Each company will be compared and contrasted with others in its industry, and the results will be presented in a report that will synthesise information and analysis for the firms:
The following issues are to be reflected in the report:
1. Evaluate each company’s Risk Profile, examine the sources of risk, and investigate how systematic risk factors are considered in each company. Critically analyse the findings, compare them with the industry, and make recommendations.
2.
Analyse the Capital Structure of each company. Estimate the Cost
of Debt and Cost of Equity for the company. Calculate the Weighted Average Cost
of Capital for each company. Compare and critically analyse your findings across
each company and make recommendations.
3. Payout
Policy. Report on the payout policy for each company over the
past 3 years. Critically analyse the payout policy adopted by the company and
make recommendations. Compare and critically analyse your findings with those of the
industry. Please support your analysis with relevant theories.
Please note that I have provided all the required calculations: regression, Jensen Alpha, WACC, CAPITAL STRUCTURE, PAYOUT POLICY and annual reports of both companies.
please use also Damodaran Spreadsheet programs (nyu.edu.)
Company annual reports for each company attached
accepted sources: London
Stock Exchange www.londonstockexchange.com
Yahoo
Finance http://uk.finance.yahoo.com
Databases: Capital IQ, EBSCO
Risk profile-
CAPM- two types of risks- relevant examples.
Beta- calculations
Risk analysis- 3 explanatory factors
Jensen’s alpha- explain
Critical evaluation and recommendation
Compare between industries.. what explains the difference/ Does the market cap?
Capital
Structure
Define cap structure- cap structure of both the
companies…(Shell and Bp- how much debt – what are the source of debt)
also repurchased because repurchase
programmes are more flexible than dividend programmes.
The company used to time the market by repurchasing shares when management
considered a company’s share price too low.
also repurchased because repurchase
programmes are more flexible than dividend programmes.
The company used to time the market by repurchasing shares when management
considered a company’s share price too low.
