Write a report to an investor considering investing in the company that you have selected, referring to the companys listing on the London Stock Exchange. Your report should cover the following areas:

Instructions:

Please read the article below from stockbrokers AJ Bell.

https://www.ajbell.co.uk/dividend-dashboard/dividend-dashboard-q2-2020

The article mentions the following companies listed on London Stock Exchange:

– Ashtead

– Aviva

– Croda

– DCC

– Evraz

– Imperial

– Intermediate capital

– M&G

– Pennon

– Sage

– Phoenix

– BAT

Please choose ONE company from the list above.

Write a report to an investor considering investing in the company that you have selected, referring to the companys listing on the London Stock Exchange. Your report should cover the following areas:

Part A: Discount Rates & Capital Structure [25 marks]

(i) Calculate your chosen companys Cost of Equity (Ke), Cost of Debt (Kd), and Weighted Average Cost of Capital (WACC) for each year for at least the last 5 years. Show your workings and state the sources for any of your assumptions. [15 marks]

(ii) Critically assess and discuss the capital structure that your chosen company has and the impact that these choices have made on its cost of equity, cost of debt and WACC. If your company has any debt funding, assess its ability to make the repayments required using a range of appropriate ratios. [10 marks]

Part B: Dividend Policy [15 marks]

(i) What has the company paid out as dividends in each of the last 5 years? How is it changing?

(ii) Critically assess whether these payouts are affordable using a variety of measures.

(iii) Critically analyse whether the dividends that have been paid are consistent with the companys stated dividend policy. Provide appropriate academic theory on dividend policy where appropriate.

Part C: Valuation [20 marks]

Value the equity shares of your chosen company using both:

(i) Comparable valuation

(ii) Dividend discount model

In both cases justify your choice of any parameters that you use.

Part D: Corporate Life Cycle [20 marks]

Critically discuss where your chosen company is located in the Corporate Life Cycle by analysing its:

(i) Revenue & profit growth

(ii) Financing (proportions of debt and equity funding)

(iii) Dividend payout ratio

Part E: Shareholder Value [20 marks]

Using the share price information, analyse the Shareholder Value performance for your company over at least the last 5 years. Critically evaluate its performance using any two Rappaport Value Drivers.

Throughout your submission you should make reference, where possible, to appropriate academic theories. You must show YOUR workings for all ratios you should NOT use ratios calculated by other sources. If you use Excel for any calculations copy/paste the appropriate tables/worksheets into Appendix, showing values AND formulae.

The word limit is strictly maximum 2,000 words.

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