Company Name : Origin Energy ASXAustralian University Postgraduate LevelI have also attached a sample assignment, I am looking for section 3 of that assignment, the working of the problems apart from...

Topic

Learning Outcomes

Objective

Key Questions

Framework for analysis

Risk and return

Section 3 (1000 - 1500 words with working in Excel)

To develop a risk profile for your company, estimate its risk parameters

and use these parameters to estimate costs of equity and capital for the firm.

1. What is the risk profile of your company? (How much overall risk is there in this firm? Where is this risk coming from [market, firm, industry, or currency]? How is the risk profile changing?)

2. What is the performance profile of an investment in this company? What return would you have earned investing in this company’s stock? Would you have under- or outperformed the market? How much of the performance can be attributed to management?

3. How risky is this company’s equity? Why? What is its cost of equity?

4. How risky is this company’s debt? What is its cost of debt?

5. What is the mix of debt and equity used by this firm to fund its investments?

6. What is this company’s current cost of capital?

Estimating Historical Risk Parameters

• Run a regression of returns on your firm’s stock against returns on a market index.

• What is the intercept of the regression? What does it tell you about the performance of this company’s stock during the period of the regression?

• What is the slope of the regression? What does it tell you about the risk of the stock?

• What portion of this firm’s risk can be attributed to market factors? What portion to firm-specific factors? Why is this important?

• Using this beta and other information, estimate the expected return on an equity investment in this company?

• As a manager in this firm, how would you use this expected return?

Estimating Default Risk and Cost of Debt

• If your firm’s debt is rated, what is the most recent rating for the firm?

· Using financial ratio analysis, comment on the changes in the firm’s liquidity, debt servicing and debt levels over time.

• If your company is not rated, does it have any other recent borrowings? If so, what interest rate did the company pay on these borrowings?

Estimating Cost of Capital

• What is the market value of equity?

• Estimate a market value for debt.

• What are the weights of debt and equity in the firm?

• What is the cost of capital for the firm?