Consider the 2019 Annual Report of The a2 Milk Company Limited (A2M). Briefly explain how the “A2M” governance is organized. Do you notice any strategies in place to align manager and shareholder interests based on the Annual Report? Provide one brief exa
finance
Description
Assessment Instructions
• Complete this individual assignment (parts 1-3) by the due date above.
• Please submit written answers and final numbers through the Turnitin “Written Report” link and submit ONE excel spreadsheet you used in calculating answers through “Excel Submission” link (you can use multiple sheets in your one file). Both of these sections will be marked.
• The written part of your assignment will be put through Turnitin and any plagiarism will be traced and penalised. Please refer to the policy.
a) Consider the 2019 Annual Report of The a2 Milk Company Limited (A2M). Briefly explain
how the “A2M” governance is organized. Do you notice any strategies in place to align
manager and shareholder interests based on the Annual Report? Provide one brief
example.
b) What is the Net Working Capital for “A2M” both in 2018 and 2019. What type of current
asset management strategy is the company pursuing? Explain why and what are the pros
and cons of this strategy.
c) Consider “A2M” 2019 Annual Report. Identify three of the major risks discussed. Are these
risks systematic or unsystematic? Why?
d) You are trying to value “A2M” share today (End of June 2019). Assume the current price of
the share in the stock market is $17.15 and that you would like to hold the investment for 4
years. Assume that “A2M” will pay its first dividend ($0.5 AUD) one year from now. The
total dividend will be paid as a lump sum (at once). After this you also estimate that the
dividends will grow respectively at 30%, 25% per year. After that (starting in time 3) you
estimate dividends will grow at a constant rate of 5% forever. Assume that today the
Australian treasury notes is 1.5%, the market risk premium is 10% and the beta of “A2M” is
0.8. Based on this price would you purchase the share? Why or why not?
