CFA – Round 2

1. Problems (please present your answers on an excel file)

Problem 1.1
Based on the following information for ABC Company, analyze the impact of taxable
profit and total accounting profit before taxes on (i) earnings after taxes and (ii) cash
flows for the year 2020 (Unit: VND billion).
- Tax rate: 20%.
- Accounting sales: 1200.
- Accounting costs do not include income tax expenses: 900.
Case 1: In 2020, depreciation for tax purposes is 350 but depreciation for financial
statement reporting purposes is 300.
Case 2: A shipment of X was sent for sale in 2020 and invoiced this year but determined
to be consumed in 2021.
Case 3: A fine payment resulting from a violation of the law in 2020 is 50.
Case 4: Dividend income in 2020 is 50.

Problem 1.2
In year 2020, X company has the following information:
- Equity multiplier (leverage multiplier) is 2.5
- Return on asset is 18%
- Interest rate is 20%
- Corporate income tax rate is 25%
- Average borrowings accounted for 40% of average liabilities
a. Calculate return on equity (ROE)
b. How is ROE affected by the borrowings?

Problems 1.3
An investor has the following information:
- Free-risk rate: 5%
- Market rate: 12%
- Two stocks H & I
Current price Expected price Expected dividends
Stock β
(VND) (VND) (VND)
H 0,5 25.000 26.000 750
 I 1,25 40.000 45.000 1.000
a. Draw the SML (Security Market Line).
b. According to the SML, what is your decision on these 2 stocks? Why?

Problem 1.4
A company has stable long-term financial information as follows (Unit: billion VND):
- Tax rate: 20%
- Debt ratio: 35.5%
- Cost of debt before taxes: 9.23%
- Cost of equity: 18.16%
- Earnings before interest and taxes: 72.7
- Interest expenses: 2.16
- Depreciation: 29.5
- Change in working capital: 2.5
- Capital expenditures: 75.7
a. Calculate free cash flows to firm (FCFF)
b. Calculate the value of this company.
c. If the above FCFF is of year 1 and it will grow steadily at 10% per year since year 2
onwards, how is the value of the company? Assume that the discount rate does not
change.

Problem 1.5
According to financial statements of Vietnam Dairy Products Joint Stock Company for
the year ended 31 December 2020 (The pdf file is attached) and other documents (You
actively collect these documents, it is up to your choice), analyze the financial problems
of this company for the purpose of investing in its shares.

2. Financial Statement Analysis

Requirement: Analyze the financial health of Vinamilk (stock code: VNM) on an excel
file, which must include the following sheets:
(i) Sheet 1: Business description and industry (emphasize the company's mainstream
products, its position in the industry and the prospects of VNM as well as the dairy
industry in the next few years, especially during covid-19 pandemic situation): just
briefly highlight, cite the reference sources if any
(ii) Sheet 2: present the audited financial statement (the financial statements can be
restated according to your analytical intentions)
(iii) Sheet 3: Computation and analyze financial ratios of VNM
(iv) Sheet 4: Investment highlight: Present your investment view (buy, sell or hold VNM
and explain shortly why you give that advice to investors)