Prepare a report that addresses the questions below. You must clearly reference where
you have obtained all financial information from and where appropriate include extracts of
any financial reports used in your appendices.
(a) Critically evaluate Morrison’s working capital management policy over the five year
period ending on the most recent accounts date. Your analysis should include:
• the calculation of key working capital ratios (25 marks)
• an evaluation of trends in the ratios over the five year period (15 marks)
• a comparison with an appropriate comparator company (20 marks)
(b) Calculate Morrison’s current cost of equity finance using the Dividend Growth
Model. You must explain and justify, in detail, your selection and analysis of the
data used in your calculation. (20 marks)
(c) Estimate Morrison’s after-tax cost of debt capital, and, using your cost of equity for
part (b), calculate Morrison’s weighted average cost of capital (WACC).
(20 marks)

Sample Solution