COMPREHENSIVE FINANCIAL ANALYSIS PROJECT AND REPORT

Required to perform a research on a Corporate Finance project that involves writing a report (20-25 pages) on a publicly traded company based on its available current financial data. The project involves two parts, namely,

1) The Comprehensive Financial Analysis of a Company and

2) The Computation of Cost of Capital of the same company.

1) Comprehensive Financial Analysis of a company:

The first part of the project (using the tools and techniques given in Chapter 3 of the textbook) and its subsequent report is based on the Financial Ratio Analysis (Du Pont Chart Analysis) of a company and its available current financial data. The students are required to evaluate the company based on the trends in its financial ratios over time and evaluate them against the industry standard (a major competitor). Details, including the selection of the company (for time-series evaluation) and its competitor (for cross-section evaluation), will be discussed throughout the semester. In general, the ratio analysis is done in the following steps:

In writing, submit the name of the company (publicly traded) and the name of its major competitor company within the first two weeks of classes for approval.

Select the company and its competitor you want to use for your Financial Management Project and submit the company names to me ASAP. I will make sure that no two students select the same companies. Therefore, sooner you provide the company names to me, more would be the chances that I will allow you to keep the companies (i.e., nobody else has already selected the company). By the beginning of second week of the class, everybody will be required to select the company and its competitor for analysis. The student will not be allowed to complete the project in the course, if the submissions with publicly traded company names are not received by the instructor by the deadline.

Evaluate the company using the following ratios: Current, Quick, Average Collection Period, Accounts Receivable Turnover, Inventory Turnover, Average Age of Inventory, Inventory to Net Working Capital, Total Asset Turnover, Fixed Asset Turnover, Fixed Charge Coverage, Basic Earning Power, Debt Ratio, Debt to Equity, Long-term Debt to Equity, Times Interest Earned, Total Profit Margin, Operating Profit Margin, Net Profit Margin, Return on Investment, Return on Asset, Return on Equity, Price-Earnings, Market-Value to Book-Value, Cash Flow per Share, Dividend Payout, and Dividend Yield ratios.

Evaluate the company using the following accounting measures: Total Net Operating Capital, Net Operating Working Capital, Gross Investment in Operating Capital, Net Operating Profit after Taxes, Free Cash Flow, Operating Cash flow, Return on Invested Capital, Market Value Added and Economic Value Added.

Use the ratio values and accounting measures to show performance trends (time series analysis) of the company (at least for five years). Find industry quartiles for each of the ratio and accounting measures and evaluate the company ratios and accounting measures against the industry norm (a major competitor company) (cross-section analysis).

Write the analysis of the company on each of the ratio and accounting measurement areas (both time-series and cross-sectional analyses).

Use the web resources available to obtain information on both time-series and cross-section ratios and accounting measures.

2) Computation of Cost of Capital of the Company:

In the second part, the cost of capital should be computed using the tools and techniques given in Chapter 12 and utilizing the most recent data (different web-based resources should be used to find necessary financial data such as common and preferred stocks, bond prices, and beta coefficient for the company). It should be done in the following steps:

Compute the after-tax cost of debt of the company.

Compute the cost of preferred stock of the company.

Compute the cost of internal equity capital using both Dividend Valuation Model and CAPM approach.

Compute the cost of external equity capital.

Compute the current capital structure (using the current financial statements of the company) to determine appropriate weights for different sources of capital.

Compute the Weighted Average Cost of Capital the company should use to evaluate new projects.

Use the web resources available to obtain information on both corporate growth rate, company beta, and calculation of cost of equity.

The following format should be used to prepare the report:

1) Cover page

2) Abstract

3) Company Introduction

4) Financial (Ratio) Analysis

5) Cost of Capital

6) Conclusion

7) Bibliography

8) Attachments

9) Appendix (if any)

Attachment:- Assignment Files.rar