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- QUESTION
Assignment Group Members
Name
Student ID
Enter your answers to each of the five case studies below each case study, adding additional pages as required.
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Case Study 1
Table 1
DMP
RFG
Date
Last Price (AUD)
Shares Outstanding (M)
87m
Market Cap (B AUD)
Earnings Per Share (AUD) (TTM)
$0.74
Current P/E Ratio (TTM)
Dividend (AUD) (TTM)
$0.518
Current Dividend Yield (%)
Table 2
Definition/Explanation
Last Price (AUD)
Shares Outstanding (M)
Market Cap (B AUD)
Earnings Per Share (AUD) (TTM)
Current P/E Ratio (TTM)
Dividend (AUD) (TTM)
Current Dividend Yield (%)
Case Study 2
Case Study 3
Case Study 4
Case Study 5
SOLUTION
| Subject | Business | Pages | 12 | Style | APA |
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Answer
Accounting and Finance for Business
The holding period earnings on investments made refers to the percentage earnings earned during the period that the investor had the investment.
- The holding period returns for Dominos Pizza Enterprise (DMP.AU) for the five years ending in 2015 June was;
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Dominos Pizza Enterprise (DMP.AU) |
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Date |
Share prices |
S/Price Trend |
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2010 June |
5.3262 |
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2011 June |
6.0676 |
13.92 |
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2012 June |
9.8038 |
61.58 |
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2013 June |
10.8963 |
11.14 |
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2014 June |
22.59 |
107.32 |
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2015 June |
37.71 |
66.93 |
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Holding Period Return formula = |
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HPR annualized = (Pt-1 - Pt +Income/pt + 1) ^1/t -1 |
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Or 1+HPR=1 + HPR1)(1+HPR2)(1+HPR3)(1+HPR4)-1 |
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Holding Period Return for DMP = |
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(1+0.1392)(1+0.6158)(1+0.1114)(1+1.0732)(1+0.6693) - 1 |
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HPR for DMP = 608% |
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The holding period returns for Retail Food Group (RFG.AU) for the five years ending in 2015 June was;
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Retail Food Group (RFG.Au) |
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Date |
Share prices |
S/Price Trend |
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2010 June |
2.65 |
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2011 June |
2.37 |
-10.57 |
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2012 June |
2.65 |
11.81 |
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2013 June |
3.95 |
49.06 |
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2014 June |
4.68 |
18.48 |
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2015 June |
5.61 |
19.87 |
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Holding Period Return formula = |
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HPR annualized = (Pt-1 - Pt +Income/pt + 1) ^1/t -1 |
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Or 1+HPR=1 + HPR1)(1+HPR2)(1+HPR3)(1+HPR4)-1 |
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Holding Period Return for RFG = |
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(1-0.11)(1+0.12)(1+0.49)(1+0.18)(1+0.20) - 1 |
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HPR for RFG = 111.70% |
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- The risks associated with the shares of a company in a capital market are measured with the beta that indicates the shares volatility in the market. A company’s portfolio’s sensitivity to the stock movements is represented by a benchmark index mostly represented by a beta of 1. A company that has a beta of 1 indicates that the company’s shares have equal volatility as the market and any fluctuations means that the company’s shares are either more or less volatile than the market.
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DMP Monthly return |
All Ordinary ASX (^AORD) |
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2010 June |
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Monthly return |
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2011 June |
0.14 |
0.03 |
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2012 June |
0.62 |
0 |
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2013 June |
0.11 |
0.03 |
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2014 June |
1.07 |
0.02 |
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2015 June |
0.67 |
0.06 |
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Covariance with the market |
-00000.00078 |
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Market Variance |
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0.00045 |
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Beta |
-1.74 |
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RFG Monthly return |
All Ordinary ASX (^AORD) |
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2010 June |
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Monthly return |
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2011 June |
-0.11 |
0.03 |
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2012 June |
0.12 |
0 |
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2013 June |
0.49 |
0.03 |
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2014 June |
0.18 |
0.02 |
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2015 June |
0.20 |
0.06 |
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Covariance with the market |
00000.00047 |
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Market Variance |
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0.00045 |
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Beta |
1.04 |
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RFG has a beta that is more than 1 and it shows that RFG’s shares in the market fluctuate at the an equal rate as the market share price index while DMP have a negative beta which indicates that the company’s shares mostly move up when the degree of risks of the market’s decreases and goes down when the rate of risks for the market increases (Bodie, Kane, Marcus, 2008).
The expected returns of each company are measured by the Capm calculations. The risk free rate has been taken as 3% while the average return in the market is 10%.
The formula =
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Capm = rf + β (rm -rf) |
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DMP Capm Calculations |
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rf = risk free rate |
3.00% |
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β = Beta |
-1.74 |
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rm = return on the market |
10% |
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Capm = |
8.82 % |
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RFG Capm Calculations |
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rf = risk free rate |
3.00% |
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β = Beta |
1.04 |
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rm = return on the market |
10% |
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Capm = |
28.28 % |
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The expected returns for RFG are much higher than those of DMP which are 28.28% and 8.82% respectively (Vance, 2003)
4.
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Total Return to Shareholders from 30th June 2010 to 30th June 2015 |
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(P5 + D1-5/PO)^1/5-1 |
P5 |
47.03 |
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D1-5 |
2.4057 |
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PO |
6.75535 |
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Rate |
0.2 |
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Total Return to Shareholders for DMP = |
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0.488765696 |
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= 48.88% |
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Total Return to Shareholders from 30th June 2010 to 30th June 2015 |
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(P5 + D1-5/PO)^1/5-1 |
P5 |
4.62 |
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D1-5 |
1.3857 |
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PO |
2.55 |
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Rate |
0.2 |
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Total Return to Shareholders for RFG = |
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0.187044112 |
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= 18.70% |
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- The shares of DMP are performing much better than the ones of RFG but the volatility of the DMP shares are much higher than those of RFG (Ross, Westerfield & Jaffe, 2013).
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DMP Shares |
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Date |
Div per share |
Share price |
Trend |
Vol traded |
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22/08/2010 |
0.1686 |
5.1994 |
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537140.2 |
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22/02/2011 |
0.1486 |
6.5066 |
25.14 |
107160 |
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24/08/2011 |
0.1643 |
7.0041 |
7.65 |
254580 |
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21/02/2012 |
0.1857 |
8.204 |
17.13 |
45620 |
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22/08/2012 |
0.2014 |
9.4623 |
15.34 |
32980 |
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19/02/2013 |
0.2214 |
10.5257 |
11.24 |
63900 |
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21/08/2013 |
0.22 |
13.83 |
31.39 |
134560 |
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18/02/2014 |
0.2529 |
20.47 |
48.01 |
134220 |
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22/08/2014 |
0.2714 |
24.5 |
19.69 |
288860 |
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19/08/2015 |
0.3514 |
39.54 |
61.39 |
157420 |
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21/08/2015 |
0.3886 |
40.07 |
1.34 |
336200 |
Average rate of growth of share prices trend is 23.83 for DMP while the average share prices growth trend for the RFG is 8.48%.
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RFG Shares |
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Date |
Div per share |
Share price |
Vol traded |
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8/9/2010 |
0.0929 |
2.47 |
79500 |
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17/03/2011 |
0.1 |
2.9 |
33380 |
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7/9/2011 |
0.1071 |
2.2 |
125420 |
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15/03/2012 |
0.1214 |
2.71 |
61200 |
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7/9/2012 |
0.1286 |
2.86 |
33940 |
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15/03/2013 |
0.1357 |
3.6 |
233840 |
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9/9/2013 |
0.1464 |
4.49 |
210240 |
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17/03/2014 |
0.1536 |
4.48 |
531320 |
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11/9/2014 |
0.1607 |
4.86 |
287220 |
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18/03/2015 |
0.1643 |
7.04 |
401300 |
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10/9/2015 |
0.1679 |
4.16 |
688580 |
References
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Bodie, Z., Kane, A., & Marcus, A. J. (2008). Investments (7th International ed) Boston: McGraw-Hill. 303. Ross, S. A., Westerfield, R. W., & Jaffe, J. (2013) Corporate finance (10th ed.) New York, NY: McGraw-Hill Irwin. Vance, D. (2003) financial analysis and decision making: tools and techniques to solve financial problems and make effective business decisions. New York, NY: McGraw-Hill.
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