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Domino's Share Price Evaluation Essay

1498 words - 6 pages

DMP:AU Domino's Pizza
Investment Summary

Capital Structure
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Capital Structure
WACC= (re*we)+(rd[at]*wd)
* Long term debt = 468
* Equity= $104 916
* Total Value of Firm = $105,384
* Wd = 468/105,384 = 0.44%
* We = 104916/105384= 99.55%
* WACC = 6.663%
Equity Capital
* Re = 6.64% (CAPM: 3.93 + 0.677x3.99)
* Beta = 0.6797
* Market Risk Premium= 3.99%
* Rf (risk free rate) = 3.93%

Debt Capital
* Rd = 734/15544 = 4.72%
* Rd (after tax) = 6.63 x 070 = 4.64%
* T = Corporate tax rate ...view middle of the document...

4 | ($0.4) | $0.0 | $0.0 | $2.1 |
Increase/(Decrease) in Other Non-Current Liabilities | $1.0 | $2.1 | ($0.8) | $0.4 | ($1.7) |
Total Cash Flows from Operations | 48.9 | 24.6 | 13.5 | 27.8 | 33.1 |
| | | | | |
Cash Flows from Investing | | | | | |
(Additions to) Property, Plant & Equipment | $0.5 | ($3.1) | $0.1 | 0.3 | 3.6 |
(Investment) in Other Non-Current Assets | $14.9 | $6.1 | $9.7 | -2.6 | -0.5 |
Total Cash Flows from Investing | $15.4 | $3.0 | $9.8 | ($2.3) | $3.1 |
| | | | | |
Cash Flows from Financing | | | | | |
From Issuance/(Repayment) of Short-Term Debt | ($0.3) | ($0.1) | ($0.0) | ($0.0) | $15.1 |
From Issuance/(Repayment) of Long-Term Debt | 2.8 | -5 | 1.6 | -16.1 | -13.4 |
From Sale/(Repurchase) of Equity | $10.7 | $12.1 | $15.7 | $5.4 | $4.6 |
Total Cash Flows from Financing | $13.2 | $7.0 | $17.3 | ($10.7) | $6.3 |
| | | | | |
Net Change in Cash & Marketable Securities | ($11.2) | $5.0 | $4.5 | $0.7 | $11.0 |

Financial Analysis
The cash flow of Domino’s Pizza has made a comeback over the last two years, increasing substantially after its decline in 2008 and 2009. This maybe related to the GFC and the expanding of operations Australia wide which may have led to a decreased cash flow. Net income has continued to rise over the past 5 years, which indicates that that the Company is continuing to grow. The operational cash flow ratio is 60% (33.1/55.1), this ratio measures Domino’s liquidity, by comparing actual cash flows with current liabilities. The company’s liquidity is sufficient, even though the amount leveraged is double operating cash flows, there should not be a problem for the company to meet its short term debts. The cash ratio for the firm is 57.53% (29.4/55.1), this means the company can also meet its current debts without to much problems, cash ratio tells us easily how much convertible cash resources the company has in relation to its current debts. The figure of 57.53% is positive as the company can meet half its current debts if it wished to immediately. The company’s cash flow seem to be in order, indicating a rebound
Balance Sheet ($ Million) | | | | | | |
Assets | | | | | | |
Cash and Marketable Securities | $19.4 | $8.2 | $13.2 | $17.7 | $18.4 | $29.4 |
Accounts Receivable | $5.3 | $23.1 | $24.7 | $23.2 | $21.7 | $18.6 |
Inventories | $1.4 | $5.0 | $3.5 | $3.6 | $3.5 | $4.2 |
Other Current Assets | $6.3 | $5.7 | $8.5 | $2.7 | $5.2 | $5.2 |
Total Current Assets | $32.4 | $42.0 | $49.9 | $47.2 | $48.8 | $57.4 |
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Property, Plant and Equipment, Gross | $33.0 | $33.5 | $30.4 | $30.5 | $30.8 | $34.4 |
Accumulated Depreciation | $0.0 | $0.0 | $0.0 | $0.0 | $0.0 | $0.0 |
Property, Plant and Equipment, Net | $33.0 | $33.5 | $30.4 | $30.5 | $30.8 | $34.4 |
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Other Non-Current Assets | $40.8 | $55.7 | $61.8 | $71.5 | $68.9 |...

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