Investment and Financing Decisions
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FINC2012 Group Assignment - Semester 1, 2022
Investment and Financing Decisions
Due 11.59pm 12th May, 2023
You are hired as an external consultant to carry out the following analyses and produce a report. Refer to the below
table to look up the company assigned to your group based on the last digit of your group number.
Last Digit of Group Number Assigned Company GICS ASX Sector
1 or 6 Aristocrat Leisure Limited (ALL) Consumer Discretionary
2 or 7 Qantas Airways Limited (QAN) Industrials
3 or 8 CSL Limited (CSL) Health Care
4 or 9 NEXTDC Limited (NXT) Information Technology
5 or 0 Bingo Industries Limited (BIN) Industrials
Your task is to review the company capital structure decisions.
1. (Total 5 marks)
(a) With references to peer-reviewed academic studies, discuss the relation between investment and financing.
What do corporations do to finance their investments? How are investments affected when corporations face
difficult/ favourable financial conditions? (2 marks)
(b) With references to peer-reviewed academic studies, discuss three key determinants of capital structure.
Specifically, what are the key factors that drive corporations to change their debt/equity mix? (3 marks)
2. (Total 4 marks) You are required to identify three peer companies for comparison analysis. Compare the capital
structure trends of your assigned company and the three peer companies in the fiscal years ending in 2017 through
2021. You should clearly explain your choices of variables and the entire estimation process, using adequate
references to academic journals. Discuss these trends in relation to the capital structure theories under the topics
covered in weeks 8 and 9.
3. (Total 6 marks) Identify the investment decisions of your assigned company before 2020. Check their annual
reports, press release or ASX filings. For example, see ASX or Datanalysis - Company financial data.
(a) What are the impacts of these decisions on capital structure? (3 marks)
(b) What do you think are the reasons for the changes in capital structure? (3 marks)
4. (Total 8 marks) Calculate the annual cost of capital of the assigned company fiscal year ending in 2017 through
2021. You should clearly explain your choices of variables and the entire estimation process, using adequate
references to academic journals.
(a) Show workings for your calculations of the annual cost of capital of the assigned company. (2 marks)
(b) How did the investment decisions (discussed in Question 3) affect any changes in the cost of capital over the
period? (3 marks)
(c) Given the current state of corporate financing, what are your suggestions to optimise the assigned company’s
cost of capital? (3 marks)
5. (Total 2 marks) for overall presentation and writing quality. For example, you should be able to illustrate your
analysis with appropriate graphs, which forms part of the overall professional presentation of this report.
TOTAL: 25 marks
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Other Requirements:
Include a cover/ title page showing the student identification number (SID) of each group member. Do not include
your name. Include the percentage of contribution by each member next to each SID. For example, if each of 4 students
contributed equally to the assignment, then put 25% next to each SID. The group leader should share a copy of the
final version with all group members prior submission.
Submit ONE word document ONLY. The report must be presented in Times New Roman, 11-point font size, 1.15 line
spacing with standard page margins (2cm per margin). Tables, charts and figures should be clearly labelled. This report
must be no more than eight (8) A4 pages. The eight (8) page limit does not include additional pages for your cover
page, reference list or Appendices. The above page limits and formatting rules will be strictly enforced. Any
assignments in breach of these requirements will be subject to page limit and/or presentation. The Appendices section
does not have a word limit.
Do NOT include executive summary, introduction or conclusion sections. These sections will not be marked.
You must label your answers for each part of the tasks clearly. (e.g. Task 1, Task 2, a. b., etc.).
Referencing: You are expected to use academic references to support your analysis and arguments. Citations and the
reference list must be prepared following one of the University of Sydney referencing and citation styles
(https://libguides.library.usyd.edu.au/citation). It is ideal to employ at least three references to justify your arguments.
Writing: The logic of the answers must be easy to follow. There are expected to be no spelling or grammatical errors
and terminology should be clearly defined.
Professional presentation is highly encouraged.
General Marking criteria
The criteria below will be followed when marking each part of the assignment:
1. The extent and quality of critical reasoning/critical thinking.
2. The demonstration of knowledge of relevant theory.
3. The successful usage and interpretation of relevant data.
4. The extent to which the work is clearly, concisely and professionally presented.
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FAQ
1. What are the most relevant dimensions for selecting peer firms?
Size and industry (or sector). E.g. you can look at firms in the same industry and find 3 peer firms with the closest size
(market capitalisation or total assets or total revenue) to your firm.
2. Should I look at capital structure of the entire industry?
It’s recommended if you are a capable researcher (and good with Excel), but you should concentrate only on the mean
or median statistics.
3. Do I need to calculate other firm characteristics for the capital structure discussions?
You need to provide sufficient data to support your arguments.
4. How do I discuss if the company’s capital structure decisions are consistent with the capital structure theories?
You need to understand the essence of these theories. What does each theory predict a firm should do, given the firm’s
specific characteristics? Are the actions you find and the leverage trend you calculate consistent with what these
theories predict?