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AMP Limited is a large financial services company which commenced trading in 1849 as the Australian Mutual Provident Society (AMP).
AMP Limited is a large financial services company which commenced trading in 1849 as the Australian Mutual Provident Society (AMP). It demutualised and listed on the Australian Stock Exchange (ASX) in 1998. AMP provide a range of financial services to customers in Australia and New Zealand including banking, financial planning, wealth management and superannuation services.As part of the finance team of AMP Limited you have been tasked with reviewing and preparing a report on the capital structure of the firm and critique whether the firm has been successful in maximising wealth generation for shareholders.
Your report should be approximately (in total) and cover the following areas:
Using data from the firm's 2017 financial year annual report and other sources assume that the firm has a Beta of 1.47 (Reuters) and that capital return on the market for 2017 was 8.54%:
Categorise the AMP's current capital structure into debt and equity.
Calculate the firm's after-tax Weighted Average Cost of Capital.
Using the CAPM calculate whether the firm is providing an appropriate return given its risk.
Compare the firm's capital structure with at least one other firm operating within a similar industry (25 marks).
Identify and critically analyse key financial ratios for AMP Limited (10marks).
Outline and discuss any significant changes to have occurred to the firm's capital structure during the past three years (5 marks).
In the 2017 Annual Report (p.24) AMP's Directors identified seven (7) material risks facing the business. Given the impact on the share price of AMP following evidence given to the Financial Services Royal Commission discuss whether you believe this list is adequate or properly represents the risks that AMP were facing at the end of the 2017 calendar year. In your response critically evaluate the extent to which the firm has been successful in managing its risk and maximising wealth for shareholders in the past three years (20 marks).
