FINM7402: Corporate Finance
Semester 2, 2024
Individual Case Study Assignment: SEEK LTD (ASX: SEK)
Course Assessment Weight 20%
(Total Marks: 40)
PENALTIES WILL BE APPLIED FOR LATE SUBMISSIONS.
FAMILIARISE YOURSELF WITH LATE SUBMISSION PENALTIES
OUTLINED IN YOUR COURSE PROFILE.
SUBMISSION DEADLINE IS 2.00 PM (AEST), OCTOBER 9, 2024.
In this assignment, you will analyze the corporate governance, cost of capital, capital structure and
payout policy of SEEK Limited (ticker code: SEK), which is a company listed in the Australian
Securities Exchange (ASX).
The submission will comprise of two parts:
(a) Report (PDF): discussing corporate governance, cost of capital, optimal capital structure
and payout policy (using the report template).
(b) Spreadsheet (EXCEL): Showing all the calculations relating to cost of capital, capital
structure and payout (using the spreadsheet template).
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REQUIREMENTS OF THE SUBMISSION
1. Corporate Governance (8/40)

a. Monitoring: Discuss about the features of the board (refer to aspects that we
covered in the class: size, independence, classified, etc.) (3)
b. Incentives/Compensation: Discuss about the compensation policies of the firm
(2)
c. Your overall view of the firm’s corporate governance: Discuss how severe is the
agency problem in the firm and whether the board and compensation policies are
helping to mitigate the problem (3)

2. Cost of Capital (8/40)

a. Estimate the firm’s cost of debt (1)
b. Estimate the firm’s cost of equity (estimating beta using the regression). Comment
on your selection of time period, use of risk-free rate, and market returns when
calculating cost of equity using the CAPM approach (5+1)
c. Estimate the firm’s WACC (1)
3. Capital Structure (14/40)
a. Discuss the firm’s current capital structure (2)
b. Discuss the firm’s cost and benefits of using debt for the following factors: Tax,
financial distress, and financial flexibility. You will need to discuss each of these
factors in relation to the firm and not in general (3)
c. What is the firm’s optimal capital structure using cost of capital approach (Use
MM-Proposition II with taxes to calculate the cost of equity)? What is the firm’s
optimal capital structure using regression analysis? Discuss the strengths and
limitations of your estimates of the optimal capital structure. What should the firm
do with respect to its level of debt and equity given your estimate of the optimal
capital structure? (4 + 4 + 1= 9)
Assume: Cost of debt increases by 0.10% for every 10% increase in debt to capital ratio
above 50%; it remains constant up to 50% debt to capital ratio.
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4. Payout Policy (6/40)

a. Discuss the firm’s current payout policy (cash dividends and share buyback).
(2)

b. How is the firm’s dividend policy different from that of its peers or the market?
(2)

c. Would you suggest any changes to the firm’s current dividend policy? (2)
5. Presentation of the report (4/40)

a. Sequence/Structure (Is the writing a logical sequence of ideas, organised into
paragraphs that works to establish a clear line of argument for the reader?) (1)
b. Language/Mechanics/Professionalism (Has the vocabulary and expression
appropriate for formal academic writing within this discourse been used? Has the
work been edited for lapses in spelling, grammar, or sentence construction? (1)
c. Referencing (Has broad research been conducted, in order to achieve a synthesis
of personal ideas and those of the extant literature? Have the researched sources
been referenced correctly, both within the document, and in the Bibliography?) (2)
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SUBMISSION FORMAT AND GUIDELINES

The report should be named in the following format StudentNO._Report_FINM7402'.
The excel workbook should be named as 'StudentNO._Calculation_FINM7402'.

Report format: The report should be in “Times New Roman”, 12 font size, 1.5 spacing, and
“justified” text alignment. Please try to keep your report brief. Consider the following:

a. This assignment is not only about performing calculations. It is also about making
qualitative judgments and recommendations based on the results of your analysis.

b. You should also keep in mind that there is no single right or wrong answer. It all depends
on your views. All I am looking for are good arguments based on your views and
assumptions. If you make a decision without justification, the submission might be
marked down even if the decision appears to be valid.

c. So, clearly articulate your assumptions that you made to get to your conclusion.
d. Remember, do not show any calculation in the report (all calculations should be shown
in the spreadsheet). Only include summary tables and graphs in the report.

Excel workbook format: The Excel workbook should contain 5 worksheets that are named
respectively as ‘Beta Regression’, ‘Cost of Capital’, ‘Capital Structure -1’ Capital Structure 2’ and
“Payout Policy’.
‘Beta Regression’ sheet: Include the data you use to estimate stock beta, the regression plot and
the estimated beta value.
‘Cost of Capital’ sheet: Show computation of cost of debt and cost of equity/capital/discount
rate
‘Optimal Capital Structure -1’ sheet: Show all the calculation relating to optimal capital structure
using WACC.
‘Optimal Capital Structure -2’ sheet: Show all the calculation relating to optimal capital structure
using the regression analysis.

‘Payout Policy’ sheet: Show all data and calculations relating to dividend payouts and other forms
of payout to shareholders.
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Time Period to Consider: Assume that we are at the beginning of July 2023 (Using data
available as of the end of June 2023).
Submission: Both the files must be submitted through Turnitin – The link will be provided
closer to the due date.
Data Sources (Available in the Data folder) & References

1. Corporate Governance:
a. Data: Annual report 2023
b. References: Slides Topic 1 and Chapter 29 of the Berk & DeMarzo textbook)

2. Cost of capital:
a. Data: Market Data
b. References: Slides Topic 2 and Chapter 12 of the Berk & DeMarzo textbook
(Chapter 12 Appendix very useful)

3. Capital Structure
a. Data: Financials & Data for Optimal Leverage
b. References: Slides Topics 4 & 5 and Chapters 15 & 16 of the Berk & DeMarzo
textbook
4. Payout Policy
a. Data: Financials & Data for Optimal Leverage
b. References: Slides Topic 6 and Chapter 17 of the Berk & DeMarzo textbook
Page limits: please adhere to the following page limits. The markers will not mark any content that
goes beyond the following page limits. Remember it is the quality not the quantity that counts.

• Corporate governance: 2 pages

• Cost of Capital: 1 page

• Capital Structure: 2 pages

• Payout Policy: 1 page

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Plagiarism and AI Statement
Please be aware that plagiarism, defined as copying and pasting someone else’s words into your
assignment without proper acknowledgement, is unacceptable at UQ. When you report someone
else’s comments or ideas, you need to fully and clearly acknowledge the source, i.e. list it under
‘References’ that starts on a new page at the end of the main text using the Harvard or APA
Referencing Style. It is also good practice to paraphrase other authors’ words, which would indicate
your level of understanding, instead of making long direct quotations. Submissions will be checked
for plagiarism using Turnitin (the extensive checking process involves the World Wide Web as
well as previously and currently submitted assignments, journals and various other publications).
This assessment task evaluates students' abilities, skills and knowledge without the aid of
generative Artificial Intelligence (AI). Students are advised that the use of AI technologies to
develop responses is strictly prohibited and may constitute student misconduct under the Student
Code of Conduct.