HI5002 Finance for Business: Fisher & Paykel Healthcare Ltd

This report provides a financial analysis of Fisher & Paykel Healthcare Ltd, focusing on the company's share price movement over the last two years compared to the All Ordinaries Index. It examines factors influencing the share price, such as increased profitability, reduced financial leverage, and strategic decisions. The report also calculates the weighted average cost of capital (WACC) and discusses its implications for investment decisions. The analysis uses data from the ASX website and other credible sources to assess the company's financial health and investment potential, concluding that Fisher & Paykel Healthcare Ltd has a less volatile share price movement compared to the All Ordinaries Index. Desklib provides solved assignments and past papers for students.

RUNNING HEAD: Financial Analysis of Fisher & Paykel Healthcare Ltd
1
Name of the student
Topic- Financial Analysis of Fisher & Paykel Healthcare Ltd
University name

Table of Contents
4.1 Graph reflecting the share price movement of Financial Analysis of Fisher & Paykel Healthcare
Ltd.........................................................................................................................................................3
4.2 Comparison between the share price movement of Fisher & Paykel Healthcare Ltd and the share
price changes of the all ordinary index shares.......................................................................................4
Introduction...................................................................................................................................4
Share price movement analysis......................................................................................................4
Conclusion.....................................................................................................................................4
5. Announcements.................................................................................................................................5
6. Research via internet.........................................................................................................................6
7. Weighted average cost of capital.......................................................................................................8
7.1 Use of Weighted Average Cost of Capital...................................................................................8
Determining the investment method (Conservative investment).......................................................8
Weighted average Cost of Capital.........................................................................................................9
Computing cost of Equity using CAPM method...............................................................................9
7.2 Implications that a higher WACC on investment decision........................................................10
References...........................................................................................................................................11
Appendix.............................................................................................................................................12

Financial Analysis of Fisher & Paykel Healthcare Ltd
3
4.1 Graph reflecting the share price movement of Financial Analysis of Fisher & Paykel
Healthcare Ltd
It is evaluated that share price Analysis of Fisher & Paykel Healthcare Ltd has been evaluated
by assessing the share price movement of company since last year.
4/1/2016
7/1/2016
10/1/2016
1/1/2017
4/1/2017
7/1/2017
10/1/2017
1/1/2018
4/1/2018
0
2
4
6
8
10
12
14
16
Fisher & Paykel Healthcare
Corporation Limited (FPH.NZ
Fisher & Paykel Healthcare
Corporation Limited
(FPH.NZ
(Yahoo Finance, 2017)
It shows that company has increased its share price value since last year. It is
observed that Fisher & Paykel Healthcare Ltd had to face down fall in its share price in 2016
due to the sluggish market condition. However, with the increasing profit, Fisher & Paykel
Healthcare Ltd increased its share price by 22% since last two years which reflects that
company has created value on its investment (Magnan, Menini, and Parbonetti, 2015).

4.2 Comparison between the share price movement of Fisher & Paykel Healthcare Ltd
and the share price changes of the all ordinary index shares.
6/1/2016
8/1/2016
10/1/2016
12/1/2016
2/1/2017
4/1/2017
6/1/2017
8/1/2017
10/1/2017
12/1/2017
2/1/2018
4/1/2018
0
2
4
6
8
10
12
14
16
-0.15
-0.10
-0.05
-
0.05
0.10
Average Return
Fisher & Paykel Healthcare Corporation Limited (FPH.NZ null 9.553705
Average Return
(Yahoo finance, 2017)
Introduction
There are several factors which might impact the share price movement of the Fisher
& Paykel Healthcare Ltd such as profitability, turnover, beta and return on capital employed
of company (Fisher & Paykel Healthcare Ltd. (2017).
Share price movement analysis
The above given graph shows that company has increased its share price by 22% as
compared to last two year data. It is considered that as compared to all ordinary index shares
Price Company has stable share price movement. It is evaluated that the share price
movement of all ordinary index is more fluctuated and risk which reflects that if investors
invest their capital in market then they will have to face high risk as compared to the
investment made in Fisher & Paykel Healthcare Ltd (Fisher & Paykel Healthcare Ltd. (2016).
Conclusion
After analysing all the share price movement of Fisher & Paykel Healthcare Ltd and all
ordinary indexes, it could be concluded that as compared to all ordinary index, Fisher &
Paykel Healthcare Ltd has less volatile share price movement. The beta of company is also

Financial Analysis of Fisher & Paykel Healthcare Ltd
5
- .098 point which divulges that the share price is positively increasing with the negative
downfall in the share price of the all ordinary index.
5. Announcements
There are several announcements which directly and indirectly impacted the share price
movement of the Fisher & Paykel Healthcare Ltd.
 Fisher & Paykel Healthcare Ltd has increased its profitability by 22% which positively
impact the share price movement of company.
 Company has lower down its financial leverage by reducing the debt portion by 13% since
last year. It shows that investors need to less worry about the financial sustainability of the
business (Fisher & Paykel Healthcare Ltd. 2016).
 Fisher & Paykel Healthcare Ltd has issued share capitals which will positively impact the
share price movement of company in long run. This strategic plan will lower down the cost of
capital of the business.
 Company has elected experienced board of directors and all the key strategic decisions will
be undertaken by the CEO of company.
 Increased GDP rate of Australian economy will positively impact the turnover of company
which will eventually impact the share price movement of Fisher & Paykel Healthcare Ltd
(Fisher & Paykel Healthcare Ltd. 2017).


6. Research via internet
Stock information and Beta calculation
The beta value of Fisher & Paykel Healthcare Ltd shows that - .098 point which positively
impacts the share price movement due to sluggish market conditions of the industry.
SUMMARY OUTPUT
Regression
Statistics
Multiple R 0.2422
8
R Square 0.0587
Adjusted R
Square
0.0159
1
Standard Error 0.0234
1
Observations 24
ANOVA
df SS MS F Significance F
Regression 1 0.00075 0.00075 1.37196 0.25401

Financial Analysis of Fisher & Paykel Healthcare Ltd
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Residual 2
2
0.01206 0.00055
Total 2
3
0.01281
Coeffici
ents
Standard
Error
t Stat P-
value
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercep
t
0.01047
1
0.004893 2.140
07
0.043
69
0.0003
24
0.0206
18
0.00032
4
0.02061
8
X
Variable
1
-
0.09864
0.084215 -
1.171
31
0.254
006
-
0.2732
9
0.0760
1
-0.27329 0.07601

7. Weighted average cost of capital
7.1 Use of Weighted Average Cost of Capital
Weighted average cost of capital is the amount of cost which company needs to pay to
its lenders or investors. It is accompanied with the cost of equity and cost of debts determined
on the basis of proportioned investment basis (Zhang, and Zhang, 2014).
E(R) = Return on Capital required
Rf = % of risk free rate of return
β = Beta
Rp= Market risk factor (National Australian Bank. (2017)
Using Capital Assets Pricing Model
Calculation of Required rate of return
Risk free rate (A) 2.69%
Beta (B) -0.098641906
Market Risk premium (C) 6%
Required rate of return [A+
(B*C)] 2.10%
(Please see the excel)
Notes- The risk free rate of return of company is 4% (Treasury bills of 10 year government
bonds)
Determining the investment method (Conservative investment)
Fisher & Paykel Healthcare Ltd has not been following the conservative investment method
Explanation
Company has been invested $ 86 million in its research and development department which
shows that company has been planning to increase the quality of its business.

Financial Analysis of Fisher & Paykel Healthcare Ltd
9
Weighted average Cost of Capital
The weighted average cost of capital is the amount of cost which company needs to pay to its
lenders or investors for their capital deployment in business.
Computing cost of Equity using CAPM method
Cost debt by using the of equity by using the CAMP method= 3.41%
Cost of interest expenses= 1.14%
Cost of debt= Interest/ debt *100 (Libby, 2017).
Computation of cost of debt
Particular
Capital Amount (NZ $
000)
Interest expense 3521
Debt capital 216566
Cost of debt 1.6%
Tax Payment 30%
Net cost of debt 1.138%
WACC = cost of debt* portion of the debt capital+ cost of Equity * portion of the Cost of
equity
WACC Capital Amount ($ Million) Cost of capital % of
portion WACC
Equity 661625 3.41% 75% 2.568%
Debt 216566 1.14% 25% 0.281%
Total
capital 878191 WACC 2.85%
(Fisher & Paykel Healthcare Ltd. (2015
The weighted average cost of capital is 2.94% which is very low and help company to
increase its overall outcomes (Fisher & Paykel Healthcare Ltd. (2015).

7.2 Implications that a higher WACC on investment decision
The weighted average cost of capital is the amount of total cost which will pay to its
lenders for their capital.
If WACC of the Fisher & Paykel Healthcare Ltd is higher than it will negatively
impact the investment decision of the company. It is observed that higher WACC will reduce
the overall return on capital employed and ultimately increase the finance leverage of
company (Fisher & Paykel Healthcare Ltd. (2017).
It will also restrict Fisher & Paykel Healthcare Ltd to accept the investment project
due to the less return available on the investment project and higher Cost of capital.

Financial Analysis of Fisher & Paykel Healthcare Ltd
11
References
Fisher & Paykel Healthcare Ltd. (2015). Annual report. Available at
https://www.fphcare.com/us/our-company/investor/reports/?redir=true. Accessed on 19th
May, 2018
Fisher & Paykel Healthcare Ltd. (2016). Annual report. Available at
https://www.fphcare.com/us/our-company/investor/reports/?redir=true. Accessed on 19th
May, 2018
Fisher & Paykel Healthcare Ltd. (2017). Annual report. Available at
https://www.fphcare.com/us/our-company/investor/reports/?redir=true. Accessed on 19th
May, 2018
Fisher & Paykel Healthcare Ltd. (2018). Annual report. Available at
https://www.fphcare.com/us/our-company/investor/reports/?redir=true. Accessed on 19th
May, 2018
Libby, R., 2017. Accounting and human information processing. In The Routledge
Companion to Behavioural Accounting Research (pp. 42-54). Routledge.
Magnan, M., Menini, A. and Parbonetti, A., 2015. Fair value accounting: information or
confusion for financial markets?. Review of Accounting Studies, 20(1), pp.559-591.
Yahoo finance, 2018 Available at https://in.finance.yahoo.com/ Accessed on 19th May, 2018
Zhang, C. and Zhang, J., 2014. Analysing Chinese citizens' intentions of outbound travel: a
machine learning approach. Current Issues in Tourism, 17(7), pp.592-609.

Appendix
WACC
Capital
Amount
Cost of
capital
% of
portion WACC
Equity 604 3.41% 75% 2.57%
Debt 198 1.52% 25% 0.37%
Total
capital 802 WACC 2.94%
Fisher & Paykel Healthcare Corp Ltd
Particulars (Amount in Million 2014 2015 2016 2017
AUD$
AU
D$
AU
D$
EBIT -161 -138 -106 -126
Interest 7 11 9 3
Net profit 91 111 129 154
Total Assets 591 657 691 802
Total Liabilities 210 195 203 198
Shareholders' Equity 381 462 488 604
Date
Adj
Close
Fisher & Paykel Healthcare
Corporation Limited
(FPH.NZ
Adj Close (All
ordinary share index)
Average
Return
30-04-
2016 null null
31-05-
2016
9.553
705 4947.899902