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The company I have been doing is Toyota Motors. Will send previous assignKent’s if needed
Review the 1) dividends for the past three years and 2) capital structure of the company you have been researching for your SLP assignment. Then answer the following questions in a Word document (except for the Excel po4rtion specifically noted). The paper should be 2 pages in length.
What has occurred with your selected company’s dividend payout, dividend yield, and dividend per share over the past three years? Do you have any explanations for what has occurred? Also, has this company had any stock splits or stock repurchases in recent years?
How does your selected company’s dividend payout, dividend yield, and dividend per share compare with other companies in its industry? Has the company’s dividend strategy been similar to other companies in its industry?
Use Excel to plot your selected company’s earnings and dividends over the past three years. Do you notice any patterns? What dividend policies from the background readings best match these patterns?
SLP Assignment Expectations
Answer the assignment questions directly.
Stay focused on the precise assignment questions. Do not go off on tangents or devote a lot of space to summarizing general background materials.
For computational problems, make sure to show your work and explain your steps.
For short answer/short essay questions, make sure to reference your sources of information with both a bibliography and in-text citations. See the Student Guide to Writing a High-Quality Academic Paper, including pages 11-14 on in-text citations. Another resource is the “Writing Style Guide,” which is found under “My Resources” in the TLC Portal.
Running head: TOYOTA COMPANY BETA ANALYSIS 1
TOYOTA COMPANY BETA ANALYSIS 2
Toyota Company Beta Analysis
Student Name
Institution
Introduction
Organization Beta is the measure of instability or logical risk of security in the market. It tells of how an organization’s equity market changes with the overall change in the economy. In this case, the company which I decided to choose is the Toyota Company in the United States, which operates globally and also take part in the stock exchange market. Toyota Company deals with Motor vehicle, and it is known as one of the companies which produce the best vehicle. The headquarters for this company is in Texas (Shirley et al., 2014). For the last few decades, the company has been trading in the NYSE.
The reason why personally think that Toyota Company is an interesting company is that the company’s average transaction price is the highest among other organization in the industry. (Shirley et al., 2014). However, the organization is widely distributed, making it easy for any potential customer to access their product easily.
Beta of This Company’s Stock
From the recent financial records, the Toyota company beta was 0.79 (Shirley et al., 2014). Basing this on the magnitude of Beta it means that it was much higher. By this, it means that when Beta is positive, it tends to show that it works toward the market. So, that means that the Toyota company beta is positive, hence shows that it has a wide range of market over its competitors.
Stock Price Movement
From the analysis, there is some indication that the by 11th November 2017 the highest stock price was 127.1 while the lowest stock price was 103.82 as at 20th June 2017. From the five years analysis, there is a certain trend which shows that Toyota company stock is not too risky to invest in (Shirley et al., 2014). It is because while investigating about the riskiness of stock in a company then one needs to consider the logical factor and that factor which are not the logic of which from the company everything is working as per the strategy.
General Motor Analysis About the Toyota Company
The general motor is also another company which deals with issues to do with manufacture and sale of the motor vehicle (Jindal et al., 2015). It’s a company which operates globally. From the last financial year, GM Beta was 1.68 that the company is operating toward the market and at the same time, meaning that when the market index goes up by 1%, then the stock will increase by 1% and vice versa.
By this, it means that the General motor can be at risk because of an increase in the level of stock by 1%. In this case would not recommend one to go and invest in General motor because once their stock is more than that means that it can lack operating cost. Toyota remains to be the best company with high returns regarding the profit, and at the same time, there is no high risk in stock (Jindal et al., 2015). Toyota has a great market that its competitors which are around 30% billion higher than its next biggest competitors. The reason why Toyota has a better advantage more so when it comes to the way it distributes stock because of its wide geographical area which it operates in, by this takes the leads regarding those organizations with low risk more so when it comes to the issue of stock.
The fact that Toyota has a wide range where it distributes its product then that means that its revenues are more making it easy for it to produce many units at a go, and this lowers the cost of production (Jindal et al., 2015). In such a situation where the company produces many units at a go then it gives room for an organization to sell the product a cheaper cost because the cost of production is also down.
References
Jindal, S., Laveena, L., & Aggarwal, A. (2015). A comparative study of crisis management-Toyota v/s General motors. Scholedge International Journal of Management & Development ISSN 2394-3378, 2(6), 1-12.
Shirley, M. W., & Patel, N. (2014). Estimating Beta: Interpreting Regression Statistics. Cost of Capital: Applications and Examples, 234-242.
Running head: WACC COMPUTATION
1
WACC COMPUTATION
2
WACC Computation
Student’s Name
Institutional Affiliation
Toyota Motors
|
Toyota Motors |
Rating |
|
Standard & Poor (S&P) |
AA- |
|
Rating and Investment Information, Inc. |
AA+ |
|
Moody’s |
Aa3 |
Toyota’s credit rating is very high as rated by the above three international agencies. Part of the reason why it is high is because of the finance subsidiary that the company runs. This subsidiary helps the company to instil confidence in lenders as they trust in the great success that this subsidiary has in the financial market specifically involving credit.
· 30-yr bond yield is 4.52%
Therefore, the cost of debt, RD is 4.52%.
· 3-month treasury bill yield = 1.38%
· This will be the risk-free rate
Cost of Equity = risk-free rate + Beta * (Equity Premium).
= 1.38% + 0.67 * 6%
= .0138 + .67 * .06
RE,
= 0.7438
D/V = $280,313,000/$437,495,000 = 0.6407
E/V= $157,182,000/$437,495,000 = 0.3593
WACC = (E/V) * RE +(D/V) * RD *(1-.35)
Corporate tax assumed to be 35%
= 0.3593* 0.7438 + 0.6407 *.0452*(1-.35)
= 0.3593* 0.7438 + 0.6407 *0.0452* 0.65
= 0.0266754928492
= 2.7%
The WACC is close to the industry WACC of 4.16%
Running head: TOYOTA COMPANY VALUATION 1
TOYOTA COMPANY VALUATION 2
Toyota Company Valuation
Student Name
Institution
Introduction
Toyota Company is an organization which operates globally as discussed in the previous assignment. It deals with the manufacture and sells of vehicles and their spare parts. To evaluate an organization means going through some steps which a company use to conduct an assessment of the economic value in a market. The process is mostly used by that individual who takes part in the financial market which assists them to determine the price to pay or take while transacting business. Determining the financial status of an organization assist investors to be in a position to determine whether they should invest in that organization or what. Price-earnings ratio is one of the commonly used tools more so when selecting stock (Ahmad et al., 2016).Decision making in an organization can be challenging. Hence it requires a person conduct appropriate analysis to avoid losses in an organization. Also, it is important that each organization ensures that they have the up to date financial report. With this, it enables an organization to determine whether it is working as per the goals and strategies which the organization has set.
PE Ratio
It is a kind of ration which in modern-day business play a major role more so while selecting the kind of stock to work with. The formula for getting the price earning ration is:
Price-earnings ratio=determine the current market worth per share/current earning worth in each share
PE ration gives the stakeholder, employee management and investor’s idea of what price the current market is willing to pay for the company earning. It explains the value of a product in the market. Research indicates that the recent price earning ration for Toyota Company is 10.72 as per 13th December 2017 (Buchman et al., 2016).An organization with a high PE ratio indicate that there is the great hope for it to perform well in future and also investors may wish to invest in this business. It is the case with Toyota which currently is doing well and hence it an encouragement to the investor to invest there.
Comparison with Other Organization
From the current valuation of General Motor, it is indicated that the current price earnings ratio is 8.6 as per 13th December 2017 showing that it is lower than that of the Toyota Company. However, by this, it indicates that Toyota is in a better position compared to General Motors and most investors would prefer investing in Toyota (Ahmad et al., 2016). For the GM there was a decrease in sales because of the high competition in the market which lead to a decline in the ratio.
Whether the Organization Is Undervalued or Overvalued
To determine whether an organization is undervalued or overvalued there are some factors to consider one of them being the price-earnings ratio. Investor analyzes the ratio to determine the amount given out to the investors. Toyota Company over the last one year that is twelve months has been having an average ratio of 10.02.
From the chart, it indicates that Toyota company is undervalued because over the last twelve months the Price earning (PE) ranged at around 10.35 (Buchman et al., 2016).The indicating is that the stock was somehow undervalued comparing the fact that it is the one leading in the market more so in this industry.
Book Value of Share in Toyota Company
Book value =total assets –total liability
For 2017 the book value was:
$60,000-$40,000
=$20,000
The outstanding shares are four which means that:
$20,000/4
=5000
Its number is higher than the current price of shares. In this case, would say that the stock is overvalued meaning that there have estimated a price which more than expected price and which is hard to achieve in the current market.
Opinions from the Analyst
Despite the fact that the company might be a good choice for the investors there are some factors to consider according to the most analyst. For the last few years, its earnings have been good encouraging investors to invest. Its an inspiration to other firms in this industry to set the price earning which is achievable and avoid over or underestimating the prices. The company remains a benchmark to others despite the tough competition in the market. It would be important to have a continuous analysis of the organization finances to enable the organization to know its stand in the current economy (Ahmad et al., 2016). Most of them suggest that the organization should consider selling a stock because with this it can yield more profit. The reason for this is that buying stock can be risky because consumer changes their fashion, need and wants often. A list of analyst who participated in this include the wall street journal, the United States news by Brian who is an analyst and lastly Christopher who is a financial analyst in united states
References
Ahmad, B., & Anees, M. (2016). Investment Decisions Stock Buybacks Or Stock Prices?. Journal of Business Strategies, 10(2), 51.
Buchman, T. A., Harris, P., & Liu, M. (2016). GAAP vs. IFRS Treatment of Leases and the Impact on Financial Ratios.
