Objective: This assignment asks you to prepare a financial report for Mitchells & Butlers plc, using data from Yahoo! Finance, the FAME database, Bloomberg, London Stock Exchange website and other sources you deem useful. You will also be expected to apply models, using the techniques and theories presented in class for the module. The maximum length of the coursework is 4,000 words, excluding appendices and bibliographical references. Please note, you cannot go above this limit. You have recently been employed by an investment bank, based in the UK. As part of its products and services, your organisation analyses and values companies, and offers advice and recommendations to UK and European hedge funds and pension funds. Your manager has asked you to prepare a financial report on your assigned company. In your report, you are required to undertake the following tasks: Task 1 (15 marks) Present a financial profile of your assigned company. The profile should include the following, the company’s:
list of the main shareholders;
current market capitalization;
book value of shareholders’ funds including share capital, reserves and any preference shares;
total long term debt (non-current liabilities);
debt-to-equity ratio, based on both book values and market values;
dividend pay-out ratio;
important, recent financial news that could be of interest to potential investors.
Task 2 (15 marks) Critically discuss the capital structure of your assigned company using one or more theories, such as Modigliani & Miller Propositions, Trade-off Theory, Pecking Order, etc., and practical issues facing the company such as taxes, risk, financial slack, types of assets held by the company, and competitor capital structures. Task 3 (15 marks)Estimate your assigned company’s cost of equity, cost of debt and cost of capital (WACC), using the capital asset pricing model. Critically discuss the variables you use to estimate the cost of capital and relate your estimate to the discussion in task 2 above.
Task 4, Part a) (15 marks) Estimate the value of your assigned company’s shares using the shareholder value analysis (SVA) model. In order, to estimate the value of your assigned company using the SVA model, you will need to establish the key drivers for the model. Critically discuss and justify the variables and proxies used to determine the key drivers. For example, you may use historical information and/or information about the company going forwards. You need to critically discuss and justify why you have done, what you did. Task 4, Part b) (15 marks) Critically discuss whether or not the SVA model is an appropriate model to use for company valuation, by comparing it to alternative models, and; Justify which variables and proxies you would change to make the difference between the value obtained using the SVA model, and the actual value of your assigned company, smaller. Task 5 (20 marks) Identify a recent acquisition (M&A) undertaken by your assigned company. Critically assess the potential sources of synergy between your assigned company and the target company, which may result in additional value for the combined company. Based on this, discuss the premium which your company paid for the target company. Presentation (5 marks) Your report should be titled appropriately, have a terms of reference and contain a section summarising the results of your tasks.
GUIDANCE NOTES ON THE REPORT
This assignment requires you to evaluate and analyse company’s value/issue.
Please note, appendices and references do not form part of the word count. It is also important to remember that appendices should be used to support the main body of your text and therefore should be labelled clearly and probably with page numbers so that the relevant information can be found easily. All references in the main text and at the end should be properly presented in the Harvard referencing style.
The report should be properly presented in terms of spelling, grammar and use of English. Your report should be in 12-point, one and a half spaced and single sided. It should be sequentially page numbered, with a contents page and all diagrams, tables, charts, etc. should be clearly labelled. The front page of the report should contain the appropriate title and your student number.+