FIN924: Financial Statement Analysis for Business-Data Analysis Assignment

Internal Code: MAS276

Data Analysis Assignment:

Question: Part (A) Free Cash Flows and Discounted Cash Flow (DCF) Analysis Using the last five years of financial data from DatAnalysis, calculate your company’s free cash flows for the last five years. Tabulate your results, making sure that you show all relevant data used in the calculation.Based on the last five years of free cash flows, explain whether or not Discounted Cash Flow (DCF) analysis would be an appropriate valuation method your company. Part (B) Residual Earnings Valuation Using the last five years of financial data from DatAnalysis, calculate your company’s residual earnings for each applicable year, either on a per-share basis or as a total for the firm. Tabulate your results, making sure that you show all relevant data used in the calculation and all necessary steps in the calculation.Based on your calculations above, discuss whether the shareholders’ equity of your company should be priced at a discount or premium to book value and whether your company currently appears to be overvalued or undervalued. Part (C) Abnormal Earnings Growth (AEG) Valuation Obtain the median analyst forecast for EPS from DatAnalysis for the next two years for your company. Estimate the future dividend payout ratio based on the dividends per share and earnings per share data in DatAnalysis. Discuss any assumptions made in your estimate. Assuming the same dividend payout ratio for all future years, estimate the per-share value of the company using the AEG model for the following two cases: (i) Zero growth in abnormal earnings after the second forecast year (ii) 4% growth in abnormal earnings after the second forecast year Comment on the results of your analysis; in particular discuss possible reasons for any differences between these valuations and the current market value, and the likely growth rate implied by the current market value. Part (D) Implied Growth Rates from Analyst Forecasts (Reverse Engineering with the Residual Earnings Model) Using the book value per share and the forecast earnings per share for the next two years from DatAnalysis, determine the implied growth rate in Residual Earnings and the implied EPS growth path for the five years following the year two forecast. Plot the growth path to obtain a figure.Discuss how the results of your analysis and your graph could be used by analysts to make buy or sell decisions. Combining the results of your analysis with any source of relevant company information in the media, discuss whether you think the implied growth rates you estimated seem too high or too low, and then make a buy or sell recommendation. Hint: Examples of sources you might try are The Australian Financial Review, Yahoo Finance, Reuters or Bloomberg.