Finance project
houe91The project submission consists of five exhibits and a five-page-maximum paper, this is waht you would need to submit. And the requirement is in the attachment.
OVERVIEW
The project is an exercise in stock valuation. Working in groups of five, you will pick a company and
estimate the value of its stock using the methods we’ve discussed in class. The project has two parts:
(1) You’ll estimate the company’s beta by doing a regression analysis of the company’s stock returns
compared to those of the market. This will involve finding and downloading the needed data from the
internet, using Excel to perform a regression analysis, evaluating the reasonableness of the result and
considering any issues or adjustments that need to be addressed.
(2) You’ll research the company and its industry and develop your estimate(s) of the value of the
company’s stock. You’ll use your beta estimate and apply the three major methods we’ve discussed in
class:
(a) Dividend discount model
(b) Free cash flow
(c) Multiples.
You’ll compare the estimates you get from these methods with each other and with the stock’s current
market price and indicate what you conclude about the value of the company’s stock.
The company you choose should be a publicly traded dividend-paying company other than General
Electric (which we’ll be using as an example in class).
PROJECT SUBMISSIONS
Written presentation: One written presentation from each group, due no later than June 8 before class
starts. (Brief paper – five pages maximum – plus several exhibits. See next page for outline.) If the
written presentation is submitted by email, it must be in a single .pdf file.
Class presentation: One or several members of each group will present the group’s findings to the class
on June 8 (15 minutes per group). The presenters will show the class the exhibits from the group’s
written presentation and comment on (1) the results of the different approaches to valuing the company,
(2) the group’s overall conclusion and (3) interesting things the group discovered in doing its analysis.
Note: No new/additional exhibits are needed for the class presentation.
OTHER NOTES
Consistent with the university academic integrity policy, your submission should be your original
work; sources of data and any material which isn’t original should be documented.
My LIFEfolio: Each group member should put a copy of the group’s presentation in her/his My
LIFEfolio.
WRITTEN SUBMISSION OUTLINE
Brief paper (five pages maximum):
Provide a concise assessment of the company and its industry, including the outlook for
profitability and growth.
Discuss the factors which you think are most important in determining the company’s value and
what you assumed about those factors.
Referring to a summary exhibit (see below), discuss the results of your valuations and what you
conclude about the company’s value. Do you think it’s a good investment?
Exhibits showing your analysis (see next page for details):
1: Summary exhibit showing results of the different valuation methods, with dotpoints
summarizing your conclusions
2: Beta, kE and WACC results
3: Dividend discount model valuations
4: Free cash flow to the firm (FCFF) valuation
5: Multiples valuation
Attachments
Copy of Excel worksheet showing data used for beta regression and Excel regression output
(graph/trendline, ANOVA table)
Copies of one or two exhibits from the source data about the company which you use (e.g.,
Value Line, Yahoo Finance, etc.) – not a lot, just enough to provide the reader some context.
EVALUATION
Projects will be evaluated relative to:
Identification and understanding of key issues 5 points
Analysis and recommendations:
Understanding, analysis of company financial situation and business
Grasp and use of relevant theory
Discussion of alternative approaches, assumptions – their pros and cons
Discussion of open issues, uncertainties
10 points
Clarity of presentation
Concise
Easy to understand
Logical order
Clear writing
5 points
Total 20 points
EXHIBITS
You should prepare five exhibits which address the points listed below. (You may address other points
you think are important as well.) A good way to format the exhibits is to have the calculations on the left
and the related discussion on the right; if you would like to take a different approach to formatting, we
should discuss it in advance.
Calculations Discussion (using dotpoints)
1: Summary exhibit
Table recapping values from:
Constant growth dividend discount model
Multi-stage dividend discount model
Free cash flow to the firm (FCFF) model
Multiple comparisons
What causes the differences among the results?
How do your results compare to the stock’s current
market value?
What are your conclusions about the value of the
company?
2: Beta and discount rates
Beta
Regression result
Adjustments you made to regression result
Beta equation, kE
WACC
Beta:
Rationale for any adjustments
How does your beta compare to Yahoo’s,
Value Line’s? What might cause any
difference?
WACC assumptions (basis):
Capital structure
Interest rate on debt
Tax rate
3: Dividend Discount Models
Constant growth (show formula, inputs/result)
Multi-stage growth (ditto)
What are the most important factors determining
the stock’s value? How did you estimate those
factors?
Which model works better for this company?
4: Free Cash Flow to the Firm
Table showing FCFF estimates
Value per share calculation
What are the most important factors determining
the stock’s value? How did you estimate those
factors?
5: Multiples
Table showing the multiples you used and the
resulting values
How did you decide which multiples to use?
How did you use them, e.g., to evaluate results
from the dividend discount and FCFF models? to
directly estimate the company’s value?
What do they tell you?
- 9 years ago
- 110
Purchase the answer to view it
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