FINM7403 Portfolio Management
Business School, The University of Queensland
Project Task Document
Project Title: Valuation of Stocks in High-Emission Industries
Summer Semester
January- February 2024
Submission Due: 22 January 2024 at 17:00 [Brisbane Time, AEST]
This project has a total mark of 25. It contributes 25% to your final grade.
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This project is to be completed and submitted individually. Students must complete tasks in
Parts A and B of this task sheet. A guide for students then follows the project tasks. Lastly, a
grading rubric for the project is presented at the end of this document. [7 pages in total]
Part A. As an equity security analyst, your current task is to estimate the fair value of an
Australian stock in operation as of January 2024.
• Stock selection criteria: 1. The stock must be a constituent of the ASX200 index; 2.
the firm should operate in high carbon emission industries, such as companies of fossil
fuel, mining, steel, aluminum, cement, fertilizer manufacturing, or in the
transportation sector.
[Note: You can select one stock that meets the criteria, except for Qantas and BHP.]
• Approach: You have decided to use a Free Cash Flow to the Firm (FCFF) model and a
Multiples-based approach, and then assign a different weight for each model result to
determine the stock’s intrinsic value.
• Source of data: Capital IQ and additional resources, including the respective
company’s website.
For the FCFF approach, you agree with the annual consensus forecasts (e.g., earnings, free
cash flows) for the chosen stock over the next three (or four) fiscal years in Capital IQ.
Beyond this time, you will derive estimates of long-term growth rates. Use the Capital
Asset Pricing Model to estimate the equity cost of capital. Assume a risk-free rate of
4.38% and a market risk premium of 5.99%.
For the Multiples-based approach, you will select a multiple for your stock and its
comparable stocks (at least two) and justify your choices of multiples as well as
comparables.
Requirement: In your written report to the fund manager, you are expected to incorporate the
following:
1. Describe the valuation process for each method so one can replicate the analysis.
2. Justify your primary considerations for valuation.
3. Report your valuation results and provide an investment recommendation (buy, sell,
or hold) based on your analysis.
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Part B. Several days after handing in the report in Part A, your fund manager requests that
you revise the FCFF stock valuation by considering his predicted early introduction of a
carbon tax on Scope 1 emissions (priced by per ton of greenhouse gas). The revision involves
several key considerations for your FCFF valuation, including a. projections of sales revenue
and operating costs, b. capital expenditures (including Research and development expenses),
c. taxation, and d. cost of capital.
Requirements: Based on the firm’s environmental performance disclosures, write a response
to discuss the above aspects and potential directional impacts on your stock valuation
recommendation and support your analysis with evidence and relevant references.
------------------------------- End of Project Task Sheet ---------------------------------
Guide for students
• Capital IQ access: Students could register with your UQ email address to access
Capital IQ (e.g., s1234567@student.uq.edu.au, replacing ‘1234567’ with your student
ID). Important: Avoid postponing this task to the last minute, as account registration
approvals for online access may require a day or two.
• Write and cite: Read the information contained in this link. Write, cite, and submit -
Library - University of Queensland (uq.edu.au). APA, Chicago, or Harvard
referencing style is acceptable.
• Word limit: 1500 words (Parts A and B). The word count excludes footnotes, tables,
figures, references, and appendixes.
• Appendix: Include your main tables within the main body of the report. If you wish to
attach Excel files to show your work, please copy and paste them into the WORD
document’s Appendix.
• Formatting: Include a title page in your submission file. Your project title page must
indicate the project name (e.g., FINM7403 Project) with your name and student ID
number.
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• Your documents should be typed in Times New Roman font, size 12. The project
should be 1.5 lines spaced. Type the course code and your student number on each
page of your submission file using the Header. Insert the page number in the Footer.
Submit for grading:
• Ensure that the entire document, Appendix included, is successfully converted into a
single PDF file before submission.
• SAVE YOUR TITLE PAGE, PARTS A AND B (with Appendix if any) AS ONE
PDF FILE before clicking on the relevant link to upload your project to the portal of
“Assessment  Assessment task 2: Project  FINM7403 Project Submission for
Grading” on Blackboard. Although the project can be submitted up to five times to
the portal, only the last submission before the due date will be graded. If you are not
familiar with the submission process, please visit this link before submission.
• Other instructions: Teaching staff will not answer any questions regarding the project,
as this gives students an unfair advantage over others. However, you may post any
questions to the ‘Discussion Board’ on Blackboard; such questions will be answered if
appropriate.
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Grading Rubrics for FINM7403 Project in Summer Semester, January 2024
Parts A & B (100%),
25 marks towards the
final grade
Outstanding Good Fair Needs to improve Poor or missing
Part 1: Equity Valuation (55%)
The FCFF method
(30%): Have you
thoroughly described
the valuation process
for the FCFF method?
Your work
demonstrates an
outstanding
understanding of
the FCFF
valuation process.
Additionally, you
have provided an
excellent
justification for
the main
consideration for
the FCFF method.
Your work
demonstrates a
good
understanding of
the FCFF
valuation process.
Additionally, you
have provided
well-justified
main
considerations for
the FCFF method.
Your work
demonstrates a
fair understanding
of the FCFF
valuation process.
Additionally, you
have provided a
fair justification
for the main
considerations for
the FCFF method.
Your work
demonstrates a
basic understanding
of the FCFF
valuation process.
Additionally, you
have provided a
basic justification
for the main
considerations for
the FCFF method.
Your work
demonstrates little to
no understanding of
the FCFF valuation
process.
Additionally, you
have provided little
to no justification for
the main
considerations for the
FCFF method.
The Multiples method
(15%): Have you
detailed the multiples
valuation process?
Your work
demonstrates an
outstanding
understanding of
the multiples
valuation process.
Additionally, you
have provided an
excellent
justification for
the main
consideration for
Your work
demonstrates a
good
understanding of
the multiples
valuation process.
Additionally, you
have provided
well-justified
main
considerations for
the multiples
method.
Your work
demonstrates a
fair understanding
of the multiples
valuation process.
Additionally, you
have provided a
fair justification
of the main
considerations for
the multiples
method.
Your work
demonstrates a
basic understanding
of the multiples
valuation process.
Additionally, you
have provided a
basic justification
of the main
considerations for
the multiples
method.
Your work
demonstrates little to
no understanding of
the multiples
valuation process.
Additionally, you
have provided little
to no justification for
the main
considerations for the
multiples method.
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the multiples
method.
Recommendation
(10%): Have you
considered the
assumptions and
limitations of the two
valuation methods in
making the stock buy or
sell recommendation?
Your
recommendation
demonstrates an
outstanding
understanding of
the assumptions
and limitations of
the two valuation
methods.
Your
recommendation
demonstrates a
good
understanding of
the assumptions
and limitations of
the two valuation
methods.
Your
recommendation
demonstrates a
fair understanding
of the
assumptions and
limitations of the
two valuation
methods.
Your
recommendation
demonstrates a
basic understanding
of the assumptions
and limitations of
the two valuation
methods.
Your
recommendation
demonstrates little to
no understanding of
the assumptions and
limitations of the two
valuation methods.
Part B: Responses to the impact of the predicted early introduction of carbon tax on stock valuation (35%)
Critical evaluation
(35%): Have you
critically evaluated
changes to the key
inputs in the FCFF
model that are likely to
be affected by the
carbon tax? Have you
discussed the extent to
which this tax could
induce a directional
change in your previous
recommendation?
Evaluation of the
carbon tax’s
impact on the
stock’s intrinsic
value is completed
with exceptional
detail. The
analysis is
underpinned by
comprehensive
evidence,
reflecting a highly
developed
capacity to
research and
analyze real-world
problems.
Evaluation of the
carbon tax’s
impact on the
stock’s intrinsic
value is
completed with
good detail. The
analysis is
underpinned by
convincing
evidence,
reflecting a well-
developed
capacity to
research and
analyze real-
world problems.
Evaluation of the
carbon tax’s
impact on the
stock’s intrinsic
value is
completed to a
fair level. The
analysis is
supported by
some evidence,
reflecting a
developed
capacity to
research and
analyze real-
world problems.
Evaluation of the
carbon tax’s impact
on the stock’s
intrinsic value is
completed to a
basic level. The
analysis lacks
evidence to support
their arguments,
reflecting a
developing capacity
to research and
analyze real-world
problems.
Evaluation of the
carbon tax’s impact
on the stock’s
intrinsic value is
completed to a very
low level of detail.
The analysis and
discussion are
superficial, reflecting
a very limited
capacity to research
and analyze real-
world problems.
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Parts A & B: Writing communications (10%)
Language (5%):
Clarity of Style,
Knowledge of
Appropriate
Terminology
Writing
demonstrates a
clear, varied,
precise and
concise use of
language and a
sophisticated
command of the
vocabulary and
expression
appropriate to the
analysis. Highly
effective choice of
register.
Writing
demonstrates a
clear and concise
use of language
and a well-
developed
knowledge of the
vocabulary and
expression
appropriate to the
analysis. Effective
choice of register.
Writing
demonstrates a
clear use of
language and a
fair knowledge of
the vocabulary
and expression
appropriate to the
analysis. A
suitable choice of
register.
Writing
demonstrates the
mostly clear use of
language.
Vocabulary and
expression are
suitable for the
analysis. The
register is generally
appropriate for
research analysis.
Writing demonstrates
unclear use of
language.
Vocabulary and
register are rarely
appropriate to the
analysis.
Mechanics (5%):
Paragraphing, Spelling,
Punctuation,
Referencing
Writing is
sophisticated, clear
and succinct, with
no lapses in
grammar, spelling
and sentence
construction.
Paragraphing
demonstrates a
refined
understanding of
argumentative
techniques.
Writing is fluent,
clear and
succinct, with no
lapses in
grammar, spelling
and sentence
construction.
Paragraphing
demonstrates a
well-developed
understanding of
argumentative
techniques.
Writing is fluent
and clear, with no
significant lapses
in grammar,
spelling and
sentence
construction.
Paragraphing
demonstrates a
good
understanding of
argumentative
techniques.
Writing is clear and
readable, with some
lapses in grammar,
spelling and
sentence
construction.
Paragraphing
demonstrates a fair
understanding of
argumentative
techniques.
Writing is not readily
comprehensible, with
significant lapses in
grammar, spelling
and sentence
construction.
Paragraphing is not
used to structure an
argument.