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Project Report on Finance- Harvey Norman

   

Added on  2020-05-08

11 Pages2529 Words118 Views
Running Head: Finance 1Project report: finance

Finance 2ContentsIntroduction.......................................................................................................................3Research Methodology.....................................................................................................3Findings and discussion on WACC..................................................................................3Discussion and findings on Capital Structure...............................................................4Work reflection.................................................................................................................4References.........................................................................................................................5Appendix...........................................................................................................................6

Finance 3Introduction:Harvey Norman is an Australian comapny which manufactures and deals in the bedding, furniture, communication, computers and consumer electrical products, this comapny operates its business in international market as well. Comapny has around 300 outlets and franchise in Australian market only. The average revenue of the comapny is AUD$ 523 billion. The performance of the comapny is increasing rapidly. Currently, 10000 peopleare working with this comapny (Home, 2017). This comapny is diversifying its market into various new countries to enhance the revenue and grab the market shares. Research Methodology:The calculation of the weighted average cost of capital of the Harvey Norman Plc has been calculated through using various spreadsheet functions and the methods which has been given in the appendix (Finance, 2017). The capital asset pricing method has been used to calculate the cost of equity. Risk free rate of the country has been found through the Australian 10 years bond rate. The market return premium has been calculated through analyzing the indices rate and return. The cost of debt of the comapny has been analyzed through analyzing the interest rate and the tax rate of the debt and the country (Bloomberg, 2017).Through the cost of debt and the cost of equity, weighted average cost of capital of the comapny has been analyzed and it has been found that how much expenses would comapny has to bear to raise the funds through equity and debt. Findings and discussion on WACC:The calculation of WACC of the Harvey Norman has been calculated through using the market value and the book value of the comapny. According to the calculation, the cost ofmarket share and book share of the debt, equity and the assets of the comapny are almost similar. The book value share of equity is 67% and the liability is 33% and the market value share of equity is 67% and the liabilities are 33%, the calculations have been given into the appendix (Australia, 2017). According to this, it has been analyzed that the market value and the book value of thecompany are almost similar. Still the book value of the shares has been taken into the consideration while analyzing the weighted average cost of capital (AFR, 2017). Through the

Finance 4comapny profit, it has been analyzed that the comapny is the biggest company in the industry and thus the investors are looking forward to invest into the comapny for long term. According to the calculations, it has been analyzed that the total beta of the comapny is 0.9369 and the total risk free rate of the country is 2.08%. Further, it has been analyzed thatthe estimated return on equity of the comapny is 8.64%.According to the calculations, it has been found that the weighted average cost of capital of the comapny is 8.14%. In which the cost of equity of the comapny is 8.64% and the cost of debt of the comapny is 5.60%. And thus the total cost of the comapny is 8.14%. Discussion and findings on Capital Structure:Harvey Norman’s capital structure has been analyzed and it has been found that the total debt of the comapny is quite lesser than the total equity of the comapny. The debt to total asset ratio of the comapny is 90.7% whereas the E/V ratio of the comapny is 9.3%. The total debt of the comapny is 33,00,00,000 whereas the total equity of the comapny is AUD 2,79,04,59,000. Through this ratio, it has been analyzed that the debt must be raised by the comapny to make an optimal capital mix and enjoy the lower risk and cost in terms of capital of the comapny. Work reflection:Before starting the work, I have found that the calculations are quite typical and it is not easy for me to do it in a perfect manner. The collection of data in a proper manner was also a challenge for me. After that, I have found that the historical data can easily be got fromthe yahoo finance of Google finance and the financial data of the company could be got from the annual report or Morningstar of the comapny. This assignment has given me a chance to raise the knowledge of me about the capitalstructure and the cost of the comapny. Through this report, it has been found that the market performance of the comapny is better. The cost of the comapny could be reduced by the company and the company is required to set an optimal mix of capital of the comapny.

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