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Assignment Remit

Assignment:

 to calculate the sample firm’s forecasted value of equity per share at the end of the fourth financial year (i.e. 2021, in some cases in 2020) by using one equity valuation model. [40%]. The presentation of the assignment counts 10% of the overall performance. C- Presentation of the assignment, which counts 10% of the overall marks.

Module Learning Outcomes:

LO 1. Able to evaluate the accounting information and other related qualitative information in order to understand a firm’ financial performance and position.

LO 3. Able to understand analysts’ reasons for profitability forecasting.

LO 4. Able to apply statistical models and the asset valuation models correctly via Excel statistic function, STATA, SPSS or Eview.

LO 5. Students can collect the secondary data from Datastream, Bloomberg, Thomsonone.com, or databases on WRDs.

Grading Criteria:

Part a: Predict the financial position and performance of the company in the fifth financial year (i.e. 2023 or in some cases 2022) by using methods introduced on lectures. Please state the assumptions used to forecast the company’s financial position and performance in its fourth financial year. Then, compare the predictions with the company’s realised results in the fifth financial year.                     (Marks: 50%)

50-59% (Marks: 25 – 29):

(1) Adopt common size and trend analysis

(2) Without refer to analysts’ reports but relying on a simple statistic method, like mean, geometric means at deriving sales forecasts, without indication of assumptions.  Or simply adopt one analyst’s sales forecasts from his/her report but without discussing his/her reasons.

(3) Indication of the difference between the expected and realized results but lack of explanation.  

60%-69% (Marks: 30 – 34):

(1) Adopt common size and trend analysis

(2) Adopt two analysts’ sales forecasts.  Or adopt one statistics model, such as Holt’s method, multivariate regression model, or other models with illustration of assumptions.

(3) Students also compare analysts’ reasons and forecasts with their own perception based on their work on Assignment 1.

(4) Compare and explain the difference between the estimated forecasts and the realized financial performance or position.     

70% or above (Marks: 35 or above):

(1) Adopt common size and trend analysis

(2) Refer to two analysts’ sales forecasts, and critically evaluate their reasons.  Or adopt one statistics model, such as Holt’s method, multivariate regression model, or other models with illustration of assumptions.  

(3) Students also compare analysts’ reasons and forecasts with their own perception based on their work on Assignment 1.

(4) Compare and explain the difference between the expected and realized financial performance with referring to qualitative data, such as analysts’ or managers’ explanation, and past news.   The forecasts must match with the business strategic position of the sample firm identified at Assignment 1.

Part b: Calculate the company’s forecasted value of equity per share at the end of the fourth financial (i.e. 2022, or in some cases 2021) year by using one equity valuation model. You need to state your assumptions based on the work of part (b).                      (Mark: 40%)

50-59% (Marks: 20 – 23):

(1) Adopt one equity valuation model and apply it correctly.  

(2) Only referring to the analyst’s long term growth rate (of residual income, residual operating income or free cash flows, or free cash flows to equity, or dividend) but without explanation.

(3) Generally compare the fundamental value of ordinary share derived with the realized share price by the end of fourth financial year.

60%-69% (Marks: 24 – 27):

(1) Adopt one equity valuation model and apply it correctly.  

(2) The work of valuation model is consistent to the work in Part (a).

(3) Referring to the analyst’s long term growth rate (of one of above variables) with referring to their explanations or assumptions.

(4) Compare and explain the difference between the expected and realized share price with referring to some qualitative information.

70% or above (Marks: 28 or above):

(1) Adopt one equity valuation model and apply it correctly.  

(2) The work of valuation model is consistent to the work in Part (a).

(3) Referring to the analyst’s long term growth rate (of one of the above variables) with referring to their explanations or assumptions.  Students present their own view on long term growth rate based on his/her perception on the sample firm’s financial performance.

(4) Compare and explain the difference between the expected and realized financial performance with referring to qualitative data, such as analysts’ or managers’ explanation, and past news.   Provide recommendation on whether the company would be a suitable investment target.  

Part c: Presentation                                                                                         (10%)

50%-59% (Marks: 5):

Presentation: formal references are provided, adopting well recognised data sources, and there are some minor English mistakes at illustration.

60%-69% (Marks: 6):

Presentation: formal references are provided, adopting well recognised data sources, and there are some a few English mistakes at illustration.

70% or above (Marks: 7 or above):

Presentation: formal references are provided, adopting well recognised data sources, and there is no English mistake at illustration.