Assignment on Company Selection, Financials, Bond and Equity Analysis

Part A: Company Selection

Part A: Company Selection Your task in this first part of the assignment is to select a publicly traded company that is listed in Australia, or in the U.S. During this semester, you will perform several analyses on this company. In order to be able to do these analyses, there is a number of selection criteria for your company:•The company has outstanding bonds, as well as shares. •The firm’s shares have been paying dividends for at least 5 years. Information on listed companies and traded securities is available on public investing websites, such as investing.com, or Yahoo Finance. To find out whether a company that you are interested in has bonds outstanding, type the name of your company in the search bar on investing.com, and a dropdown menu will appear showing all outstanding securities of this firm (there should be equity as well as bonds). To find out whether a company that you are interested in has been paying dividends, select the stock of your company on Yahoo Finance, and go to Historical Data, and select Show: Dividends Only. (Hint: dividend paying firms with bonds outstanding are often mature, well-established firms.) Once you have found a company of interest that fulfils all selection criteria, provide an overview of the company details, listing your company’s name, name of stock exchange on which the firm’s stock is listed, it’s ticker symbol, an overview of the firms outstanding bonds, including coupon rates and maturity dates, and provide a brief (one short paragraph) description of the company’s business. Part B: Company financials Write a brief report (1 to 3 pages) describing your company’s business model, its financial situation, and the major opportunities and challenges in the coming years. Your report should have a bibliography with at least 3 references from reputable business publications (which are not publications of the company itself!). In this report you can include any information that you think will be relevant for investors in the company’s shares and bonds.Part C: Bond Analysis In this part of the assignment you will analyse one of the firm’s outstanding bonds. Firstly, calculate the credit spread of this bond, using the yield on Treasury bonds of comparable duration. You will need to compute the rate of return that investors currently require for holding this bond. To simplify your calculations, assume that the last coupon payment has just been made. Estimate the bond’s price one year from now (assume that interest rates remain constant), and provide commentary. Finally, provide a credit rating for the firm’s bonds, based on your analysis of the company bond, as well as your analysis in Part B of the assignment, and explain.Part D: Equity Analysis In this part of the assignment you will analyse your company’s shares. Investigate and comment on the stock price changes in recent years. Explain why these changes have occurred, and link these developments to your analysis in Part B. Provide an overview of the firm’s dividend payments during the previous 5 years. Using the dividend discount model, estimate the return that investors currently require for holding your company’s stock. You can assume that the firm’s dividends will continue to grow indefinitely at the same rate as the average dividend growth rate in the previous five years, or you can make alternative assumptions on the future dividend payments, as you see fit. Part E: Cost of Capital, In this part of the assignment you will estimate your company’s Weighted Average Cost of Capital (WACC). To estimate the cost of debt and cost of equity of your company, use your results in Part C and Part D respectively. Investigate which projects your company has recently invested in. Comment on whether you think these are good investments, given the firms cost of capital.