CORPORATE
FINANCIAL MANAGEMENT
Objective: This assignment asks you to prepare a financial
report for a real UK firm assigned to
you using data from several sources
(at least the FAME database).
Question: You have just been employed by a financial services
company. Your new manager wishes to test your skills so she sets an initial assignment
for you. You should prepare a financial report about LAND
SECURITIES GROUP PLC. In your report, you should:
1.
Present and discuss the profile of the firm
(including Main Shareholders, Market Capitalization, Stock Price, Stockholders’
Equity (Common Stock and Preferred Stock), Retained Earnings, Total Debt, Gearing
Ratio, Credit Risk, Dividends, Payout Ratio, social and environmental metrics. Discuss
also
some
recent financial and sustainability news related to the firm that could be
interesting to the shareholders) and its evolution in the last five years. You
may find information about the profile of the firm, its capital structure and
main competitors from Yahoo! Finance within the “Key Statistics” (also view Financials
– Balance Sheet - Annual Data) and “Competitors” sections. You may find
information about the profile of the firm, its capital structure and main
competitors from the FAME database.
(20 marks)
You need to have a look for few key competitors –
usually one or two
2.
Look at the data on corporate financing
choices of the firm (Retained Earnings, Debt and Equity) and discuss which
theory (Trade-off Theory versus Pecking Order Theory) and dimensions (Taxes,
Risk, Asset Type and Financial Slack) best explain what you see in the data in
the past five years.
(35 marks)
3.
Compute and report the followings two performance
measures for the last five years: Market Value Added and Market to Book Ratio.
Discuss the relationship between the Market Value of Equity and the Market to
Book Ratio. You may find the information necessary to compute those measures in
Yahoo! Finance within the Key Statistics and in the FAME database.
also include
details about the data you used and the formulas you applied for your
computations.
(10 marks)
4. Compute
and report the cost of equity of the firm (i.e. rate of return required by the
shareholders) using the Capital Asset Pricing Model (CAPM). You may assume that
the rates of return on the market and on the risk-free rate are 8% and 2%,
respectively. The beta of the firm can be found in Yahoo! Finance within the Key
Statistics section and in the FAME database. Discuss the relation between
the market risk of the firm and the cost of equity. You need to research and
reference here – expect long discussion – important to discus
also include
details about the data you used and the formulas you applied for your
computations.
(10 marks)
5.
Present the firm’s board remuneration
(compensation) and report details on directors’ pay (as disclosed in the last annual
report of the firm) detailing the weaknesses you have identified with respect
to the main Uk corporate governance code’s recommendations on board
remuneration and discuss their potential impact on the shareholders and other
stakeholders. Provide a balanced view by also discussing positive aspects of
its board remuneration (assuming there are some!). You may find information
about the board’s remuneration (compensation) from the last company’s annual
report.
(25 marks)
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