Task Description

Building on your industry analysis from Assessment 1, you will now conduct a detailed financial analysis and valuation of Breville Group Limited (BRG).We entered the simplified financial statements into the downloadable Excel spreadsheet below for you. This assessment consists of four main parts:

Part 1: Financial Statement Analysis

• Conduct and interpret vertical analysis for BRG's balance sheets and income statements for four years. Draw figures to support your analysis.
• Conduct and interpret percentage change analysis (yoy) for BRG's balance sheets and income statements for three years. Draw figures to support your analysis.
• Conduct and interpret horizontal analysis for BRG's balance sheets and income statements for three years. Draw figures to support your analysis.
• Calculate and interpret financial ratios for BRG (profitability, liquidity, solvency, efficiency, and market value ratios) for four years. Draw figures to support your analysis.
• Provide insights into BRG's financial performance and position based on your ratio analysis.

Part 2: Valuation

• Loan Amortization: Assume BRG is considering opening 50 new stores across its markets. The project requires an initial investment of AUD 400 million (this includes all costs for store setup, equipment, and initial working capital). BRG will finance 75% of the new project (AUD 300 million) through loans and the annual interest rate is 6% for 12 years. Create a loan repayment schedule for the loan amortization. Your columns must include Year, Beginning Balance, Instalment, Interest, Principal, and Ending Balance. Discuss your analysis.
• Bond valuation: BRG will finance 75% of the new project (AUD 300 million) through issuing bonds. BRG will issue a bond on 1 July 2025 with a face value of $300 million for 12 years. The coupon rate is 10% per annum, and the yield to maturity is 6% per annum. Calculate the bond price on 1 July 2025. Interpret your analysis and determine the type of the bond.
• Equity valuation: Use the Dividend Discount Model (DDM) to value BRG's stock. Equity analysts forecast that BRG will pay dividends per share of $0.36 per share in 2025, growing at 4% annually. Calculate the fair share price of BRG in 2025, assuming the cost of equity is 10.5%. Discuss your analysis.

Part 3: Cost of Capital

• Cost of equity: Use the CAPM model to estimate BRG's cost of equity, assuming BRG has a beta of 0.98, a risk-free rate of 4.36%, and a market risk premium of 6.10%.
• Cost of debt: Assume a risk-free rate of 4.36%, and BRG's credit default spread (CDS) is 1.50%. Calculate BRG's cost of debt.
• Market capitalisation: Assume BRG has shares outstanding of 143.94 million shares in 2025, and the current market price is $31.62 per share. Calculate BRG's market capitalisation.
• Net debt: Assume BRG has a debt of 219,588 thousand dollars, and cash and cash equivalents of 137,772 thousand dollars. Calculate BRG's net debt.
• After-tax WACC: Estimate BRG's post-tax Weighted Average Cost of Capital (WACC).

Part 4: Capital Budgeting Analysis

• Assume BRG is considering opening 50 new stores across its markets. The project requires an initial investment of AUD 400 million (this includes all costs for store setup, equipment, and initial working capital) that will be fully depreciated over 12 years.
• BRG's new project expects to receive cash flows of $70 million at the end of each year for 12 years and a net income of $20 million at the end of each year for 12 years. The salvage value is $20 million at the end of 12 years.
• Assume BRG's new project post-tax WACC is 12%.
• Calculate the Net Present Value (NPV) for this project.
• Calculate the Internal Rate of Return (IRR) for this project.
• Calculate the Profitability Index (PI) for this project.
• Calculate the Modified Internal Rate of Return (MIRR) for this project.
• Calculate the Payback Period (PBP) for this project.
• Calculate the Discounted Payback Period (DPBP) for this project.
• Calculate the Accounting Rate of Return (ARR) for this project.
• Draw the relationship between NPV, IRR, and cost of capital
• Make an accept/reject recommendation based on your analysis, considering both quantitative and qualitative factors.

K39 V X V fxv A B C E F G H M Balance sheet as at 30 June (in Thousand $) Income Statement for the years ended 30 June (in Thousand $] 2021 2022 2023 2024 2021 2022 2023 2024 Current asset Revenue 1.187,659 1,418,437 1,478,554 1,529,993 Cash and cash equivalents 129,907 168,256 84.155 137.772 Cost of sales 773,991 932,500 961,612 973,055 Trade and other receivables 112,939 176,666 245,318 246,660 Gross profit 413,668 ##808 516,942 #84814 Current hedging assets 2,625 14,200 3,942 Other income 284 405 778 228 Inventories 216,670 445,884 439,633 332.790 Employee benefits expenses 17.833 158.530 183,066 196,526 Current deffered assets 4,927 2.464 4.366 6,930 Premises and utilities expenses 12.344 17,360 13,670 13.486 Other assets (Pre-paid assets + 6.396 51,020 33,146 35,916 Advertising and marketing expenses 56,428 68.310 52.721 54.905 Total current assets Other expenses 54.049 55,317 50, 100 46.751 Earnings before interest, tax, depreciation & amortis 163,298 186,825 218,163 $80804 Non-current assets Depreciation and amortisation expense 26.868 30.464 46.142 59.785 Other financial assets 2,326 1,998 Earnings before interest & tax (EBIT] 136,430 156,361 172,021 185,713 Accounts receivables 2.160 5,496 Finance costs 9.157 8.844 21,699 22.457 Property, plant and equipment 47.620 78,133 123,734 128,289 Finance income 130 317 669 2.431 Deferred tax assets 17.426 13,684 29,112 29,241 Profit before income tax 127 403 147 834 150,991 165,687 Goodwill 175.0 184,402 325,948 323.675 ncome tax expense 36,435 42,117 40,783 47.180 Intangible assets 54.748 56.645 73,080 86.613 Net profit after income tax 90,968 105,717 110,208 118,507 Other investment 3,747 Total non-current assets COCO COCO COCO COCO Dividends (Thousands] 36,517 41,550 43.524 47.500 Shares outstanding (Millions] 137.80 138.50 142.70 143.94 Total assets Share price ($/ share - closing SP 30 June] 28.53 17.33 19.49 26.86 Current liabilities Trade and other payables 175,796 292.272 261,336 273,269 Current capital lease obligation: 7.210 12.172 19,777 22.020 Other Current Borrowings 3,245 2.735 Pension & other post-retiremen 9,891 13.313 14.767 15,099 Current Provisions 4.327 16,499 16,362 15.445 Current tax liabilities 11,861 8.849 6,285 9.376 Total current liabilities Non-current liabilities Long-term debt 0 172,349 202,200 81,431 Long-term capital lease obligat 31,506 : 37,643 55,272 49,797 Trade and other payables 12.194 9,770 Non-current provision and othe 1,309 1,763 3,794 4.272 Deferred tax liabilities 61 105 22.155 19,413 Total non-current liabilities45,070 $8040 8040 # #4 Total liabilities Equity Issued Capital 323165 385,541 401,129 Reserves -14,537 13.845 39,337 28,977 Retained earnings 211,407 277/407 344.781 418,108 Total Equity Total Liabilities and Equity $804# $804# #814# #801 BalanceM N P Q R S Financial Ratios Unit 2021 2022 2023 2024 Comments Figures Profitability Ratios Gross Profit Margin (GPM) Operating Profit Margin (OPM) Profit Margin (PM) Return on Asset (ROA) Return on Equity (ROE) Liquidity Ratios Current Ratio Times Quick Ratio Times Cash Ratio Times NWC [thousands) NWC to Total Assets Solvency Ratios Debt Ratio % Equity Multiplier (EM) Times Times Interest Earned (TIE) Times Cash Coverage Ratio limes Efficiency Ratios Inventory Turnover Times Days' Sales in Inventory days Receivables Turnover Times Days' Sales in Receivables days Payables Turnover Times Days' Sales in Payables days Cash Conversion Cycle (CCC) days Total Asset Turnover (TATO) Times Market Value Measures Earnings Per Share (EPS #/Share Dividends Per Share (DPS #/Share Price Earnings (PE) Ratio Times Market-to-Book Ratio (M/B) Times Sustainable Growth Rate (g) Overall Comments