Select two companies in the same industry/sector from the list of companies available from the Australian Securities Exchange (ASX) and collect information on the share price, treasury bond yields, capital structure and dividends for the three most recent financial years of the companies. Your sources of information are: yahoo finance (https://au.finance.yahoo.com/), the Reserve Bank of Australia (RBA)’s website (www.rba.gov.au) and the company’s annual reports on the company’s websites.
Daily share price and daily market index data should be collected over the three year period. Ensure you select an appropriate market index to compare with the share price data. Regarding treasury bond yields, collect information on 10 year commonwealth bonds. With respect to capital structure and dividends, extract from the financial statements information on the various sources of capital, the amounts and the terms if present and dividend payments over the three year period.
You are expected to prepare and submit individually a 2000 Word report which addresses the following:
(a) Calculate daily stock price returns and market index returns over the three year period. (5 marks)
(b) Determine the total risk, systematic risk and unsystematic risk of the companies’ stocks over the each of the years. (10 marks)
(c) Calculate the weighted average cost of capital (WACC) for each of the years for the two companies. Provide an explanation why there is a difference in the costs of capital. (20 marks)
(d) Compare and contrast the dividend policy of the two companies over the three year period by calculating dividend payout ratios, identifying the dividend policy if any followed by each of the companies and checking how the share price of the companies have reacted to dividend announcements during the period. Drawing from dividend theory, suggest dividend theory/theories that could explain the patterns you have identified. (15 marks)
(e) With $10 million that you inherited from your late aunt, which company’s shares would you purchase? Use relevant information from the calculations above to support your decision. (10 marks)
In addition to the above you will also be assessed on the following: (see marking Rubric at the end for more description of expectation).
(f) Content, Audience and Purpose (5%)
(g) Critical reasoning, presentation and defence of an argument and/or position (10%)
(h) Analysis and Application with synthesis of new knowledge (15%)
(i) Use of academic conventions and sources of evidence (5%)
Page 2 of 8
(j) Effective communication (5%)
This assignment must adhere to the following:
1. This assignment must be prepared and submitted individually.
2. You must prepare a Business Report in a Word Document with Excel workings embedded into the Word document. The instructions to embed the Excel workings are as follows:
INSTRUCTIONS TO EMBED AN EXCEL FILE INTO A WORD DOCUMENT
Open your Assignment in Word and Click the “Insert” tab.
Click the “Object” button on the Text section of the ribbon. Click “Object” from the small
C. When the Object window opens, click the “Create from File” tab. Browse to the Excel file containing your analysis in the directory where it is located and double-click it to embed it into the Word document. Ensure that you have ticked the box that allows you to embed the Excel file as an icon.
3. The Word document must be properly referenced using the APA referencing style. Wikipedia and Investopedia not acceptable academic sources. Note that the Reference list, appendices and calculations are not included in word count.