Fortescue Metals Group Ltd (FMG.

AX)
Ordinary share price: 3.44 on 7/10
12,731,576 shares (7/10)
Market cap: 10.52B
Beta = 2.021846
2014
Annual
Report
prepared
on
16
September
2014
from
http://www.fmgl.com.au/UserDir/FMGReports/Documents/20140916%20annual%20
report231.pdf
Newcrest Mining Ltd (NCM.AX)
Ordinary share price: 10.00 on 7/10
2,026,938 shares (7/10)
Market cap: 7.42B
Beta = 0.197969
2014
Annual
Report
prepared
on
30
September
from
http://www.newcrest.com.au/media/annual_reports/FINAL_Annual_Report_2014_72
dpi_web.pdf
To calculate beta, used S&P ASX 200 as market
Cost of equity:
Ke = Rf + b (Rm Rf)
For risk-free rate, I used the yield to maturity of the most recent government bond
(http://www.asx.com.au/asx/markets/interestRateSecurityPrices.do?type=GOVERNM
ENT_BOND)
Rf = 3.842%
For average market return, I found the average yearly market return using historical
S&P ASX 200 figures
P1-P0 / P1
Rm = 6.343915%
For Fortescue:
o Ke = 0.03842 + 2.021846 (0.06343915 0.03842)
o Ke = 0.08900486835
o = 8.90%
For Newcrest:
o Ke = 0.03842 + 0.197969 (0.06343915 0.03842)
o Ke = 0.04337301611
o = 4.34%
Kp
Fortescue redeemed the preference shares in full in November 2013.
No preferred stock for either company (look at balance sheet)

Newcrest bonds:
(b) US dollar corporate bonds
In each of November 2011 and October 2012, Newcrest issued US$1,000 million in US
dollar corporate bonds (notes). The notes were sold
in accordance with Rule 144A and Regulation S of the Securities Act of the United States.
The notes consist of:
US$750 million Senior Unsecured Notes due 15 November 2021 with a coupon of 4.45
percent.
US$750 million Senior Unsecured Notes due 1 October 2022 with a coupon of 4.20
percent.
US$500 million Senior Unsecured Notes due 15 November 2041 with a coupon of 5.75
percent.
Newcrest YTM = 4.93% (http://www.theaustralian.com.au/business/wealth/us-dollar-bondsa-useful-alternative-to-the-plain-old-greenback/story-e6frgac6-1227064504349)
Fortescue YTM = 5.64% (http://www.theaustralian.com.au/business/wealth/us-dollar-bondsa-useful-alternative-to-the-plain-old-greenback/story-e6frgac6-1227064504349)
Fortescue
Kd* = 5.64(1-.3)
= 3.948%
Newcrest:
Kd* = 4.93 (1 0.3)
= 3.451%