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FINM7403 Portfolio Management
Business School, The University of Queensland
Team Assignment Task Document
Title: Valuation of Stocks in High-Emission Industries
Semester Two
July- November 2024
Assignment Submission Due: 14 October 2024 at 17:00 Brisbane Time
This assignment has a total mark of 20 marks. It contributes 20% to your final grade.
Each student must separately complete and submit the accompanying peer evaluation form by
18 October 2024, 17:00. Peer evaluation contributes 5% to your final grade.
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This assignment is to be completed and submitted as a team. Students are required to
complete tasks in Parts A and B of this task sheet. A guide for student teams follows the
assignment tasks, a grading rubric is presented at the end of this document. [8 pages in total]
Part A. As an equity security analyst, your current task is to estimate the fair value of an
Australian stock in operation as of July 2024.
• Stock selection criteria: 1. The stock must be a constituent of the ASX200 index; 2. the firm should operate in high carbon emission industries, such as companies of fossil fuel, mining, steel, aluminium, cement, fertilizer manufacturing, or in the transportation sector. [Note: You can select one stock that meets the criteria, except for Qantas and BHP.] • Approach: You have decided to use a Free Cash Flow to the Firm (FCFF) model and a Multiples-based approach, and then assign a different weight for each model result to determine the stock’s intrinsic value. • Source of data: Capital IQ and additional resources, including company disclosures from the company’s website, news and academic journal articles. For the FCFF approach, you agree with the annual consensus forecasts (e.g., earnings, free
cash flows) for the chosen stock over the next three (or four) fiscal years in Capital IQ.
Beyond this time, you will derive estimates of long-term growth rates. Use the Capital
Asset Pricing Model to estimate the equity cost of capital. Assume a risk-free rate of
4.38% and a market risk premium of 5.99%.
For the Multiples-based approach, you will select a multiple for your stock and its
comparable stocks (at least two) and justify your choices of multiples as well as
comparable.
Requirement: In your written report to the fund manager, you are expected to incorporate the
following:
1. Describe the valuation process for each method so one can replicate the analysis. 2. Justify your primary considerations for valuation. 3. Report your valuation results and provide an investment recommendation (buy, sell, or hold) based on the results from two different valuation methods. 3
Part B. Several days after handing in the report in Part A, your fund manager requests a
revision of the FCFF stock valuation to account for his predicted early introduction of a
carbon tax on Scope 1 emissions (priced per ton of greenhouse gas). The revision should
address the following key considerations for your FCFF valuation: a. projections of sales
revenue and operating costs, b. capital expenditures (including Research and development
expenses), c. taxation, and d. cost of capital.
Requirements: Based on the firm’s environmental performance disclosures, write a response
to evaluate the above aspects and potential directional impacts on your stock valuation
recommendation. Support your analysis with evidence including company disclosures and
relevant credible references.
------------------------------- End of Assignment Task Sheet ---------------------------------
Guide for students
A. Researching and writing your assignment:
• Capital IQ access: I requested Capital IQ to create accounts for all student enrolled in the course in early July. If you are in the list you should have access to https://www.capitaliq.com/ciqdotnet/Login-okta.aspx starting 21 July 2024. Please check your UQ email (including your junk folder) for the access details. Students who enrolled after early July could register using their UQ email address (e.g., [email protected], replacing ‘1234567’ with your student ID) to create their accounts. Avoid postponing this task to the last minute, as account registration approvals for online access may require a day or two. • The process of forming a team consists of two phases. First, students can self-enrol in a team by registering online through Blackboard (Assessment Assessment Task 2: Team assignment-> Team Assignment sign up sheet) between 29 July and 5 Aug. Student who do not self-register will be allocated to random teams by their instructors before 10 Aug. It is recommended that each team consists of three or four students. If you have form a team of four, please email me as that I can allocate you to the same team. Please note that a fourth member can join a team consisting of three members. If 4
you wish to withdraw from a team after joining, please email Elizabeth for assistance,
as Blackboard does not allow students withdraw on their own.
• Write and cite: 2,500 words for Parts A and B combined. The word count excludes footnotes, tables, figures, references, and appendices. The main body of your report should be typed in Times New Roman font, size 12, and 1.5 lines spaced. Type the course code and your assignment team number on each page of your submission file using the Header. Insert the page number in the Footer. Read the information contained in this link. Write, cite, and submit - Library - University of Queensland (uq.edu.au). APA, Chicago, or Harvard referencing style is acceptable. • Appendix: Include your main tables within the main body of the report. If you wish to attach Excel files to show your work, please copy and paste them into the WORD document’s Appendix. • Formatting: Include a title page in your submission file. Your Team assignment title page must indicate the assignment name (e.g., FINM7403 Team Assignment), your team name, student ID numbers and names of each team member, and their individual contribution to the assignment. • AI policy: In Part A of the assignment, the use of AI tools is prohibited. In Part B, while AI tools may be used to aid in understanding the relevant concepts but must not be used to write the report. If AI is used in the assignment, you must reference all the content from Generative AI tools. Failure to reference externally sourced, non-original work can result in Academic misconduct. Machine translation tools are prohibited. Students are encouraged to review and revise their work with their team members. B. Submit for grading & similarity checks:
• Ensure that the entire document, Appendix included, is successfully converted into a single PDF file before submission. • SAVE YOUR TITLE PAGE, PARTS A AND B (with Appendices if any) AS ONE PDF FILE before clicking on the relevant link to upload your assignment to the portal of “Assessment Assessment task 2: Team Assignment FINM7403 Team Assignment Submission for Grading” on Blackboard. If you are not familiar with the submission process, please visit this link before submission. 5
• While the assignment can be submitted for grading by any team member and multiple times, only the submission made closest to and before the due date will be graded. • Each team must elect one team leader responsible for submitting the assignment to TurnitIn. Multiple submissions are allowed, but they must be made by the same person (team leader). Note that TurnitIn also provides AI similarity scores visible only to teaching staff. • Other instructions: Teaching staff will not answer any questions regarding the assignment, as this gives students an unfair advantage over others. However, you may post any questions to the ‘Discussion Board’ on Blackboard; such questions will be answered if appropriate. C. Peer evaluation:
• There are two peer evaluation forms for each student to complete. One is for practice that needs to be completed up to one week before the assignment submission. This form is for practice only and doesn’t account for students’ final grades. The second evaluation form to be completed between 9:00 on 14 Oct and 17:00 on 18 Oct 2024 contributes to 5% of your final grade. 6
Grading Rubrics for FINM7403 Assignment in Semester Two, Jul- Nov 2024
Parts A & B (100%),
20 marks towards the
final grade
Outstanding Good Fair Needs to improve Poor or missing
Part 1: Equity Valuation (55%)
The FCFF method
(30%): Have you
thoroughly described
the valuation process
for the FCFF method?
Your work
demonstrates an
outstanding
understanding of
the FCFF
valuation process.
Additionally, you
have provided an
excellent
justification for
the main
consideration for
the FCFF method.
Your work
demonstrates a
good
understanding of
the FCFF
valuation process.
Additionally, you
have provided
well-justified
main
considerations for
the FCFF method.
Your work
demonstrates a
fair understanding
of the FCFF
valuation process.
Additionally, you
have provided a
fair justification
for the main
considerations for
the FCFF method.
Your work
demonstrates a
basic understanding
of the FCFF
valuation process.
Additionally, you
have provided a
basic justification
for the main
considerations for
the FCFF method.
Your work
demonstrates little to
no understanding of
the FCFF valuation
process.
Additionally, you
have provided little
to no justification for
the main
considerations for the
FCFF method.
The Multiples method
(15%): Have you
detailed the multiples
valuation process?
Your work
demonstrates an
outstanding
understanding of
the multiples
valuation process.
Additionally, you
have provided an
excellent
justification for
the main
consideration for
Your work
demonstrates a
good
understanding of
the multiples
valuation process.
Additionally, you
have provided
well-justified
main
considerations for
the multiples
method.
Your work
demonstrates a
fair understanding
of the multiples
valuation process.
Additionally, you
have provided a
fair justification
of the main
considerations for
the multiples
method.
Your work
demonstrates a
basic understanding
of the multiples
valuation process.
Additionally, you
have provided a
basic justification
of the main
considerations for
the multiples
method.
Your work
demonstrates little to
no understanding of
the multiples
valuation process.
Additionally, you
have provided little
to no justification for
the main
considerations for the
multiples method.
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the multiples
method.
Recommendation
(10%): Have you
considered the
assumptions and
limitations of the two
valuation methods in
making the stock buy or
sell recommendation?
Your
recommendation
demonstrates an
outstanding
understanding of
the assumptions
and limitations of
the two valuation
methods.
Your
recommendation
demonstrates a
good
understanding of
the assumptions
and limitations of
the two valuation
methods.
Your
recommendation
demonstrates a
fair understanding
of the
assumptions and
limitations of the
two valuation
methods.
Your
recommendation
demonstrates a
basic understanding
of the assumptions
and limitations of
the two valuation
methods.
Your
recommendation
demonstrates little to
no understanding of
the assumptions and
limitations of the two
valuation methods.
Part B: Responses to the impact of the predicted early introduction of carbon tax on stock valuation (35%)
Critical evaluation
(35%): Have you
critically evaluated
changes to the key
inputs in the FCFF
model that are likely to
be affected by the
carbon tax? Have you
discussed the extent to
which this tax could
induce a directional
change in your previous
recommendation?
Evaluation of the
carbon tax’s
impact on the
stock’s intrinsic
value is completed
with exceptional
detail. The
analysis is
underpinned by
comprehensive
evidence,
reflecting a highly
developed
capacity to
research and
analyze real-world
problems.
Evaluation of the
carbon tax’s
impact on the
stock’s intrinsic
value is
completed with
good detail. The
analysis is
underpinned by
convincing
evidence,
reflecting a well- developed
capacity to
research and
analyze real- world problems.
Evaluation of the
carbon tax’s
impact on the
stock’s intrinsic
value is
completed to a
fair level. The
analysis is
supported by
some evidence,
reflecting a
developed
capacity to
research and
analyze real- world problems.
Evaluation of the
carbon tax’s impact
on the stock’s
intrinsic value is
completed to a
basic level. The
analysis lacks
evidence to support
their arguments,
reflecting a
developing capacity
to research and
analyze real-world
problems.
Evaluation of the
carbon tax’s impact
on the stock’s
intrinsic value is
completed to a very
low level of detail.
The analysis and
discussion are
superficial, reflecting
a very limited
capacity to research
and analyze real- world problems.
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Parts A & B: Writing communications (10%)
Language (5%):
Clarity of Style,
Knowledge of
Appropriate
Terminology
Writing
demonstrates a
clear, varied,
precise and
concise use of
language and a
sophisticated
command of the
vocabulary and
expression
appropriate to the
analysis. Highly
effective choice of
register.
Writing
demonstrates a
clear and concise
use of language
and a well- developed
knowledge of the
vocabulary and
expression
appropriate to the
analysis. Effective
choice of register.
Writing
demonstrates a
clear use of
language and a
fair knowledge of
the vocabulary
and expression
appropriate to the
analysis. A
suitable choice of
register.
Writing
demonstrates the
mostly clear use of
language.
Vocabulary and
expression are
suitable for the
analysis. The
register is generally
appropriate for
research analysis.
Writing demonstrates
unclear use of
language.
Vocabulary and
register are rarely
appropriate to the
analysis.
Mechanics (5%):
Paragraphing, Spelling,
Punctuation,
Referencing
Writing is
sophisticated, clear
and succinct, with
no lapses in
grammar, spelling
and sentence
construction.
Paragraphing
demonstrates a
refined
understanding of
argumentative
techniques.
Writing is fluent,
clear and
succinct, with no
lapses in
grammar, spelling
and sentence
construction.
Paragraphing
demonstrates a
well-developed
understanding of
argumentative
techniques.
Writing is fluent
and clear, with no
significant lapses
in grammar,
spelling and
sentence
construction.
Paragraphing
demonstrates a
good
understanding of
argumentative
techniques.
Writing is clear and
readable, with some
lapses in grammar,
spelling and
sentence
construction.
Paragraphing
demonstrates a fair
understanding of
argumentative
techniques.
Writing is not readily
comprehensible, with
significant lapses in
grammar, spelling
and sentence
construction.
Paragraphing is not
used to structure an
argument.
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