LO1 analysing information from a company’s annual report and focusing on governance issues

MAF203 Business Finance – Trimester 2 2023

Assessment Task 2 – Group Assignment

DUE DATE AND TIME: 14 September 2023 by 8:00 PM AEDT

PERCENTAGE OF FINAL GRADE: 40%

WORD COUNT LIMIT: 3000 words

1. Description of the task

This assessment task is designed to assess your skills on:

(1) analysing information from a company’s annual report and focusing on governance issues

(2) valuing a company using both a discounted dividend valuation model and a relative valuation approach

(3) assessing whether a company’s share price is overvalued or undervalued

Since this is a group assignment, it is expected that you will solve the assigned problems in groups. Please note that not all parts are equal. Therefore, it is essential to solve and discuss this assignment in the group. This is important because every group member should achieve the set-out unit learning outcomes for this task. It is also important because the final exam will assess all unit learning outcomes.

The task is framed as a series of requests that a finance manager might request of your team, expecting that you will provide them with clear recommendations supported by accurate and substantiated calculations.

It contributes 40% of your unit’s overall marks.

Task Requirements:

This assessment task has three parts, and you must complete ALL questions. Use Excel for numerical calculations.

Part 1 – About the Company’s corporate governance (10 marks) (up to 1000 words)

1. Download the 2023 annual report of Macquarie (MQG) Group from the unit site.Carefully study the board of directors of the firm. Evaluate the effectiveness of the board. Explain your answer clearly. What is the advantage of having an effective board? (5 marks)

1. Based on the 2023 annual report, what steps has MQG undertaken to minimise its environmental impact? In your view, what other actions could MQG take to minimise its environmental effects further? (5 marks)

Part 2 – MQG Valuation Using the Discounted Dividend Model (22 marks) (up to 1200 words)

The dividend discount model is a well-known model for pricing shares based on the present value of future expected dividends. We will use the two-stage variable growth model introduced in Week 5 to estimate the share prices of MQG using real data drawn from the financial database: DatAnalysis Premium.  

a) Access DatAnalysis Premium via the Deakin University library. Obtain the last ten years (2014 to 2023) of dividend payment history for MQG.  For simplicity, each year’s dividends are equal to the sum of the interim and final dividend. Determine the dollar dividends received by shareholders for each of the past ten years. (2 Marks)

b) Based on the information obtained in part (a) and your own economic analysis, forecast the next 5 year’s expected dividend payments and the annual constant growth rate of dividends in the second stage starting in year 6. Must elaborate on the reasons for your forecasts. (6 Marks)

c) Look up the beta of the company from the “Key Data” section under the company’s name in DatAnalysis. Google the current 10-year Australian government bond yield, which will be used as the risk-free rate. Then calculate the required rate of return (discount rate) of equity capital based on the Capital Asset Pricing Model (CAPM). (3 Marks)

d) Calculate the share price for the company based on the “two-stage” variable growth model. Need to list the formula for your calculation. (6 Marks)

e) Compare your results in part (d) with the current share price of MQG at $175.17 per share (accessed on 09/08/2023). Comment on the difference. Are you ready to trade the stocks based on your own analysis? Please elaborate. (5 Marks)

Part 3: MQG Valuation Using the P/E ratio (8 Marks) (Maximum 800 words)

The following table shows the relevant statistics for several firms in the banking and financial sector in Australia.

a) Calculate the share price of Macquarie Group using the relative valuation approach based on the data below. (4 marks)

b) Comment on using P/E multiples of comparable firms as a valuation technique in this case. When we use the relative valuation approach based on the P/E ratio, what factors do we need to consider to make sure that the comparison makes sense? Your comments should be specific in the context of using four major Australian banks as comparable companies to Macquarie Group.

LO1 analysing information from a company’s annual report and focusing on governance issues

b. Specific Requirements

Your Assignment submission must contain the following:

- Write complete sentences when you are explaining your answers.

- Upload one Excel file to the MAF203 assignment Dropbox with all the workings for relevant parts. This submission is necessary to check your calculation in the assignment.

- Word or .pdf file with all the workings (and relevant snapshots from your Excel file) for all parts should be uploaded for your group to the MAF203 assignment Dropbox, including:

• Title page: With group number, student names and student IDs for all members
• Body/Content: All responses should be structured and numbered. All quantitative calculations should show your calculation steps, explained as required. You must explain which formula you are using to work out the question and copy and paste the important output of the Excel spreadsheet to the body of your Word document.
• Aspects not required: Executive summary, Introduction and Conclusion.

- The assignment weighs 40% of your overall mark for the unit.  All members of the group will receive the same mark.

LO2 valuing a company using both a discounted dividend valuation model and a relative valuation approach

c. Learning Outcomes

The learning outcomes assessed in this task are:

a. Submission

It is the responsibility of all group members to read the whole assignment before submitting it. This is to maximise your chance to get a good grade on the assignment. You must finish your assignment well before the due date. You should be able to complete this assignment by the end of week 8, and the assignment is due in week 9. If you finish it on time, there is enough time for everyone to read the complete assignment and fix any errors.

Submit your assignment in the Assignment Dropbox on the MAF203 CloudDeakin unit site on or before the due date.

When uploading your assignment, name your word document and excel spreadsheet using the following syntax: : . For example,  Group_XXX_123456789_ABC123.doc’.

Only one group member should submit the assignment on CloudDeakin on behalf of the entire group. Assignments sent as an email attachment or by mail will not be accepted under any circumstances.

Submitting a hard copy of this assignment is not required.

You must keep a backup copy of every assignment you submit until the marked assignment has been returned to you.  In the unlikely event that one of your assignments is misplaced, you will need to submit your backup copy.

Any work you submit may be checked electronically or by other means to detect collusion and plagiarism.

When you submit an assignment through your CloudDeakin unit site, you will receive an email confirming that it has been submitted to your Deakin email address. You should check that you can see your assignment in the Submissions view of the Assignment Dropbox folder after upload, and check for, and keep, the email receipt for the submission.

b. Marking and feedback

The marking rubric for this task will be available in the MAF203 CloudDeakin unit site - in the Assessment folder (under Assessment Resources).

It is always a valuable exercise to familiarise yourself with the rubric before completing an assessment task. Rubrics act as a boundary around the task and help identify what assessors are looking for specifically in your submission. The standards are drawn from the unit’s learning outcomes ensuring they align with appropriate graduate attribute/s.

Identifying the standard you aim to achieve is also a valuable strategy for success, and to that end, familiarising yourself with the descriptor for that standard is highly recommended.

Students who submit their work by the due date will receive their marks and feedback on CloudDeakin 15 working days after the submission deadline.

c. Extensions

Follow the Assignment Extension policy that you have received from the Faculty.

d. Consultations

I will hold two public consultations for this project. The exact time for consultations will be announced in due course. As usual, you can raise questions on the discussion board. Please note: While I am happy to clarify things for you, I cannot verify whether a specific answer to the questions is correct or not.

e. Late submission penalties

If you submit an assessment task after the due date without an approved extension or special consideration, 5% will be deducted from the available marks for each day after the due date up to seven days. The Unit Chair may refuse to accept a late submission where it is unreasonable or impracticable to assess the task seven days after the due date.