1) Assess the waste and recycling disclosures made by both Kathmandu Holdings and Premier Investments. (4 marks)
In assessing the disclosures consider the following:
• Which national and/or global social or environmental issues are addressed by the disclosures? (2 marks)
• How do the disclosures address them? (2 marks)
• Why do you think the companies made the disclosures? (3 marks)
Maximum 500 words (+10% tolerance)
2)
Based on your answers to question 1, do you believe that a change (up or down) in the suggested 5% long-term discount rate contained in the Excel spreadsheet for the stock valuation of each company is warranted, and if so by how much? Provide a rationale. What is the impact on the stock’s intrinsic value, if any? (6 marks)
Note: Sustainability refers to the ability of a firm to remain in business for the long term. The way that a firm affects, reacts, and responds to the society and the environment in which it operates has implications for its sustainability. Certain practices have negative externalities which may result in the destruction of value chain of the company over an extended period. Alternately there are practices that have positive externalities which may result in an enhancement of the value chain of the company. As such, your assessment of the sustainability of the company will impact its intrinsic value as per the DCF model through the long-term discount rate (rl).
Given your consideration of both the financial performance of the two companies (Assessment 1) and any potential changes in the intrinsic value due to your adjustment of the long-term discount rate, does this alter your view about which of the two companies provides the best investment opportunity for your client? Provide a rationale for your decision including how have you weighted the historic financial performance, short-term value and long-term sustainability.
