in the market, investors have to analysisfinancial performance risk factor and return offered by the companies to investors. Investorneeds to use different valuation methods such as ratio analysis, share price analysis, anddividend discount model to value the shares of the companies. It is observed that Dividenddiscount model and Price earnings are the main methods which are used by the investors todetermine the future sustainability and share price of company.
Financial Analysis of the Companies2Table of ContentsExecutive Summary...............................................................................................................................1Introduction...........................................................................................................................................3Task 1....................................................................................................................................................4Answer to question no-1........................................................................................................................4Use of equity valuation method.........................................................................................................4Computation of the Return on equity of the companies...............................................................4Computation of the market price of Shares by using Dividend Discount Model...................................5Computation of the Price earnings Ratio...............................................................................................7Rank the ten investments in order of desirability..................................................................................8Which investment of the ten would you select................................................................................10Why the investment option selected................................................................................................10Task-2..................................................................................................................................................10Research and summaries some interesting facts about Warren Buffet.................................................10Task 3..................................................................................................................................................13Compare Warren Buffet’s approach to share valuation and the share valuation methodology............13Share valuation Methodology..........................................................................................................14Conclusion...........................................................................................................................................14References...........................................................................................................................................15Appendix.............................................................................................................................................19
Financial Analysis of the Companies3Introduction Investors are the persons who invest capital in business. It is observed that investmentdecision for investing capital in particular stocks depends upon the several factors such asrisk associated, beta, Stock return and opportunities available in market. In this report, 10companies have been selected from the three different business sectors to identify whichvalue of stocks will offer good return as compared to others. After that in the end, WarrenBuffet valuation method is used to compare the share value and offered return available onthe invested capital. In the end, comparison between the valuation methods and WarrenBuffet logical share valuation method has been used.
Financial Analysis of the Companies4Task 1Answer to question no-1Use of equity valuation method There are 10 listed companies that have been selected from the three differentindustries. Computation of the cost of equity of company by using CAPM method (Yahoofinance, 2018)CAPM MethodRFRisk free rate of returnRMMarket premium Betarisk of the Company Cost of equity RF+(RM-Rf)B(Owens, 2018).Computation of the Return on equity of the companies PARTICULARSPRICEOF SHARESGROWTH COST OF EQUITY Computed by using the CAPM model RISK FREERATE OF RETURN BETAMARKET RATEINFORMATION TECHNOLOGYADACEL TECHNOLOGIESLIMITED0.05-0.37%7%2.77%1.256.5%ANIMOCA BRANDS CORPORATION LIMITED0.550.17%11%2.77%2.256.5%Altium22.281.67%7%2.77%1.16.5%ENERGY
Financial Analysis of the Companies5AUSTRALIS OIL & GAS LIMITED0.39-20.00%9%2.77%1.37.7%AUS ASIA MINERALS LIMITED0.011.00%6%2.77%0.687.7%WORLEYPARSONS LIMITED17.441.99%11%2.77%1.717.7%APAC COAL LIMITED2.430.83%10%2.77%1.47.7%FINANACIALSWestpac29.58-0.87%8%2.77%1.018.2%National Austtralian Bank28.4-0.63%9%2.77%1.188.2%SUNCORP GROUP LIMITED13.93-0.29%8%2.77%0.898.2%(Yahoo finance, 2018).Computation of the market price of Shares by using Dividend Discount Model This dividend discount model has been used to compute the future share price of companies Dividend Discount ModelPrice of the company D1/ Ke-GD1Dividend payment Ke=Cost of the equity G=Growth rate ParticularNet incomDividend Dividend RetentioGrowth KED1 (In KE-Share
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