Corporate Finance
Table of content Executive summary
1.Introduction 4 1.1. Overview of Adelaide Brighton Limited 4 1.1.1. History 4 1.1.2. Industry 4 1.2. Major competitors 5 1.2.1. Boral Limited 5 1.2.2. Fletcher Building Limited 5 1.2.3. Brickwork Limited 5
2.Capital structure 6 2.1. Leverage 6 2.1.1. Current ABC’s leverage 6 2.1.2. Recent history of ABC’s leverage 6 2.2. ABC’s capital expenditures and its financing 9 2.3. Comparison of ABC’s capital structure with similar companies 10 2.4. Characteristics of the company influencing the leverage policy 11 2.4.1. Tax advantage 11 2.4.2. Corporate tax rate 11 2.4.3. Earnings before tax and interest 11 2.4.4. Interest rate 11 2.4.5. Credit rating 12 2.5. Pecking order theory 13 2.6. Optimal capital structure 13
3.Dividend 14 3.1. Dividend policy .14 3.2. Competitors Dividend Analysis …16 3.2.1 Brickworks Limited…...................................................................................................16 3.2.2. Boral Limited………………………………………………………….……………..….…....17 3.2.3. Fletcher Building Limited…………………………………………..……………….……....17 3.3. Comparison ………………………….…………………………………….......………………….18 3.4. Optimal dividend policy…………………...……………………….……..……........................20
4.Valuation………………………………………………………………………………………………..22 4.1. Capital Asset Pricing Model (CAPM) 22 4.1.1 Estimation of Beta (β)………………………………………………………..…..………..…22 4.1.2 Estimation of cost of equity………………………………………………….……….….... 23 4.2. Weighted Average Cost of Capital (WACC) 23 4.2.1 Estimation of cost of Debt in 2010………………………….………………………….…24 4.2.2 Estimation of corporate tax rate……………………………………………………….….24 4.2.3 Weighted Average Cost of
1.Introduction 4 1.1. Overview of Adelaide Brighton Limited 4 1.1.1. History 4 1.1.2. Industry 4 1.2. Major competitors 5 1.2.1. Boral Limited 5 1.2.2. Fletcher Building Limited 5 1.2.3. Brickwork Limited 5
2.Capital structure 6 2.1. Leverage 6 2.1.1. Current ABC’s leverage 6 2.1.2. Recent history of ABC’s leverage 6 2.2. ABC’s capital expenditures and its financing 9 2.3. Comparison of ABC’s capital structure with similar companies 10 2.4. Characteristics of the company influencing the leverage policy 11 2.4.1. Tax advantage 11 2.4.2. Corporate tax rate 11 2.4.3. Earnings before tax and interest 11 2.4.4. Interest rate 11 2.4.5. Credit rating 12 2.5. Pecking order theory 13 2.6. Optimal capital structure 13
3.Dividend 14 3.1. Dividend policy .14 3.2. Competitors Dividend Analysis …16 3.2.1 Brickworks Limited…...................................................................................................16 3.2.2. Boral Limited………………………………………………………….……………..….…....17 3.2.3. Fletcher Building Limited…………………………………………..……………….……....17 3.3. Comparison ………………………….…………………………………….......………………….18 3.4. Optimal dividend policy…………………...……………………….……..……........................20
4.Valuation………………………………………………………………………………………………..22 4.1. Capital Asset Pricing Model (CAPM) 22 4.1.1 Estimation of Beta (β)………………………………………………………..…..………..…22 4.1.2 Estimation of cost of equity………………………………………………….……….….... 23 4.2. Weighted Average Cost of Capital (WACC) 23 4.2.1 Estimation of cost of Debt in 2010………………………….………………………….…24 4.2.2 Estimation of corporate tax rate……………………………………………………….….24 4.2.3 Weighted Average Cost of