Bafi1042 investment company valuation assignment (30%) semester 1


BAFI1042 Boarding Crew Valuation Assignment (30%)
Semester 1 2017
 
 
Company:           First Health Care Scant (PRY)
Website:                  www.primaryhealthcare.com.au 
Submission Date:   Monday 01. 05. 2017, 5:00pm (Beginning of Week 9)
 
 
[Group Comcompromise for Collection Assignment: strictly 3 learners per collection among
the selfselfsame tutorial]
 
For this assignment you are required to use publicly suited teaching to analyse a
publicly scheduleed crew and lay a description which fruits an duty of the
company’s prevalent comcompromise and forthcoming prospects, and which incorporates the use of a
range of valuation moulds to land at an regard of the crew’s divide charge. To
fruit citationure the assignment should grasp the points scheduleed below: 
 
The definite affording of the assignment should grasp the subjoined:
 
Part 1: Conduct Financial Deed and Analyse Prevalent Issues (10%)
 
In this exception, learners are expected to fruit: 
 
•  An evaluation of the crew’s paltry new truth and financial deed
aggravate era and as-well grasp compatriot collection segregation.
•  Conduct ROE for the crew subjoined the DuPont ROE bearing and
grasp compatriot collection similarity.
•  An segregation of the prevalent issues facing  the crew,  the assiduity it operates
in, and expound the collision of the issues on the crew’s forthcoming earning.
 
Part 2: Regard Valuation Models (15%)
 
The assist sever/exception of the assignment should comprehend the capacity of the prize
of the crew’s divide using:
 
  Dividend abatement/valuation mould (DDM)
  Unreserved coin progress to equity mould (FCFE)
 
You are expected to use the Capital Asset Pricing Mould (CAPM) - argueed in theme
3 - to regard the required trounce of repay or abatement trounce deficiencyed for each mould. For
CAPM capacity, you are required to weigh the subjoined:
 
1.  Beta:  You cannot cull a beta prize regardd elsewhere (e.g.,
Bloomberg) and use it in your description. Flourish theme 3 disquisition silences and
expend section (section 3) of the prescribed citationbook to regard the
beta of the crew and conjoin details of your labor as an epilogue.
Also manage the raw beta using embezzle methodology (belong to theme
3 disquisition silences). 
2
2.  Risk-Free Rate: Use 10 years Govt. Association Afford as a delegate for the
risk-unreserved trounce. Indicate  any advantages or disadvantages if there are
any.
 
3.  Dispense Expose Premium: The capacity of the  expected dispense expose
bribe is critical. You must carefully expound what you do and any
assumption you compel span estimating dispense expose bribe.
 
•  Expose Bribe Capacity
To regard the expose bribe, original, you entertain to regard the expected
dispense repay (ASX200 is your dispense portfolio).  Then, receive the
RFR from the expected dispense repay and land at your dispense expose
premium. 
 
Once you regard these three figures (1-3) you earn be able to regard the
required trounce of repay or abatement trounce subjoined CAPM that can be used in
valuation moulds. 
 
Important points to be habituated in Sever 2:
 
•  Expound any assumptions made in implementing the moulds.
•  Where embezzle, expound how you landd at the variables
you are using. E.g., it is not ample to say you are coxcombical a 2
percent enlargement trounce. You would be expected to fruit
justification/motivation of how you land at 2 per cent enlargement
rate.
 
Part 3: Evaluate/Discuss the prize/charge of the crew (5%)
 
Comment on your valuations from sever 2, including a argument of potential
explanations of why your valuations contend from the prevalent/new divide charge. If
appropriate, argue why some of the aggravatehead moulds may be indecent for valuing the
company. 
 
Maximum  engagement expression  for the Crew Valuation Assignment is  6,000  engagements
excluding executive abridgment and appendices.  
 
Note:
Every unique constituent of the syndicate is expected to do a sever of implementing the
valuation moulds. That is to say, there should not be the condition where a constituent
simply does the truth and financial deed of the crew extraneously any input in
the developed implementation of valuation mould.
 
The rendezvous of this assignment is on the valuation, favoringally generating the inputs
into the valuation rule and alloting valuation moulds to these inputs to land at a
range of divide charge regards. The requirements outlined aggravatehead entertain been prepared
to aid this rule. For the abatemented coin progress valuation moulds the first
requirement is to fruit the embezzle expected repay measures and abatement trounces
to use in the moulds. 
 
3
It is expend that forecasts of expected repays muse the collision of the factors
verified as prevalent issues facing by the crew. A despicable strike is to establish a
range of issues which earn collision on the crew’s forthcoming hues or coin progresss, but
then fruit a set of repay forecasts which are merely extrapolations of unvarnished
returns, by the collision of the factors verified as prevalent issues. The
development of repay regards requires judgement; it is not merely a statistical or
mathematical prospect practice. 
 
References/Resources for collection assignment 
 
Islam, S.Z., Fundamental of Investment, Corpus Education (2016).
 
Reilly, Frank K. and Keith C, Brown, Boarding Segregation and Portfolio Management
(10th
  Edition), Thomson South-Wesevere (2012): Chapters 10, 11, 12, 13, and 14.
[Much of the material  in these sections is habituated in precedent successions and these
chapters should be used for revision purposes].
 
Search Bloomberg, Yahoo! Finance, Google Finance site  for occupation and financial
dispense counsel. These transmit globe economic counsel, store forthcomings, store quotes, &
personal finance teaching.  
 
Damodaran, Aswath, Boarding Valuation [3nd
 Edition], suited ondirection at:
http://people.stern.nyu.edu/adamodar/New_Home_Page/Inv3ed.htm
 
Assignment affording proceeding
 
All assignments must be affordted ondirection through the succession Blackboard as well-mannered-mannered as in
a  obdutrounce delineation. They must be accompanied by an assignments shelter shuffle and
submitted through Turnitin on the blackboard, a plagiarism checking utensil. For
teaching on Turnitin see:
 
Student FAQ, http://www.rmit.edu.au/academicintegrity/studentfaq
Student proceedings and statement setup (pdf),
http://www.rmit.edu.au/academicintegrity/studentprocedures
Turnitin learner teaching page,
Student Quick Guide - How to afford an assignment through Turnitin suited from
the ADG webpage; http://www.rmit.edu.au/bus/adq
 
Turnitin earn assess your labor in closely one searching, and repay a colour
coded apology for the originality of the citation. 
 
Penalties for deceased affording
 
All assignments earn be noticeable as if affordted on era then the trace awarded earn be
reduced by 10% each day (or sever of a day) it is deceased. Assignments that are deceased by 7
days or more earn not be noticeable and earn be awarded naught traces. 
 
 
4
Presentation of Description
 
The description is to be presented in the constitute of a occupation description. It should entertain an
executive abridgment, outlining the ocean findings, at the origin. The rest can
be citationured in direction delay the aggravatehead points.  Calculations should be graspd in
appendices.
 
Reports are to be typed in Arial/Times new roman delay a font greatness 12 in unique or one
and one-half boundlessness on A4 monograph. Reports are to be stapled delay two staples down the
left-hand edge, or unendangered delay a fold-back curtail. Do not conjoin teaching you entertain
used in compiling the description, i.e. annual descriptions, counselmonograph subscription etc., to the description. 
 
Group Comcompromise
 
Group constituents are strictly scant to three (3) learners. Experience has shown that
numbers either smaller or larger than these are dysfunctional. Collection comcompromise is to
be constituteed among week 2.
 
Contribution Statement
 
All collections are expected to grasp a  CONTRIBUTION STATEMENT  detailing
(the constitute can be build in the Blackboard),  in exact provisions, what each individual in the
collection has manufactured, when you afford the assignment. 
 
Please silence traces of the collection assignment earn be allocated to each constituents
inveterate on their aid percentage.  That  is  all learners are expected to
participate and subscribe to the collection assignment. Unreserved riding would not be
rewarded. As such learners would be consecrated a naught trace if it is shown that s/he did not
subscribe ample to the definite output.
 
 Investment Assignment
Silvia Zia Islam 
[email protected]
 RMIT University©2017  2
Executive Abridgment
Company aggravateview
Historical deed muses companies hues
How the sort of the crew career the flatten of the
risk/return/hues
Decisions that you made environing the crew inveterate on
your segregation 
 
[outedge of the engagement expression]
 
BAFI1042 Investment  RMIT University©2017  BAFI1042 Investment   3
Part 1 [10%]
Part 1 comprehends 4 questions:
 
Q1) Evaluate the crew’s new and aggravateera financial deed by analysing the companies
divide charge deed, financial statements and other expend counsel during the definite five years. 
• Rendezvous points:
1. New financial deed [spent 2 years]
    - pick-out a era find (Look for any main public announcements)
2. Overera financial deed [spent 5 years]
    - pick-out a era find 
 
Q2) Compatriot collection similarity/assiduity segregation [simply pick-out 5 main antagonists from the schedule for
discussion]
 
Q3) Analyse the crew’s/assiduity prevalent issues and expound the collision of these issues on the
company’s forthcoming hues 
  1. At Macro Flatten
    - public factors that allot for the assiduity (income, enlargement of the assiduity, govt. judgment etc.)
  2. At Micro Flatten
    - the crew favoring requirements (operation, flatten of score, directions/goals, rivalry etc.)
 
 RMIT University©2017  4
Part 1 (cont.)
Q4) Regard the ROE of the crew for definite five years [for example; 2010-2015] using the
DuPont ROE bearing. 
 
– DuPont Segregation can be manufactured using either of the subjoined steps
    - 3 steps: Profit Margin, Total Asset Turnaggravate and Financial Leverage
    - 5 steps: In attention, Interest Expense trounce and Tax Retention Ratio 
Refer to section 4 or Theme 4 Disquisition slides for constituteulas
 
– Compare the financial deeds of the crew delay its compatriot collections 
• Pick-out 2 compatriot (competitor) companies for similarity
 
 
[Approximately 2500 engagements!]
BAFI1042 Investment  RMIT University©2017  5
Part 2 – Valuation [15%]
Part 2 comprehends 2 questions:
 
Q1) Start your valuation segregation delay the CAPM capacity
You deficiency 3 variables to weigh the CAPM:
– Regard Beta (β): You can regard beta by using retrogradation segregation Or by manual
          calculation 
        For twain bearing you deficiency to use the store charge postulates of 
                 the crew and ASX/S&P200 to regard repay for five years
        Then flourish the constituteula of beta capacity on theme 3 
– Risk-Free Trounce of Return: Receive the 10 year Govt. association afford trounce as a delegate for RFR
– Expose Premium: It is the contendence between expected dispense repay E(Rm) and RFR 
        We entertain fruitd E(Rm)= 9.610% [source: Bloomberg] 
     
Once you regard the CAPM required trounce of repay denoted as E(Re) subjoined the steps
above, you can use this repay (as-well notorious as require of equity, ke) in the valuation mould
 
BAFI1042 Investment  Sever 2 (cont.)
Q2) Regard the valuation mould using two contendent techniques to regard the real prize
of the crew argueed in theme 6 (section 6):
– Regard dividend abatement mould or dividend valuation mould (DDM) 
– Regard unreserved coin progress to equity mould (FCFE) 
 Dividend Valuation Mould (DDM): Flourish the constituteula argueed in section 6
    - Use CAPM repay 
    - Regard the enlargement trounce (g = Retention bearing x DuPont ROE)
    - Use assumptions if indispensable
    - Forecast dividends (if expend)
 Unreserved Coin progress to Equity (FCFE): Flourish the constituteula argueed in section 6
  - Enlargement trounce of FCFE (you can receive changes in FCFE prizes aggravate the spent five years to
     foretell the enlargement trounce)
  - Use assumptions if indispensable
  - Forecast FCFE (if expend)
 
  
[Approximately 2000 engagements!]
 
RMIT University©2017
BAFI1042 Investment 
6 RMIT University©2017  7
Part 3 [5%]
Part 3 comprehends the evaluation of the prize/charge of the crew
Write this sever answering the subjoined questions: 
 
Why the real prize (you regardd) of the crew contends from the
current/new divide charge?
 Why the prize of the crew contends opposite contendent valuation moulds?
 Which mould is the most embezzle and why?
 And most expendly, what is your boarding judgment inveterate on your
evaluation? 
 
[Approximately 1500 engagements!]
BAFI1042 Investment  RMIT University©2017  8
Last Notes
 
• The description is to be presented in a constitute of a occupation description
• Reference
• No delineation and spente
• Keep it inadequate, but argumentative and concrete!!
BAFI1042 Investment