FIN4410 Financial Theory and Application, Coursework | Middlesex University London

Coursework Assignment

You are required to complete the below coursework individually. 

You have to investigate and analyse a stock of your choice using the methods and models that are discussed in the module. Select a stock that has been listed for a minimum of 5 years on the UK market. The stock should be paying regular dividends.

1. Estimate the stock required rate of return using two asset pricing models: CAPM and a multifactor asset pricing model. Compare the stock’s beta to the sector’s beta and estimate the stock’s required rate of return.
   
   
2.  Evaluate the stock based on your estimations using the dividend valuation model and discounted cash flow model. This requires a forecast of horizon cash flows and dividends that is based on company’s prospective growth and industry prospects. Compare your estimated share price to the real share price of the stock and make relevant recommendations for potential investors.
   
   
3. Estimate the firm’s cost of debt (using value-weighted average of interest rates) and then evaluate its cost of capital using market values of equity and debt.

For each of the above section, you should discuss and justify in details the steps and criteria followed in collecting your data variables and applying the methods. Comment on the company’s risk, performance and value based on your findings and in relation to the peer firms in the industry.

Guidelines for the assignment:

• Data variables could be obtained from Eikon/DataStream, Bloomberg, the company’s annual reports or Capital IQ;
• For this assignment you would need to use Excel to collect and store your data, in addition to using a statistical/econometrics package (such as Stata, Eviews, or SPSS etc) to handle the type of analysis. For help with DataStream,  Bloomberg or Capital IQ go to the Sheppard Library and consult Miss Sarah Hudson;
• You are required to provide full details of all sources of your data and reference materials used in your assignment in the bibliography;
• You are required to discuss with the module leader your selected stock for approval;
•  You must submit a hard copy and TurnitIn online submission;
•  You MUST INCLUDE all the data and the computation for your findings in your Turnitin submission;
• You are expected to submit the work in a typed format with font 12, 1.5 line spacing;
• Word limits 2000 words.

Learning Outcomes Examined:

Knowledge

• develop various financial models to determine the riskiness of stocks and measure their impact on the estimated stock price;
•  Use your critical ability to apply various forecasting techniques that will assist you in conducting a fundamental analysis of a firm’s earnings and its intrinsic value;
•  understand and appreciate the complexity and contradictions of the current academic literature in financial theory and its implications for professional practice;
• use specialised and technical, professional and academic skills in the analysis of relevant specific problems in the area of finance.

Skills

• written communication; 
• interpersonal communication;
• planning, organising and time management;
• initiative; 
• problem solving and analysis.