An Analysis of the Companies Portfolio to Create Value on the Inv
Added on 2021-06-17
22 Pages2960 Words167 Views
Running Head: Financial Analysis of the Companies 0Financial Analysis of the Companies
Financial Analysis of the Companies1Executive SummaryWith the ramified changes in economy, investors needs to analysis the stock price,return available on the equity investment and beta of the company to create value on theirinvestment. It is observed that investors needs to analysis whether the undertaken companiesin the portfolio will create value on the investment or not. It is observed investors needs toselect those companies which will have lower beta and market risk premium.
Financial Analysis of the Companies2Table of ContentsExecutive Summary...............................................................................................................................2Introduction...........................................................................................................................................2Task 1....................................................................................................................................................3Answer to question no-1.......................................................................................................................3Use of equity valuation method........................................................................................................3Dividend discount model...................................................................................................................3Computation of the Price earnings Ratio...............................................................................................8Rank the ten investments in order of desirability..............................................................................9Which investment of the ten would you select...............................................................................12Why the investment option selected...............................................................................................12Task-2..................................................................................................................................................12Research and summarise some interesting facts about Warren Buffet...............................................12Task 3...................................................................................................................................................15Compare Warren Buffet’s approach to share valuation and the share valuation methodology.........15Share valuation Methodology..........................................................................................................16Conclusion...........................................................................................................................................17References...........................................................................................................................................17Appendix.............................................................................................................................................19
Financial Analysis of the Companies3Introduction It is analyzed that Investors needs to assess whether the particular company in whichthey will invest their capital will create value on their investment or not on the basis ofdifferent valuation method. The profitability, rate of return, weighted average cost of capitalis some of the factors which affect the share price of company. In this report, valuationmethod is used to value the share undertaken in this report. After that, approach WarrenBuffet has been used for the valuation of the share. In the end, comparisons of the WarrenBuffet’s approach with the share valuation have been done to evaluate the best share pricevalue of these selected companies.
Financial Analysis of the Companies4Task 1Answer to question no-1Use of equity valuation method In order to compute the equity value of these 10 selected companies, Capital AssetsPricing model will be used to determine the return on capital employed (Yahoo finance,2018).CAPM Method RFRisk free rate of returnRMMarket premium Betarisk of the Company Cost of equity RF+(RM-Rf)BDividend discount model After that, Dividend discount model will be used to compute the share price ofcompany (Yahoo finance, 2018).PARTICULARSPRICEOFSHARESGROWTH COST OF EQUITYComputed by usingthe CAPM model RISK FREERATE OFRETURN BETAMARKETRATEINFORMATIONTECHNOLOGYCOMPUTERSH17.57-7%2.77%1.6.5%
Financial Analysis of the Companies5ARE LIMITED0.28%04WISETECHGLOBAL13.250.15%12%2.77%2.396.5%Altium22.281.67%6%2.77%0.826.5%ENERGYBHP Billiton 50.3-0.10%9%2.77%1.29157.7%CALTEXAUSTRALIALIMITED30.52.11%7%2.77%0.917.7%WORLEYPARSONS LIMITED17.441.99%11%2.77%1.697.7%APAC COALLIMITED2.430.83%26%2.77%4.827.7%FINANACIALSCOMMONWEALTH BANKOF AUSTRALIA70.94-0.06%8%2.77%1.018.2%
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