MODULE TITLE: Accounting and Finance
Second Part: Finance
Assignment Title:
Report on the financial management of a company – an
Individual Assignment
Guide for the final submission of your individual assignment:
Individual assessment question: This is an individual assignment to be written by each
student. The allowed word count is 2,500 words. The assignment will carry 50% of the
overall course mark.
You have to select a UK listed company. You have been hired as a consultant by its
shareholders to advise them on the firm’s strengths, shortcomings and opportunities for
growth over the short and long-term. This exercise involves: (i) comparing the firm’s
performance with that of other companies in the same industry and (ii) evaluating trends
in the company’s financial position analysis over some time period. From a shareholder’s
point of view, such financial analysis will help predict future earnings, dividends and the
firm’s stock price.
Some important points:
• Annual data should be for no more than the last 5 years – or less if 5 years is not
available. Osiris (via SOLAR) is a good source of data but the Annual Report has
more detail and more explanation so you will probably need to use both sources.
• Monthly data should be for the previous 61 months
• Items below represent a guide, you may wish to add further analysis.
• Presentation is very important, it is not easy to construct tables that show enough,
but not too much, data – one table for the company overview?
You are required to download monthly share price data for your company for the most
recent 60 months. In addition, upload the monthly time series data for the returns on the
FTSE-100 index. Note that all calculations in this part of the assignment should be based
on monthly return data.
The assignment has three sections:
Section A: Analysis of the share price behaviour of the company
50 marks
Analyse the share price behaviour of the company for the last 60 months (5 years) in
terms of:
(i) The expected monthly returns.
(ii) The standard deviation of the monthly returns.
(iii) The correlation of the monthly returns with the returns on the FTSE-100
index.
(iv) Construct a portfolio made of your share and the FTSE-100 index in
varying proportions and do the following two requirements:
1- Plot the results from your calculations in problem (i) above in an
expected return to risk space.
2- Which of the efficient portfolio sets would you recommend for an
investor who wishes to earn an additional return that, at worst,
compensates for a given increase in risk undertaken.
Section B: An investigation of the financial structure and cost of capital of the firm
40 marks
(i) Estimate the systematic risk measured in terms of the beta coefficient obtained
using monthly return data for the last 5 years (60 months) when the FTSE-100
Index is chosen as the benchmark stock market index. Assume that the only
reason why returns on securities co-vary is because of their common response
to market changes.
(ii) Calculate the monthly average cost of equity capital for the firm using the
standard Capital Asset Pricing Model (CAPM). Evaluate the significance of
your result for an investor.
(iii) Calculate the price-to-earnings ratio in the current and recent years and
comment on the significance of this figure in relation to the risk of the
investment. (iv) Using the company’s financial statements comment on the appropriateness of
the company’s choice of capital structure and its implications for its market
value from a stockholder’s points of view.
Section C: Concluding Remarks
10 marks
Provide brief concluding remarks on the future performance of the company from
the standpoint of current and prospective shareholders. Also give your advice to
the current shareholders to buy more shares or sell their current shares.
please choose from one of these companies (Hotels)
DALATA HOTEL GROUP PLC
EASYHOTEL PLC
EIH
HOTEL CORP(THE)
INDIAN HOTELS CO(THE)
INTERCONTINENTAL HOTELS GROUP
MANDARIN ORIENTAL INTERNATIONAL
MEIKLES LTD
MILLENNIUM & COPTHORNE HOTELS
MINOAN GROUP
PEEL HOTELS
PPHE HOTEL GROUP LTD
REAL HOTEL CO PLC(THE)
SAFESTAY PLC
SNOOZEBOX HLDGS PLC
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