I Have Inherited €10,000 From My Great Aunt Mixy: Strategic Finance – Investment Appraisal Assignment, UCD, Ireland

Assignment

I have inherited €10,000 from my Great Aunt Mixy, I am interested in investing this windfall in the company (A) selected (out of the hat) by you. Please prepare a briefing paper indicating whether you consider your chosen company a suitable candidate for my investment. Due to my Great Aunt’s wishes, I can only invest in a single company so you should not propose splitting my investment.

Your analysis should cover:

1. General discussion of the business/market sector Analysis of the business with commentary, under the following headings for at least four years:

• Profitability
• Activity
• Liquidity
• Gearing
• Investor

Calculation of Ke using the Dividend Valuation Model (DVM), outline assumptions and calculations Assuming Rf of 0.1% and Equity Risk Premium of 5.5% calculate Ke using CAPM – show calculations Discuss the outcome of your Ke calculations under DVM and CAPM.

2. You will identify a suitable publicly listed competitor (B) and perform the same analysis on the competitor. Explain why this competitor has been chosen. Compare this company (B) to your selected business (A).

3. Recommendation (invest, don’t invest in your selected business (A)) – with reasons. Your report should include an appendix containing the Income Statement and Statement of Financial Position for the last two years (current year plus comparatives) for both your chosen business and the competitor, together with the definition and mathematical calculation of substantially all ratios referred to in your report.