1. From the annual accounts, estimate the equity values of two FTSE350 companies for each specific year over a four-year period using
(i) the Miller-Modigliani investment opportunities model (assume investment and its return remain constant for all periods)
You can choose any two companies from the FTSE350 and any four-year period you wish.
Required:
A. Estimate the equity values using all three suggested equity pricing equations. Make clear the rationale for all your assumptions and show all workings.
B. Compare the estimated equity values with the corresponding market values and comment on any differences.
2. From the annual accounts, estimate the following key financial ratios for the companies and period chosen above:
(i) Return on Common Equity = Net Income / Shareholders Equity
(ii) Profit Margin = Net Income / Revenue
(iii) Total Asset Turnover = Revenue / Assets
(iv) Leverage = Assets / Shareholders equity
Required:
A. Comment on the companies’ financial position and performance over the four-year period chosen.
B. Compare the key financial ratios across the two companies and over time.
C. Is there a relation between accounting information and market values?
Students succeed in their courses by connecting and communicating with an expert until they receive help on their questions
Consult our trusted tutors.
Login | Sign Up
