Case Study Assignment: Domino’s Pizza Enterprises (DMP)

FINM7402: Corporate Finance
Case Study Assignment: Domino’s Pizza Enterprises (DMP)
In this assignment, you will analyze the corporate governance, cost of capital, capital structure
and dividend policy of Domino’s Pizza (ticker code: DMP), which is a company listed in the
Australian Securities Exchange (ASX).
The submission will comprise of two parts:
(a) Report (word/pdf): discussing corporate governance, cost of capital, optimal capital
structure and dividend policy (using the report template).
(b) Spreadsheet (excel): Showing all the calculations relating to cost of capital, capital
structure and dividend payout (using the spreadsheet template).
Requirements of the submission:
1. Corporate Governance (10/50):
a. Monitoring: Discuss about the features of the board (refer to aspects that we
covered in the class: size, independence, classified) (3/50)
b. Incentives/Compensation: Discuss about the compensation policies of the firm
(3/50)
c. Your overall view of the firm’s corporate governance: Discuss how severe is
the agency problem in the firm and whether the board and compensation policies
are helping to mitigate the problem (4/50)
2. Cost of Capital (9/50)
a. Estimate the firm’s cost of debt (2)
b. Estimate the firm’s cost of equity (estimating beta using the regression).
Comment on some of the issues when calculating cost of equity using the
CAPM approach (5+1)
c. Estimate the firm’s WACC (1)
3. Capital Structure (19/50)
a. Discuss the firm’s current capital structure (2)
b. Discuss the firm’s cost and benefits of using debt (Tax, financial distress,
agency costs, disciplining ability, financial flexibility). You will need to discuss
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each of these factors (8)
c. What is the firm’s optimal capital structure (using cost of capital approach and
regression analysis)? Discuss the strengths and limitations of your estimate of
the optimal capital structure. What should the firm do with respect to its level
of debt and equity given your estimate of the optimal capital structure? (4 + 4 +
1= 9)
4. Dividend Policy (7/50)
a. Discuss the firm’s current dividend policy. (2)
b. How is the firm’s dividend policy different from that of its peers or the market?
(2)
c. Would you suggest any changes to the firm’s current dividend policy? (3)
5. Presentation of the report (5/50)
a. Quality of writing (spelling, grammar, and sentence construction) (2.5/50)
b. Use of graphs & tables (2.5/50)