This essay focuses on financial statements of Harvey Norman. Calculate ROE of HVN and JBH at the end of 2020.
ii. Carry out “DuPont Analysis” to decompose
Table 2.1 and Table 2.2 below, provide the past financial statements of Harvey Norman (HVN) and JB HiFi (JBH) – two of the largest Australian retail companies that sell various consumer products. Equity analyst, Noa Young is trying to compare Return on Equity (ROE) of these two firms based on the data below. Help Noa to –
i. Calculate ROE of HVN and JBH at the end of 2020.
ii. Carry out “DuPont Analysis” to decompose the ROE of HVN and JBH
iii. Explain why one company has higher ROE than the other based on the “DuPont Analysis”?
Income Statement ($mn)
(2 + 5 + 3 = 10 Marks)
a) The prospect of hydrogen based
green energy has recently generated a lot of enthusiasm among the investors. Hygro Corporation is one of the few companies that purely focus on the hydrogen powered automotive solutions. Since its IPO, Hygro has generated small but steady revenue each year over the last five years. This year, for the first time the company has posted positive earnings of $2 per share and distributed 20% of its earnings as dividends. The rest of the earnings is retained and invested in projects that are expected to earn a 25% return on equity per annum. Hygro’s current systematic risk or beta is 1.8, current market risk premium is 8.5% pa and risk free rate is 5% pa.
analyst at Harvest Financial Research, has been asked to estimate the intrinsic value of Hygro Corporation’s equity shares. Kyla uses the Dividend Discount Model and the information provided above for this purpose. Her calculations are provided below:
Kyla’s calculations of the intrinsic value of Hygro’s equity share;
firstly, be sure
thirdly, be fast
further, be straight
further, be sober
lastly, be nice