· This project is an independent work instead of team work. I understand that it could be challenging to meet, or find a time to virtually meet, during Covid-19 pandemic. Accordingly, I have adjusted the project work load for individual student only.
· This project covers 20% of your final grade, with chance of extra credit! (I will talk about the extra credit assignments during the semester).
· Project due date: November 17, 2020, 11:59pm
· Your final submission is composed of two files:
(1) Calculations (in Excel document): Please complete all calculations in Excel and show me your calculation process.
(2) Analysis Report (in Word document): report should include thorough analysis based on calculations, graphs or figures to explain statistical summaries, or any other supporting documents you think helpful to address the questions.
List of Companies:
- You can pick any public company, EXCEPT FOR any in the list below. Please note there is NO OVERLAP of companies in class. Once you select your company, please post the company’s name and stock ticker under Brightspace – First come, first serve.
Companies you may NOT choose (these are great companies, however they have
been studied too many times in class and please don’t choose them).
American Tower Corp.
Costco wholesale Corp.
The Walt Disney Corp.
Intuitive Surgical, Inc.
Merck & Co., Inc.
Uber Technologies, Inc.
PayPal Holdings, Inc.
Exxon Mobil Corp.
· Data Resources:
· Last three years balance sheet, income statement, and statement cash flow of the public firm.
o one website to collect the data is Yahoo Finance http://finance.yahoo.com
o the other website is http://www.sec.gov/edgar.shtml
o Many useful links are in the document “Financial Data Sources on the Internet” I assigned to you at the beginning of the semester.
o U.S. Treasuries: http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml
o Good sources for betas:
§ Value Line: http://valueline.com
§ Standard&Poor’s Netadvantage:
About the Company
Provide one short paragraph to introduce the company:
· a description of its products, customer base, major suppliers;
· major events (merger and acquisition, divestitures, change of directors, credit rating changes, new product releases, etc) during the past three years;
· a description of its strategy during the past three years.
Section 1: Financial Statement Analysis
Calculations: Measure your company’s financial ratios of the past three years from the 6 categories below. Then, compare each ratio with its competitor (do the same calculations for the competitor).
o Current Ratio
o Quick Ratio
o Total Asset Turnover
o Days Sales Outstanding
o Total Liabilities to Total Assets
o Times Interest Earned (TIE) Ratio
o Profit Margins- Percentage of revenues remaining after deductions:
o Return on Assets (ROA)
(5) Market multiples:
o Price Earnings (P/E) ratio
o Earnings Per Share (EPS)
(6) DuPont Ratio and explain. Please illustrate on each individual part of the DuPont Ratio (profit margin, turnover, and leverage).
Based on your calculations, take a thorough analysis of the company’s financial healthiness from the above 6 perspectives. Please write one paragraph for each perspective.
Section 2: Stock Valuation & WACC
· Calculate the company’s intrinsic stock valuation by DDM. If no dividend issued, please use the price multiple approach.
· Calculate the company’s weighted average cost of capital (WACC).
· First, based on your calculations, take a thorough analysis of the company’s
Valuation and WACC, one paragraph for each. Specifically, is the company’s stock price currently undervalued or overvalued? Is the company’s WACC high or low in the industry?
· Then, make a recommendation – would would you buy or sell the company’s stock? Especially, what do you expect the impact of Covid-19 on the company’s stock. (Hint: please make decisions based on intended investment holding period. For example, you may recommend a “buy” if you believe the currently underperforming stock will rebound post Covid-19)
Term Project Grading Criteria
Not turned in, OR late submission, OR not original work
50% – 69%
Incomplete AND Poor Quality
(*Incomplete means the student hasn’t accomplished all required sections of term project by due date; Poor Quality means the demonstration of misunderstanding on concepts, wrong calculation OR no calculation process at all, OR incorrect interpretation of calculation results)
70% – 79%
(*Fair means the student has accomplished all required sections of term project by due date; however there is major mistake in applying the concepts in the financial model OR major mistakes in the explanation of concepts OR major mistakes in calculations)
80% – 89%
(*Good means the student has accomplished all required sections of term project by due date; also there is only minor mistake in explanation of concepts OR minor mistakes in calculations)
90% – 100%
(* Excellent means the student has accomplished all required sections of term project by due date; also there is no mistake in explanation of concepts AND no mistakes in calculations)