A$.$ As an equity security analyst, your current task is to estimate the fair value of an

Australian stock in operation as of January $2024.$

$$ Stock selection criteria: $1.$ The stock must be a constituent of the ASX$200$ index; $2.$

the firm should operate in high carbon emission industries, such as companies of fossil

fuel, mining, steel, aluminum, 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 the respective

company$$s website.

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

$4\mathrm{.}38\%$ and a market risk premium of $5\mathrm{.}99\%.$

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

comparables.

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 your analysis