UIU – BA 341 Corporate Financial Management

Final Assessment (Due in Module 8)

The Final Assessment lets you apply many of the concepts that we explore throughout the course in a “real world” setting by analyzing a publicly-traded company.  This assignment is due on the last day of class. There are no intermediate submissions but it is recommended that you familiarize yourself with the assignment as early as possible and work on it as you go through the relevant course material.

Below are the assignment requirements.  Please complete your analysis in a Word document and include an accompanying Excel spreadsheet with your detailed calculations.

Publicly traded company from the below list:

• Coca Cola

Prepare a paper which discusses the below items.

1. Company and Competitive Overview:

1. Company Overview: State what company you have chosen and provide a brief overview of the company, explaining what industry and lines of business it is in and other noteworthy information.  (Good sources:  Yahoo! Finance Company “Profile” page and the company’s Annual Report.)

1. Competitive Overview: Identify the company’s primary competitors.  You can find this information in Yahoo! Finance under, “Competitors.”   Provide a comparison of several relevant factors, such as the market cap, number of employees, annual revenue, net income and other relevant metrics.

1. Financial Performance Analysis:
2. Perform a ratio analysis to determine how your company is performing versus one of the competitors you have identified. For your company and the competitor present the following financial information for the prior three years:
   1. Income Statement
      1. Revenues
      2. Net Income
   2. Balance Sheet
      1. Total Assets
      2. Total Debt

• Equity

1. Using the above financial data calculate the following for both companies for all three years
   1. Return on Assets (ROA)
   2. Return on Equity (ROE)

1. Analyze and comment on how your company is doing compared to the competitor

• Stock Valuation

Using the Dividend Valuation Method or DVM (Chapter 10), estimate the value of your chosen company.  As a reminder the DVM formula is:

P0 = D0 * (1 + g) / (r – g)

Where:

P0 is the price of the stock today
D0 is the most recent dividend
g is the dividend growth rate estimate
r is the cost of equity

1. Calculating the most recent year’s dividend (D0):
   1. To start this analysis you will want to get 5 years of dividend payment history for your company. You can get this information from Yahoo! Finance (MSFT example) and choosing the time period and “Dividends Only” option.  Include this data in your submission.
   2. What is the total dividend payment for the prior year (you will need to add up the payments for the year)?

1. Estimating the growth rate (g):
   1. To estimate the growth rate at your data from above and calculate the dividend payment from 5 years ago (add up the payments during the year).
      1. Calculate the compound average growth rate over this period (example)
   2. Calculating the cost of equity
      1. Use the Capital Asset Pricing Model (CAPM) to estimate the cost of equity
      2. Assume a risk free rate of 3.5%
      3. Assume a market return of 10.5%
      4. Look up the stock’s beta in the Key Statistics page in Yahoo! Finance
      5. Use the above to calculate the cost of equity

1. Calculate the value of the company’s stock
   1. Put all of the above together to calculate the value of the company’s stock.
   2. Compare this value to the current market cap as found in Yahoo Finance.
   3. How do they compare? What could account for differences between your calculated value (the “intrinsic value” and the market value through Yahoo Finance?