Internal Code: MAS5619
Aristocrat Leisure, the star entertainment group, Tabcorp, tats group are crown’s peers where Aristocrat leisure has a high market cap than crown and others are below the crown. Gambling is a very important activity undertaken by many Australians, over 80% engage in gambling of some kind, which is the highest rate of gambling in the world. There is a good scope for such companies to perform better in the market due to the interest in the field for many people. Crown continues to invest in tourism assets to ensure they are equal to or better than the finest resorts in the world. The major excitement and highly anticipated crown Sydney is under construction. It always tries to continue to maximize the performance of Crown Melbourne and Crown Perth. In the digital side, the crown is looking to optimize its online social gaming operations and explore further growth options. Crown also has a major eye towards its international projects as it continues to achieve to become a world leader in its field.
1. What are the short-term and long-term debts used by your firm?
2. Is your company’s debt structure consistent with the industry?
3. How does the industry your company operates in influence the proportion of short-term to long-term debts of your company?
4. What is your company’s the cost of debt?
(II) Share Valuation (30%)
1. What is your company’s cost of equity?
2. Evaluate and discuss your company’s revenue, earnings, EPS, dividends and growth expectations. Use the most recent reported earnings results from the annual report you submitted in PART A for your analysis.
3. Value your company’s stock using comparables approach (ie. P/E) and constant dividend growth rate model. What are the factors that influence your company’s stock price and how are they captured in these models?
4. Which of the values in question 3 appear most reasonable compared to the market price of your company’s stock?
5. What additional data and information would you prefer for valuing your company’s stocks? Explain your reason(s).
Cost of Capital (30%)
1. Calculate the weighted average cost of capital (WACC) of your company?
2. Explain the company’s tax rate in the calculation of WACC?
3. Why is there a difference in the cost of debt and the cost of equity?
4. Should current liabilities be included in the cost of capital calculation? What are the pros and cons?
5. What is the major value of the WACC calculation for your company and how is it applied in investment decision-making?
6. Provide examples of how your company might have recently used WACC in its investment decision-making with reference to two projects recently undertaken by your company. You may need to synthesize information from your readings (ie. Annual reports, GPFS etc.) to identify the projects.
7. Define and explain a capital structure of your company. Discuss whether it is consistent with the industry and why or why not.
8. What is the optimal capital structure and what economic circumstances will likely cause a change in it?
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