Assessment 3: Risks And Returns On Investment, Valuation Of Stocks, And Capital Budgeting Techniques

	Description	Formuals	FMG	OZL
	Total assets (book value) ($m)		$       19,115.00	$         2,826.00		Recommendation:    On the basis of the calculations on both the stock of FMG and OZL. It has been found that the market value to book value, return on equity, dividend per share, sustainbale growth, intrinsic value etc of FMG is better than OZL. It explains that the invetsment into FMG would offer higher returns to the investors rather than investing into OZL.
	Total liabilities (book value) ($m)		$         9,381.00	$            310.00
	Number of shares (millions)		$         3,111.00	$            299.00
	Market capitalisation ($m)		$       16,239.00	$         2,739.00
	Net income ($m)		$         2,093.00	$            231.00
	Dividends paid ($m)		$            755.00	$              42.00
	Description	Formuals	FMG	OZL
	Market value of equity to book vakue of equity ratio	Market value of equity / book vakue of equity ratio	$                1.67	$                1.09
	Return on equity	Net profit / Total stockholder’s equity	21.502%	9.181%
	Dividend per share	Dividend paid / number of shares	$                0.24	$                0.14
	Sustainable growth rate per annum	Return on equity * (1- dividend payout ratio)	13.75%	7.51%
	Intrinsic value	Dividend (1+ growth arte) / (required rate of return – growth rate)	$            108.52	$                2.33
Calculation of Net present value		Calculation of accounting rate of return
Year	Cash outflow	Cash inflow	P.V. factor	Present value		Year	Cash outflow	Cash inflow
0	$ -25,00,000.00		1.00	$ -25,00,000.00		0	$ -25,00,000.00
1		$ 5,00,000.00	0.93	$    4,67,289.72		1		$ 5,00,000.00
2		$ 5,00,000.00	0.87	$    4,36,719.36		2		$ 5,00,000.00
3		$ 5,00,000.00	0.82	$    4,08,148.94		3		$ 5,00,000.00
4		$ 5,00,000.00	0.76	$    3,81,447.61		4		$ 5,00,000.00
5		$ 5,00,000.00	0.71	$    3,56,493.09		5		$ 5,00,000.00
6		$ 5,00,000.00	0.67	$    3,33,171.11		6		$ 5,00,000.00
7		$ 5,00,000.00	0.62	$    3,11,374.87		7		$ 5,00,000.00
8		$ 5,00,000.00	0.58	$    2,91,004.55		8		$ 5,00,000.00
9		$ 5,00,000.00	0.54	$    2,71,966.87		9		$ 5,00,000.00
NPV (Total cash outflow – total cash inflow)	$    7,57,616.12		ARR = Total profit / intial investment	20.0%
Calculation of Internal rate of return
						the project should be accepted by the company as the net cash flow of the company is positive which explains about the profitability level of the company. further, the inetranl rate of return of the company is better than the cost of capital and lastly, the accounting rate of return also expalins about the better position of the company. thus, the project should be accepted by the company.
Year	Cash outflow	Cash inflow	Total cash flow
0	$ -25,00,000.00		$ -25,00,000.00
1		$ 5,00,000.00	$    5,00,000.00
2		$ 5,00,000.00	$    5,00,000.00
3		$ 5,00,000.00	$    5,00,000.00
4		$ 5,00,000.00	$    5,00,000.00
5		$ 5,00,000.00	$    5,00,000.00
6		$ 5,00,000.00	$    5,00,000.00
7		$ 5,00,000.00	$    5,00,000.00
8		$ 5,00,000.00	$    5,00,000.00
9		$ 5,00,000.00	$    5,00,000.00
IRR	14%
	Calculation of yearly return from Monthly returns
	Monthly average retun of security	4.05%	-5.70%	5.29%	5.08%	-0.95%
	Number of days in a month	12	12	12	12	12
	Formula	(1+average return)^number of days -1
							Average yearly return
	Monthly return	61.04%	-50.54%	85.58%	81.18%	-10.85%	33.28%
	Calculation of risk associated with the company
	Standard deviation	0.12479483
	Calculation of yearly return from Monthly returns
	Monthly average retun of security	0.51%	0.51%	-0.71%	1.04%	-0.23%
	Number of days in a month	12	12	12	12	12
	Formula	(1+average return)^number of days -1
							Average yearly return
	Monthly return	6.32%	6.24%	-8.25%	13.25%	-2.77%	2.96%
	Calculation of risk associated with the company
	Standard deviation	0.033017796
Adj Close	Return
5191.2			Calculation of total risk (FMG)
4926.6	-5.10%				Comment
4802.6	-2.52%		Standard deviation	12.48%	STDEV of return
5052	5.19%		Variance	1.557%	Square of stdev
5135	1.64%		Annualized variance	0.20375	(1+variance)^365 -1
5218.9	1.63%		Annualized standard deviation	0.45139	sqrt of annualized variance
5425.5	3.96%
5320.1	-1.94%
5352.2	0.60%		Calculation of total risk (AXJO)
5190	-3.03%				Comment
5404.8	4.14%		Standard deviation	3.30%	STDEV of return
5394.8	-0.19%		Variance	0.109%	Square of stdev
5489.1	1.75%		Annualized variance	0.01316	(1+variance)^365 -1
5492.5	0.06%		Annualized standard deviation	0.11472	sqrt of annualized variance
5395.7	-1.76%
5632.9	4.40%
5625.9	-0.12%
5292.8	-5.92%
5526.6	4.42%
5313	-3.86%
5411	1.84%
5588.3	3.28%
5928.8	6.09%
5891.5	-0.63%
5790	-1.72%
5777.2	-0.22%
5459	-5.51%
5699.2	4.40%
5207	-8.64%
5021.6	-3.56%
5239.4	4.34%
5166.5	-1.39%
5295.9	2.50%
5005.5	-5.48%
4880.9	-2.49%
5082.8	4.14%
5252.2	3.33%
5378.6	2.41%
5233.4	-2.70%
5562.3	6.28%
5433	-2.32%
5435.9	0.05%
5317.7	-2.17%
5440.5	2.31%
5665.8	4.14%
5620.9	-0.79%
5712.2	1.62%
5864.9	2.67%
5924.1	1.01%
5724.6	-3.37%
5721.5	-0.05%
5720.6	-0.02%
5714.5	-0.11%
5681.6	-0.58%
5909	4.00%
5969.9	1.03%
6065.1	1.59%
6037.7	-0.45%
6016	-0.36%
5759.4	-4.27%	1.47153772