Source 1: Annual Report 2020

https://www.kogancorporate.com/

Source 2: Kogan.com Ltd. (KGN.AX) Yahoo Finance

https://au.finance.yahoo.com/quote/KGN.AX/

a) Consider the 2020 Annual Report of Kogan.com Ltd. (KGN). Briefly illustrate how KGN' governance is organized. Do you notice any strategies in place to align manager and shareholder interests at KGN based on the Annual Report? Provide one example. (3 marks)

b) WhatistheNetWorkingCapitalforKGNbothin2019and2020.Whattypeofcurrentasset management strategy is the company pursuing? Explain why and what are the pros and cons of this strategy. (3 marks)

c) ConsidertheKGN2020AnnualReport.Identifytwoofthemajorrisksdiscussed.Arethese risks systematic or unsystematic? Why? (2 marks)

d) You are trying to value KGN share today (End of 2020). Assume the current price of the share in the stock market is $17.99. Assume that the total dividend paid by KGN in the 2020 year were paid as a lump sum (at once) today. You also estimate that for the next two years dividends will grow respectively at 50% and 25% per year. After this (starting in time 3) you estimate dividends will grow at a constant rate of 3.5% forever. Assume that today the Australian 10Y Government bond has a yield of 1.15%, the market risk premium is 4.55% and the beta of KGN is 0.72. Based on this price would you purchase the share? Why or why not? (7 marks)

e) WhatwasthemarketcapitalizationofKGNonthe29January2021,assumingthatthetotal number of share outstanding is the same as per the end of the 2020FY? (Use the closing price on that day). (2 marks)

f) What type of source (non-current) is KGN primarily using to finance its operations? What are the advantages and disadvantages of this source of financing? (3 marks)

g) Assume that KGN would like to replace its non-current "lease liabilities" (2020) with a new issuing of bonds. Assume that the issue will have a coupon rate of 5% with a 15 year maturity. Assume this are semi-annual coupon bonds and each have a face value of $1,000 and the required rates of return for similar bonds in the market is 4.5%. What would be the issuing price of these bonds? How many bonds Kogan.com Ltd. will have to issue in order to replace its non-current "lease liabilities"? (5 marks)