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This project is individual & needs to be submitted by the due date.
Please uplo
This project is individual & needs to be submitted by the due date.
Please upload your submissions in both Excel & Word.
This assignment is an extension to the one you did in the financial statement analysis course. In the accounting assignment, we analyzed the accounting choices management made while recognizing revenues and expenses over the study period. In this assignment, we are examining the same companies to assess their financing, investing, and operating decisions. You are required to estimate the cost of financing (WACC), rate of return on equity & rate of return on invested capital and decide whether management has added value to the shareholders over the study period or not. If you have questions, please let me know.
Instruction
Choose one of the following ten companies & perform the analysis listed below:
No. Company Name Symbol
1 Apple AAPL
2 Amazon AMZN
3 Alphabet GOOG
4 Exxon Mobil XOM
5 Procter & Gamble PG
6 The Walt Disney Co DIS
7 Verizon Communications VZ
8 Pfizer PFE
9 Coca-Cola KO
10 Nike NKE
1. Use Pitchbook to download the most recent 5 years of financial statements.
2. Visit Yahoo Finance https://finance.yahoo.com/Links to an external site. & collect:
The most recent five years of monthly prices of your company.
The most recent five years of monthly prices of S&P 500 (^GSPC)
3. Visit Macrotrends to collect the historical annual returns of the S&P500 & the 10-year Treasury bond rates for the last 30 years. Use the information collected to determine/estimate the Equity Market Risk Premium.
https://www.macrotrends.net/2526/sp-500-historical-annual-returnsLinks to an external site.
https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chartLinks to an external site.
Links to an external site.In your report, make sure you discuss the following:
1. Company Information – Name of company, Auditor, Industry, Market Capitalization, & Stock Exchange listing.
2. Summary of Management’s Discussion and Analysis.
3. Growth Analysis.
– Calculate the Actual & Sustainable growth rates of your company over the last 5 years. Analyze the differences between the rates and explain how the company managed and financed those differences if any.
– Assume the company’s sales are expected to grow by 5% next year. Estimate how much external financing the company will need and how that is going to impact its capital structure.
4. Risk and Return Analysis. Use the prices and returns you downloaded above & calculate the company’s Average Monthly Return, the Standard Deviation of Returns, Beta, & Equity Required Rate of Return. Explain the meaning of each of these parameters.
5. Cost of Capital. Analyze your company’s current Capital Structure over the study period. Calculate the company’s leverage ratio using both market & book values. Also, calculate the company’s Weighted Average Cost of Capital (WACC).
6. Performance Analysis. Analyze the company’s ROE and ROIC parameters and compare them to the Cost of Equity and WACC you calculated above. Comment on whether management has added value over the last year for its debt and equity investors or not. Make sure you justify and support all of your estimates.
7. Valuation. Use the techniques we learned in class to estimate the market value of the company and compare that to the actual stock price and discuss the possible differences
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