Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Financial Accounting Expert

INTRODUCTION:

The objective of this project is to familiarize you with the investment analysis of a publicly traded stock. You will assume the role of a financial analyst. Your task is to value the common stock of a public company and issue a recommendation to investors whether to buy, sell or hold the stock.

SELECTING A COMPANY
:

Your first task is to select a company for your project. The company must be listed in a stock exchange and paying dividends. You are not allowed to select a service provider, such as a bank, an insurance company, etc.

ECONOMIC ANALYSIS:
Your second task is to conduct an economic analysis.

• What is the state of the overall economy?
• Describe key economic measures such as GDP, interest rate, inflation, consumer spending, etc.

INDUSTRY ANALYSIS: Your third task is to conduct an industry analysis.

• What is the nature of the industry?
• Who are the major competitors in the industry?
• How important are technological developments?
• Which economic forces have the most impact on the industry?

COMPANY ANALYSIS: Your fourth task is to conduct a company analysis.

Collect the income statements and balance sheets of the company and a major competitor.

• find out the liquidity, efficiency, financial leverage and profitability ratios for the company for 2011 and 2012 and the competitor for 2012.
• Evaluate the financial condition and operating results of the company using both time-series and cross-sectional analysis.

ESTIMATING BETA: Your fifth task is to collect the monthly stock prices of the company and the market index between January 2008 and December 2012.

• Enter the data into Excel.
• find out the monthly return of the stock and the market index between January 2008 and December 2012.
• Estimate the beta of the stock using regression analysis.

ESTIMATING THE INTRINSIC VALUE OF THE STOCK: Your sixth task is to estimate the intrinsic value of the stock.

• Collect the dividend per share paid by the company in 2012.

• Estimate the constant dividend growth rate of the stock for the foreseeable future.  You need to justify this rate based on your economic, industry and company analyses.

• Determine the required rate of return on the stock using the Capital Asset Pricing Model.  You may use 13% as the market return and 8% as the risk-free rate.

• Estimate the intrinsic value of the stock using the constant growth dividend valuation model.

CONCLUSION AND RECOMMENDATION: Your final task is to make a recommendation.

• Provide a summary of your economic, industry and company analyses which should shed some lights on the future prospects of the company.

• Compare the intrinsic value find outd above to the market price (the stock price on 31 December 2012) and determine whether the stock is undervalued or overvalued.

• State your recommendation to buy, sell or hold the stock.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M9717

Have any Question? 


Related Questions in Financial Accounting

Orchard has forecast sales to be 125000 in february 141000

Orchard has forecast sales to be $125,000 in February, $141,000 in March, $158,000 in April, and $142,000 in May. The average cost of goods sold is 70% of sales. All sales are made on credit and sales are collected 60% i ...

Zaird and associates is preparing their third audit of

Zaird and Associates is preparing their third audit of Universal Air and has uncovered a policy that raises some concern. When sales are booked on the airline website, a receivable account is debited and a sales account ...

Assess the volatility risk with an investment in a

Assess the volatility risk with an investment in a derivative, using an interest rate cap or floor in today’s marketplace. Indicate whether or not you would advise financial institutions to engage in this type of investm ...

The redwood company determined that its balance in its

The Redwood Company determined that its balance in its Accounts Receivable account represented 23% of total assets and that cost of goods sold represented 38% of total revenue. These findings are the result of horizontal ...

If a corporation finances with the use of bonds rather than

If a corporation finances with the use of bonds rather than equity, a desirable outcome of selecting this form of financing may well be: A. More owners would be involved with the company. B. A legal obligation to make in ...

Using the following information determine the break even

Using the following information determine the break even point in units and dollars? What is the Contribution Margin? What is the Contribution Margin Ratio? How many units does a business need to sell in order to earn a ...

Questionkhan company specializes in manufacturing a unique

Question: Khan Company specializes in manufacturing a unique model of bicycle helmet. The model is well accepted by consumers, and the company has enough orders to keep the factory production at 10,000 helmets per month ...

Outback outfitters sells recreational equipment one of the

Outback Outfitters sells recreational equipment. One of the company’s products, a small camp stove, sells for $150 per unit. Variable expenses are $105 per stove, and fixed expenses associated with the stove total $198,0 ...

Last year burch corporations cash account decreased by

Last year Burch Corporation's cash account decreased by $34,000. Net cash provided by investing activities was $8,900. Net cash used in financing activities was $31,500. On the statement of cash flows, the net cash flow ...

Lucas company uses the weighted average method in its

Lucas Company uses the weighted average method in its process costing system. The company adds materials at the beginning of the process in the forming department, which is the first of two stages in its production proce ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate