Davies,Brighid,15519342,External,CS - Corporate Finance FNCE3000 Case Study(20 Week 6 Monday 2pm Word Count 4296 excluding tables Brighid Davies

Davies,Brighid,15519342,External,CS - Corporate Finance...

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Corporate Finance- FNCE3000 Case Study (20%) Week 6- Monday 2pm Word Count- 4296- excluding tables Brighid Davies 15519342 External student Shareholder analysis Who are the typical investors in this stock Who are the marginal investors in this stock? Risk return analysis What are the risks of this company? (Where is this risk coming from (market, firm, industry or currency)? How is the risk profile of the company changing? What return would you have earned investing in this company’s stock? How much would you have under or out-performed the market in the short term? In your view, how much of the performance can be attributed to management? Cost of capital Calculate the company’s cost of equity using various methods (at least 2); showing your calculations and detailing the source of your data Calculate the company’s cost of debt; showing your calculations and detailing assumptions and the source of your data. Calculate the company’s cost of capital; showing your calculations. 1
1.0 Introduction 3 2.0 Shareholder analysis 3 3.0 Risk Profile 5 3.1 Return for Financial Year 2014/2015 7 4.0 Cost of Capital 10 4.1 Cost of Equity 11 4.1.1 Capital Asset Pricing Model 11 4.1.2 Dividend Growth Model 11 4.1.3 Evaluation and Comparison of Models 11 4.2 Cost of Debt 11 4.3 Weighted Average Cost of Capital 11 4.4 Discussion of Weighted Average Cost of Capital 12 5.0 Bibliography- 13 6.0 Appendix 14 2
2.0 Introduction Medibank Private Limited is Australian’s largest health insurance provider, which is a listed company on the Australian Stock Exchange as MPL. Medibank Private Limited offers health insurance and other complementary services such as travel, life, pet, overseas student health cover and visitor & working visa holders cover. Medibank also provides other health services, which includes Healthdirect Australia, Nurse-On-Call and Healthline. These services were made available to Medibank through the 2009 acquisition of AHM ( Australian Health Management), the 2010 acquisition of McKesson Asia- Pacific and the 2009 merger with HAS (Health Services Australia). A list of the subsidiary companies of Medibank Private includes; In 1976, Medibank was established by the Health Insurance Commission (Medicare), as a government owned private health insurer. It was originally establish to provide competition to for-profit health funds. The fund was establish to put pressure on other health funds to keep premiums at an appropriate level. In 2009, the Rudd government announced that they would make Medibank a for-profit company. This meant that Medibank was obliged to pay taxes on any future income. On the 25 th of March 2014, the Abbott Government prepared a $4 billion proposal for the privatisation of Medibank. On the 20 th of October 2014, Medibank issued a Prospectus with details about the sale of shares to the public. On the 25 th November 2014, Medibank was listed on the Australian Securities Exchange. It was the second largest float in ASX history.

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