Accounting And Finance of Newcrest Mining and Orica Ltd †Free Samples

Question: Discuss about the Accounting And Finance of Newcrest Mining and Orica Ltd. Answer: Introduction This report consists of market research done on Newcrest Mining and Orica Limited. The research evaluates both companies and gives recommendations about the investment opportunities in both the companies. Evaluation of analysis done Based on the research on Newcrest Mining Ltd and Orica Ltd following outcome can be drawn: As per CAPM it can be concluded that Systematic Return () of Newcrest Mining Limited is lower than Orica Limited and also Expected rate of return of Newcrest Mining limited is higher than Orica Limited which means Newcrest Mining limited is good for the investment based on CAPM Model. According to Dividend Growth Model, there is positive growth rate in dividend of Newcrest Mining Limited as compare to Orica Limited which shows Newcrest Mining Limited will provide a good value of investment to an investor in future. Also it can be clearly seen that the share price of the Newcrest ltd shows positive growth as compared to the share price of Orica ltd (Yahoo Finance, 2017). Moreover growth rate of Newcrest ltd is also higher than the growth rate of Orica ltd which also gives a positive reason to invest in Newcrest mining limited. Recommendation After considering the following points as discussed in the report it can be concluded that Newcrest Mining limited provides the good value to an investor and therefore investors should invest their fund in Newcrest Mining Limited. Required rate of return using CAPM model Expected return based on CAPM ri = Rf + (Rm Rf) Where, ri= Required rate of return Rf = Risk Free rate (Source: https://www.asx.com.au/). Rm = Expected rate of market return (Refer excel sheet for calculation). = Beta (Refer excel sheet for calculation). ORICA LIMITED ri = 2.10% (Refer excel sheet for calculation). NEWCREST MINING LIMITED ri = 2.30% (Refer excel sheet for calculation). Calculation of share price using Dividend Growth model Ve = D0 (1 + g) ke g Where, Ve = Value of equity shares D0 = Current dividend g = Growth rate ke = Cost of equity ORICA LIMITED VE = $ 64.30 (Refer excel sheet for calculation). NEWCREST MINING LIMITED Since the value is negative of Equity is negative cannot be determined (Refer excel sheet for calculations) Calculation of monthly holding period return (%) for ORICA LIMITED and NEWCREST MINING LIMITED: Date Close Price of ORICA LTD Monthly Return of ORICA LTD 01-09-2016 01-08-2016 01-07-2016 01-06-2016 02-05-2016 01-04-2016 01-03-2016 01-02-2016 01-01-2016 01-12-2015 02-11-2015 01-10-2015 15.2 14.76 14.15 12.33 13.6 15.3 15.37 14.25 14.22 15.5 15.8 16.48 3% 4% 15% -9% -11% 0% 8% 0% -8% -2% -4% 0% (Source: https://au.finance.yahoo.com/). Calculation of share price using Dividend growth model Orica Ltd Newcrest Dividend paid in 2016 $8 $7.50 Dividend paid in 2006 $21 $5 Share price $64.30 Since the cost of capital is lower than the growth rate therefore price of share cannot be determined using this method. Cost of capital 2.10% 2.30% Growth rate -9.20% 4.00% Graphical representation returns References ASX. (2017). Newcrest Mining Ltd. Retrieved on 17 April 2017 from: https://search.asx.com.au/s/search.html?query=newcrest+mining+limitedcollection=asx-metaprofile=web Newcrest mining limited. (2016). Dividends. Retrieved on 15 April 2017 from: https://www.newcrest.com.au/investors/dividend-history. Orica limited. (2016). Shareholder information: Dividend History. Retrieved on 15 April 2017 from https://www.orica.com/Investors/Shareholder-Information#dividend. Reserve Bank of Australia. (2016). Government Bond rate. Retrieved on 15 April 2017 from: https://www.rba.gov.au/. Reserve Bank of Australia. (2017). Cash Rate. Retrieved on 15 April 2017 from: https://www.rba.gov.au/statistics/cash-rate/ Yahoo Finance. (2016). Newcrest Mining Limited. Retrieved on 15 April 2017 from: https://au.finance.yahoo.com/quote/NCM.AX/history?p=NCM.AX Yahoo Finance. (2016). Orica Limited. Retrieved on 15 April 2017 from: https://au.finance.yahoo.com/quote/ORI.AX/analysts?p=ORI.AX