7211AFE-Case Study on Corporate Finance Report Writing – Accounting and Finance Assignment Help

Assignment Task

Task

Part A: Case study report for an assigned company.

The purpose of this case study is to allow students to take some of the main concepts introduced in the course and provide a framework for applying them to a company assigned by the course convenor. One of the best ways of learning corporate finance is to apply the models and theories we encounter to the real-world contexts and problems. You will: 

• Task 1: Evaluate the company’s corporate governance;
• Task 2: Evaluate the stock price and estimate the impact of an important announcement on its stock prices.

Scenario:

You have recently started an internship position with Sunnybank Equity Management (SEM), a large asset management company with A$600 million Assets Under Management located in Sunnybank, Brisbane. The company’s core investment focuses on domestic share market; however, investments in share markets have provided lower than expected returns in the recent years.

SEM’s Chief Investment Officer (CIO) has assigned you to perform an investment appraisal on a single company listed on the ASX and provide a recommendation if the company analyzed should be included as part of SEM’s investment.

Your personal values and experiences are important, and you should base your response on the evidence provided in these tasks along with your knowledge gained in the course. It is important that you provide clear evidence of your ability to apply your knowledge of finance as learned in the course to the task. The CIO has requested that your analysis must be an up-to-date analysis with at least 3 years of data. 

Your report must address the following issues: the first four issues are related to the corporate governance (task 1), and the fifth issue is related to the share price analysis (task 2):

1. A brief description of the company analyzed

2. Information of the CEO of the company

3. The Board of Directors of the company

4. Societal Constraints

5. Analysis of company’s share price using

a) the Dividend Discount Model (1-stage and 2-stage). You will determine if the share price is priced fairly or over/under-valued. (Hint: To apply the DDM model and multi-stage model, you may need to calculate the beta, and cost of equity for the firm first; for more details, please refer to the guidance for 5.a and 5.b.)

b) News/Announcement effect on the company’s share price. You will investigate the speed of share price adjustment to these announcements using graphs. You will discuss the share performance over the last 3 years, showing the major events(announcements) in the life of the company and discuss how these events (announcements) have impacted the share price.

c) On the same chart, present the performance of the major competitor and the market for comparison. Your current internship position is under 3 months’ probation period. Upon completing the task in hand, your department secretary will arrange a meeting with the CIO to discuss whether you have passed the probation period and should be promoted to a Junior Corporate Finance Analyst.

Task 1: Corporate Governance.

1. A brief description of the company analyzed.

2. The CEO.

a) Who is the CEO of the company?
b) How much did the CEO make last year?
c) What form did the compensation take (salary, bonus, options)?
d) How much equity in the company does the CEO own?

3. The Board of Directors.

a) Who are on the board of directors of the company?

b) How long have they served as directors?

c) What are their remunerations?

d) How many of the directors have other connections to the firm (as suppliers, clients,customers, etc.)? Are they independent?

e) How many of the directors are CEOs of other companies?

f) Do any of the directors have large stockholdings?

4. Societal Constraints.

a) How has the firm addressed the issue of Corporate Social Responsibility?
b) Does the firm have a particularly good or bad reputation as a corporate citizen?
c) If it does, how has it earned this reputation?

Task 2: Evaluate the stock price, and estimate the impact of an important announcement on its stock prices.

5. Evaluate the stock price and estimate the impact of an important announcement on its stock prices.

a) Stock beta: Download 3 years of weekly stock returns and ASX200 market index returns ending April 2022 from Bloomberg or Yahoo! Finance (see notes) and estimate the stock beta. Does the estimate of stock beta make sense to you? (The normal range of beta is from 0.5 to 3.) Provide reasoning, why or why not? If not, you have to use the stock beta from Bloomberg or Yahoo! Finance for the later parts.

b) Estimate the Cost of Equity, using the CAPM return. Assume the market risk premium, RRmm ? RRff = 6%, and use the current 10-year Government bond yield for the risk-free rate.

c) DPS is the total annual dividend per share paid for the financial year. Based on the previous 5-year pattern of DPS payments, estimate the stock’s intrinsic value using 1-stage model (the constant dividend growth model), and the 2-stage non-constant dividend growth model. Use the 10-year Government bond yield as the Dividend growth rate in the equilibrium stage. You need to choose which model is the most appropriate one to use, and compare the intrinsic value to the share price as of May 2022 (“current price”). Would you recommend to buy or sell the shares in May 2022?

d) You will study an announcement in 2019-2022 from this company. The announcement can be a new product, a scandal, an earnings announcement, a change in strategy, etc. What is your expectation of the market reaction to the announcement, good or bad news? On the same chart, present the performance of the major competitor and the market for comparison. Discuss the following aspects: Does the stock price react quickly or slowly to the news announcement? How does it relate to the theory we have learned in class?

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