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[pdf] Financial Analysis of a Selected Company

   

Added on  2021-06-15

26 Pages4103 Words34 Views
Running Head: Valuation method and investment decision0Valuation method and investment decision

Financial Analysis of the Companies1Executive SummaryThis report emphasises upon the share valuation methods and investment decisions ofthe investors which are undertaken to create value on the investment. It is observed that thereare several investment methods which are used to identify the potential value creation stakesin market. The Warren Buffet considers several factors such as profitability, return on capitalemployed, financial leverage and market share of company before investing in the particularstocks. In this report, all the internal and external factors need to be analyzed before investingcapital in the business. There are several companies and the valuation methods have beenused to evaluate whether the investors should invest their capital in these companies or not.

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...................................................................................6Rank the ten investments in order of desirability.......................................................................6Which investment of the ten would you select.....................................................................15Why the investment option selected.....................................................................................15Task-2.......................................................................................................................................15Research and summaries some interesting facts about Warren Buffet....................................15Task 3.......................................................................................................................................16Compare Warren Buffet’s approach to share valuation and the share valuation methodology..................................................................................................................................................16Share valuation Methodology...............................................................................................17Conclusion................................................................................................................................17References................................................................................................................................18Appendix..................................................................................................................................20

Financial Analysis of the Companies3Introduction With the increasing ramified economic changes, investors are the person who investstheir capital in company with a view to create value on the investment.There are several factors which need to be considered by investors before investing capital inparticular stocks such as return, risk and opportunities available in market. All companieshave been selected from different business sectors such as information technology, energysector and financial market sectors. After that, in the end, Warren buffet valuation methodshave been compared with other valuation methods (Andalib, Tavakolan, & Gatmiri, (2018).All the companies have been selected from the information technologies businesssector, energy sector and financial market sector. In the end, comparisons between theWarrant buffet valuation theory and dividend discount model and PE ratio has been done(Zuzik, et al. 2018).

Financial Analysis of the Companies4Task 1Answer to question no-1Use of equity valuation method In this part, 10 companies from the different industry sectors have been selected(Guerrini, Vigolo, Romano, and Testa, 2018).Capital assets pricing model and Discount valuation method have been used toidentify the value of the stocks in market (Yahoo finance, 2018).Formula to compute return on equity CAPMRF+ (RM-RF) BThe RF stands for the risk free rate of return, RM stands for Risk of the marketB= Beta of the CompanyComputation of the Return on equity of the companies Computation of the Cost of equity of company by using the CAPM method PARTICULARSPRICE OF SHARESGROWTH COST OF EQUITY Computed by using the CAPM model RISK FREE RATE OF RETURN BETAMARKET RATEINFORMATION TECHNOLOGYADSLOT LTD0.025-0.40%7%2.77%1.256.5%ASSEMBLEBAY LIMITED0.0.190.20%11%2.77%2.256.5%Altium22.281.107%2.77%1.6.5%

Financial Analysis of the Companies5%1ENERGYAUSTRALIS OIL & GAS LIMITED0.3910.00%9%2.77%1.37.7%ALGAE.TEC LIMITED0.0281.50%6%2.77%0.687.7%ADX ENERGY LTD0.0111.50%11%2.77%1.717.7%ADAVALE RESOURCES LIMITED2.430.53%10%2.77%1.47.7%FINANACIALSAUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED27.9825.00%8%2.77%1.018.2%AUSTRALIAN FINANCE GROUP LTD22.4-26.00%9%2.77%1.188.2%AUSTRALIAN COMMONWEALTH GOVERNMENT LOANS25.2-30.00%8%2.77%0.898.2%(Yahoo finance, 2018).

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