Question:
Assignment requirements:
1. Download all available financial data for Fortescue Metals Group Ltd (ASX Code: FMG) from DataAnalysis.
2. Give a brief description of FMG.
3. Explain the purpose of financial statement analysis.
4. Analyse the firm’s current operation using its financial statements (i.e. income statement, balance sheet and cash-flow statement).
You should also take into account supply and demand factors (i.e. you need to look at the market conditions at both industry and economy levels).
5. Download the S&P/ASX 200 from Yahoo Finance website and calculate the rate of return for S&P/ASX 200.
6. Using the Capital Asset Pricing Model and an appropriate government bond yield as risk-free interest rate and the result from (5) to calculate the required rate of return for FMG.
7. Use an appropriate dividend valuation model to value FMG's shares (Hint: use the total dividend figures).
8. Draw graphs for FMG’s adjusted share price and return (you can use daily, monthly or quarterly return). Compare the company's share price and return with your analyses in questions (6) and (7) above.
9. Use the information and results from your analyses in questions 4-8 above; identify areas of cash flows (i.e. operating, investing and financing) where the firm needs to pay attention to.
10. Suggest relevant investment and financing strategies to improve the firm’s cash flow position.
11. Justify your recommendation in terms of shareholders’ wealth maximisation.
Note: You should use data for the period 2009-2019 in your analysis. Hint: Look at the entire operation of the company from a finance perspective as well as the growth prospect of the company with a focus on changes in the company's cash flows over time.
Write a professional looking report for the management of the selected company with your recommendation. Your recommendation(s) should be succinct and you need to highlight expected outcomes or possible financial consequences of your recommendations.
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