FNCE90018
Corporate Financial Policy


Major Assignment



Semester 2, 2022


Department of Finance




Introduction
This assignment is to be completed individually.
All students are to select one ASX-listed company to work on, based on the
following selection criteria:
1. The final digit of your student ID number will determine the ASX
Industry group (see Appendix) from which you must select a company.
2. Click on the appropriate link to access the list of companies that
comprise the Industry group.
3. Choose a company from that Industry group whose 3-letter ASX code
starts with one of the initials in you name.
4. If no company’s 3-letter ASX code starts with one of the initials in your
name, choose a company whose second letter in the code corresponds
with one of the initials in your name (or the third, if necessary).
For example, if his student ID number ends in a 1, Jing Siong must choose from the Materials
(XMJ) Industry group and may select any company whose code begins with J (e.g. JRV, JMS,
JNO, etc.) or S (e.g. SFR, S32, SYR, etc.). Once selected, you need to answer 5 questions for
the company (see next page).

DUE DATE

The assignment must be submitted on or before 5.00 pm, Friday 23rd September.
Please note that penalties will apply to late submissions. Assignments submitted after the
submission date and time without an approved extension will incur a penalty of 10% of the
total mark allocated to this assessment task which will be deducted for each day, or part
thereof, that it is late.

WORD LIMIT

The word limit for this assignment is up to 1,500 words. However, I am flexible about this
limit and my expectation is that most assignments will be well under 1,500 words as the main
challenges are quantitative.

SUBMISSION

The assignment is to be submitted via the submission button in the Assignments section of
the LMS. Ensure that the front page of the assignment contains your name, student ID and
the company that you have selected (including ASX code).


FNCE90018 Corporate Financial Policy
Assignment
In relation to the company that you have chosen, answer each of the following.
Required:
1. Access the most recent Annual Report for your company and use the Financial Statements
to determine the amount of Free Cash Flows (FCF) as at the balance date (the reading by
Galpin uploaded to Module 6 provides guidance on the process).
2. Estimate the WACC of your company. The estimate should be supported by a detailed
explanation of each variable that you have used in the calculation.
3. Using the estimates from 1. and 2. above, perform a valuation of your company assuming
a 2.5% p.a. annual growth rate of the FCF in perpetuity. Compare the valuation that you
have estimated to the company’s market value implied by the current share price, and
comment on the difference between the two.
4. Assume that you are a member of the Board that will announces a rights issue for your
company on 2nd November 2022. State all of the relevant details, i.e. terms of issue and
offer price per share (you are to make these up, but they need to be sensible) and dates
for this issue. Using the current market price of the shares as a starting point and assuming
it does not change other than as a result of the rights issue, estimate the new market price
on (i) the date of announcement, and (ii) the ex-rights date. Justify both estimates.
5. (Bonus mark) Forecast your company’s closing share price at the close of trading on Friday
7th October 2022, i.e. two weeks after submission date. This is basically just a bit of fun,
requiring you to make a guess (hopefully educated) about a future event. This is why it is
worth an extra mark on top of the allocated 15 marks for the assignment – sadly, it is
expected that most students won’t get this extra mark.
[4 + 5 + 2 + 4 + 1 = 16 marks]

APPENDIX
Details of ASX Industry groups (Sectors) can be found at Australian Stock Exchange (ASX)
Sectors - Listcorp.
The final digit of your Student ID number will determine the group from which you must
choose a company, as follows:
0 – Energy (XEJ)
1 – Materials (XMJ)
2 – Industrials (XNJ)
3 – Consumer Discretionary (XDJ)
4 – Consumer Staples (XSJ)
5 – Health Care (XHJ)
6 – Financials (XFJ)
7 – Information Technology (XIJ)
8 – Communication Services (XTJ)
9 – Real Estate (XPJ)
NOTE – avoid 4-letter code companies.