country
$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!

Report On Apn Outdoor’s Capital Structure

tag 0 Download5 Pages 1,151 Words tag Add in library Click this icon and make it bookmark in your library to refer it later. GOT IT

Question:

Discuss about the Report On Apn Outdoor’s Capital Structure.
 
 

Answer:

Introduction

The purpose of this report is to provide information on the capital structure of APN Outdoor Group (APO) which is listed in the ASX and advice whether the firm has been successful in maximizing wealth generation for its shareholders.

The report is divided four chapters as follows. In chapter one, which is the introduction, I discuss the layout of the report.

In chapter two, I discuss the approach used to analyze the capital structure of APN Outdoor Group.

In chapter three, we analyze other financial ratios in respect to the company.

In chapter four, I conclude my analysis by providing information on whether APN’s has been successful in maximizing wealth generation for its shareholders.

Analysis Of Capital Structure

In order to determine the capital structure of APN, we need to analyze the following information based on the company’s financial reports (Lee, Liang, & Miglo, 2014).

  • Determine APN Outdoor’s debt to equity ratio.
  • Perform comparison of debt/equity ratio with other similar companies in the advertising industry.
  • Determine APN’s optimal capital structure
  • Determine APN’s Weighted Average Cost of Capital.
  • Compare APN Outdoor’s capital structure over past three years.

Total Debt to Equity Ratio

The total debt to equity ratio measures the relationship between equity capital and debt. A high ratio suggests that a company has taken more debt and consequently, is more aggressive with a higher risk (Investopedia, 2017).

In 2016, APN outdoor’s debt to equity was 0.67. Thus its total debt was 0.67 times its equity (Yahoo Finance, 2017).

Comparison of Debt to Equity Ratio to oOH! Media Ltd

A similar company is oOH! Media Ltd (OML).  oOH! Media is also an advertising company that specializes in billboards (oOH! Media Ltd , 2017).

The 2016 debt/equity ratio for oOH! Media was 0.65 which was slightly below APN Outdoors.

Weighted Average Cost of Capital

Also written as WACC, the Weighted Average Cost of Capital is the expected return on the securities for a company.

 WACC = Weight Debt * cost of debt *(1 – corporate tax) + Weight equity *cost of equity

 

Optimal Capital Structure

Let’s assume that APN’s corporate tax, T is 36%. Furthermore, let’s assume the pre-tax interest rates for each level of debt is given as below.

% financed with debt

Pre tax cost of Debt

0%

0%

10%

0%

20%

5%

30%

5%

40%

7%

50%

7%

60%

9%

70%

9%

80%

12%

90%

12%

Table 1: Pre Tax Interest Rates

The cost of equity can be determined from CAPM.

To determine the optimal capital structure of APN Outdoor Ltd, we need to find the level of debt and equity that will result in lowest WACC. To do this we can use Hamada equation (Lee, Liang, & Miglo, 2014). I.e. βL= βu*[ 1 + (1-T)(D/E)]

Where βL - beta of firm that uses debt

βu- beta of firm without debt

T- Corporate tax

D/E- debt/ equity

We determine that APN Outdoor’s unlevered βu is 0.8822. We then calculate the WACC for each level of debt (see Table 2)

% financed with debt

Debt/Equity Ratio

Beta

Cost of Equity

Cost of Debt-After Tax

WACC

0%

                         -  

0.88219

6.46%

0.00%

6.458%

10%

                0.1111

0.94492

6.75%

0.00%

6.072%

20%

                0.2500

1.02334

7.11%

3.20%

6.326%

30%

                0.4286

1.12416

7.57%

3.20%

6.260%

40%

                0.6667

1.25859

8.19%

4.48%

6.706%

50%

                1.0000

1.44679

9.06%

4.48%

6.768%

60%

                1.5000

1.72909

10.35%

5.76%

7.598%

70%

                2.3333

2.19959

12.52%

5.76%

7.787%

80%

                4.0000

3.14060

16.85%

7.68%

9.513%

90%

                9.0000

5.96360

29.83%

7.68%

9.895%

Table 2: WACC

We determine the lowest WACC is 6.072%. Therefore the optimal mix that will maximize the value of APN Outdoor is 10% debt and 90% equity.

Comparison APN Outdoor’s Capital Structure over Past Three Years

From the financial reports in Yahoo Finance, we note for year 2015 and 2014, the debt/equity ratios were 0.57 and 0.68 respectively. This suggests the company had taken little debt in 2015 in comparison to 2016 and 2014. Otherwise the company was still not at its optimum capital structure.

Other Key Financial Ratios

Liquidity ratio

These ratios determine the liquidity risk for the company. They include current ratio, quick ratio and cash ratio. In 2016, APN Outdoors had a current ratio of 1.9 and a quick ratio of 1.89 (The Wall Street Journal, 2017). A high current ratio suggests greater assurance that APN’s current liabilities can be paid using its current assets, thus the company does not have a liquidity risk problem (Subramanya & Wild, 2009, p. 530)

Profitability Ratios

These ratios measure the profitability for the company. They include return on asset and return on equity.  In 2016, APN Outdoors had a return on asset of 10.63 and return on equity of 17.27. Since the ratio is high, APN is doing well (Subramanya & Wild, 2009).

Efficiency Ratios

Efficiency Ratios measure how the company is using its assets. They include inventory turnover. In 2016, APN Outdoors had inventory turnover of 10.38. A high ratio suggests strong sales (Subramanya & Wild, 2009).

Conclusion- Shareholder Value

Shareholder wealth maximization involves increasing the share price. One of the ways to create value in a firm is by utilizing an optimal capital structure.

In the case for APN Outdoor’s, we can see that indeed the company is not at its optimum capital structure of 10% debt and 90% equity. However, their key ratios indicate that it is making profits and don’t seem to have any liquidity risk.

In conclusion, APN Outdoor Group does not appear to create maximum value for its shareholder’s. It should aim to minimize its cost of capital so that the firm’s value is maximized in the long run. Some of the ways APN can minimize its WACC include lowering its interest rates and  managing its operational risks.

 

References

Investopedia. (2017). Debt/Equity Ratio. Retrieved from Investopedia: https://www.investopedia.com

Lee, Z., Liang, S., & Miglo, A. (2014). Capital Structure of Internet Companies: Case Study. Retrieved from https://faculty.nipissingu.ca/antonm/files/2014/06

oOH! Media Ltd . (2017). About Us. Retrieved from oOH! Media Ltd : https://www.oohmedia.com.au

Subramanya, K., & Wild, J. (2009). Financial Statement Analysis. New York: McGraw-Hill Irwin.

The Wall Street Journal. (2017). APN Outdoor Group Ltd. Retrieved from The Wall Street Journal: https://quotes.wsj.com/AU/XASX/APO/financials/annual/balance-sheet

Yahoo Finance. (2017). APN OUTDOORS LTD. Retrieved from Yahoo Finance: https://au.finance.yahoo.com

OR

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2018). Report On Apn Outdoor’s Capital Structure. Retrieved from https://myassignmenthelp.com/free-samples/report-on-apn-outdoors-capital-structure.

"Report On Apn Outdoor’s Capital Structure." My Assignment Help, 2018, https://myassignmenthelp.com/free-samples/report-on-apn-outdoors-capital-structure.

My Assignment Help (2018) Report On Apn Outdoor’s Capital Structure [Online]. Available from: https://myassignmenthelp.com/free-samples/report-on-apn-outdoors-capital-structure
[Accessed 18 January 2020].

My Assignment Help. 'Report On Apn Outdoor’s Capital Structure' (My Assignment Help, 2018) <https://myassignmenthelp.com/free-samples/report-on-apn-outdoors-capital-structure> accessed 18 January 2020.

My Assignment Help. Report On Apn Outdoor’s Capital Structure [Internet]. My Assignment Help. 2018 [cited 18 January 2020]. Available from: https://myassignmenthelp.com/free-samples/report-on-apn-outdoors-capital-structure.


With time, MyAssignmenthelp.com has become one of the best college essay writing services. Our all rounded services give students the confidence to overcome assignment related issues. Our services are fast enough to meet most urgent deadlines. We are capable of delivering fast essay writing services with the help of our specially designed provisions and writers' teams. Our urgent essay help services guarantee most rapid delivery of assignment solutions. Some of our most popular essay services are application essay help, exploratory essay help, literary review essay help and argumentative essay help.

Latest Finance Samples

SITXFIN004-Prepare And Monitor Budgets

Download : 0 | Pages : 3
  • Course Code: SITXFIN004
  • University: Victoria University
  • Country: Australia

Answer: 1.The scope and nature of budgets are to be ascertained with relevant colleagues, as consultation with them might lead to surprising outcomes. This is because ideas and suggestions could be obtained in relation to waste management, recommendations for improvement of supplier performance and efficient usage of resources (Barr and McClellan 2018). At the time of sharing information, the financial objectives should be related to performan...

Read More arrow

INF60012 ERP Analysis And Implementation 2

Download : 0 | Pages : 15

Answer: Introduction The report is based on the implementation of a proper ERP system within CLNRecycle Ltd. The company is one of the most owned and highly operated recycling company. The primary purpose of the company was based on providing different solutions for product that would be recycled. The products of the company were mainly sold is Japan, New Zealand and Australia. With the implementation of the various new kinds of processes wit...

Read More arrow

BANK2007 Business Finance

Download : 0 | Pages : 7

Answer: Introduction The objective of the given report is to answer the financial questions with regards to different aspects of NPV coupled with risk and return related discussion. In this regards, reference has been given to the portfolio theory and theoretical underpinnings related to capital budgeting. Additionally, the client investments have also been critically analysed in order to provide advice to the client with regards to the appro...

Read More arrow Tags: Australia Parafield Gardens Management lab report University of Melbourne 

MAF707-Investment Analysis And Portfolio Management

Download : 0 | Pages : 14

Answer: Introduction: Investment analysis is crucial factor for the investors to identify the best security or asset to make an investment and get higher returns from the market. Investment analysis is an approach which focuses on various related factors of an equity and other investment products such as bonds and debt to measure the best product to make investment and get higher returns. It is important for the analyst and the professionals ...

Read More arrow

FNS50215 Diploma Of Accounting

Download : 0 | Pages : 13

Answer: Requirement 1:  Payroll management policies:  Management of payroll is an important part of overall management of an organization. A standard payroll management system must have the following attributes to ensure efficient management of payroll system (Laudon & Laudon, 2016). Security:  The security is of utmost importance in the payroll management system. The information in the payroll system should be secured a...

Read More arrow
Next
watch

Save Time & improve Grades

Just share your requirements and get customized solutions on time.

question
We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits

1,180,194

Orders

4.9/5

Overall Rating

5,056

Experts

Our Amazing Features

delivery

On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.

work

Plagiarism Free Work

Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.

time

24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat.

subject

Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.

price

Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

Assignment writing guide
student rating student rating student rating student rating student rating 5/5

529 Order Completed

95% Response Time

Ivan Blank

PhD in Functional Human Biology

Wellington, New Zealand

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

440 Order Completed

99% Response Time

Jack Arens

MBA in HRM

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

285 Order Completed

99% Response Time

Eugene Baranowski

MBA in Supply Chain

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 4/5

2594 Order Completed

95% Response Time

Michael Johnson

Masters of MSc in Economics

Washington, United States

Hire Me

FREE Tools

plagiarism

Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.

essay

Essay Typer

Get different kinds of essays typed in minutes with clicks.

edit

GPA Calculator

Calculate your semester grades and cumulative GPa with our GPA Calculator.

referencing

Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.

calculator

Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than $2000

Check your estimated earning as per your ability

1

1

1

Your Approx Earning

Live Review

Our Mission Client Satisfaction

Amazing work done, work was very detailed. I got an A in that class. I highly recommend myassignmenthelp.com for such projects Thank you

flag

User Id: 343085 - 18 Jan 2020

Australia

student rating student rating student rating student rating student rating

Question answered exactly to the standard it needed to be. Everything written in the assessment is what was expected. Can not wait to receive marks back

flag

User Id: 343147 - 18 Jan 2020

Australia

student rating student rating student rating student rating student rating

Thank you for putting together this project. I helped me to understand more in detail how elders would find healing.

flag

User Id: 309497 - 17 Jan 2020

Australia

student rating student rating student rating student rating student rating

Answers were provided last minute. I could not able to transfer the answers. But good work though from expert.

flag

User Id: 246827 - 17 Jan 2020

Australia

student rating student rating student rating student rating student rating
callback request mobile
Have any Query?