BAFN200: Principles of Finance - Dividend Policy Analyse - Accounting and Finance Assessment Answer

Accounting and Finance Assessment Task

Required: Suppose you work for an S&P/ASX20 company which is exploring opportunities to acquire a business. Chief Executive Officer (CEO) is seeking your recommendation whether the company you selected would be a worthy target for acquisition. You have been asked by CEO to write a report addressing the industry outlook, risk profile, cost of capital and dividend policy and make recommendations.

A) Industry and market outlook Describe the economic and industry environment for the industry in general and the selected company in particular. Critically evaluate and comment on the key factors that affect the company’s attractiveness for investment.

B) Risk analysis Outline and comment on the risk (both systematic and unsystematic risk) profile of the company. Determine the beta for the firm using raw data. Discuss the issues associated with estimating beta.

C) Cost of capital and capital structure Determine the cost of capital for each source of finance as well as the weighted average cost of capital for 2018. What does the WACC suggest for the company? Provide an evaluation of the company’s capital structure policy and recommend an appropriate capital structure policy for the company. Do you find the capital structure risky for the company? Justify your answer.

D) Dividend policy Analyse the company’s dividend practices and the use of internal funds over the 2009-2018 period. Describe the dividend pattern and policy followed. E) Share price performance Page 3 of 6 Analyse changes in the of share price over the past 10 years, and based on your analysis discuss the performance of the company over the past 10 years.

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