Select a Firm – Please let me know what firm you will report on.

SELECT A FIRM!

Make certain that you have access to all financial information of the firm. The firm must have outstanding common stock, outstanding bonds, and you have access to all their financial information with relatively little transactions cost. This will be incumbent upon you to find this out immediately and have it be a basis upon firm selection.

Please see example of how the report should be done.

a)Sheet 1 (Chapter 2-Financial Statements) (from the first draft):Obtain the last 4 years of financial statements: balance sheet, income statement, and statement of owner’s equity. Import these items into an Excel workbook. Remember that this data will be recalled later in this project for analysis. The intent is not for you to manually enter these data, but to import, then format them.

b)Sheet 2 (Chapter 3-Financial Ratios) (from the first draft):Evaluate your firm’s financial situation. Use actual and pro forma statements to construct financial ratios for your firm. Compare these to the current industry averages. Most of these industry ratios can be found on the FINRA.org website. Comment on the firm’s prognosis.

c)Sheet 4 (Chapter 9 – Common Stock Valuation):Using the free cash flow model of stock valuation, compute the price per share of the firm’s common stock. (Use chapter 8 as a guide). Compare the actual market price to the intrinsic value that you have calculated above.

d)Sheet 5 (Chapter 11 – Cost of Capital):Estimate your firm’s WACC: (Information comes from various chapters of your text)

• Estimate your firm’s beta coefficient using 5 years of quarterly data for your firm and the S&P 500 index, found on Yahoo! Finance.
• Use the last 10 years of the annual closings of the S&P 500 (Use the GSPC ticker). Use the trend function to forecast one year ahead return. This is expected return for the market.
• Using the most current estimate of the 20-year T-Bond as the proxy for the risk-free interest and the expected market return from 2.b, estimate the firm’s cost of common equity.
• Use FINRA.org to find the firm’s cost of debt. Obtain the firm’s marginal tax rate and use it to find the firm’s after-tax cost of debt. If you have multiple bonds outstanding, use the weighted average YTM of each bond.
• If applicable, obtain the price of preferred stock and use the dividend to calculate the firm’s cost of preferred stock.

Use all of the above information and the firm’s market capital structure to determine the firm’s WACC.

Your Company
Income Statement
For the Year Ended Dec. 31 2018
2018
Sales
3,074,000
Cost of Goods Sold
2,088,000
Gross Profit
986,000
Selling and G&A Expenses
294,000
Fixed Expenses
35,000
Depreciation Expense
239,000
EBIT
418,000
Interest Expense
93,000
Earnings Before Taxes
325,000
Taxes
94,000
Net Income
231,000
Tax Rate
28.92%
Your
Balan
As of D
Your Company
Balance Sheet
As of Dec. 31 2018
Assets
Cash
Accounts Receivable
Inventories
Total Current Assets
Gross Fixed Assets
Accumulated Depreciation
Net Fixed Assets
Total Assets
Liabilities and Owners’ Equity
Accounts Payable
Short-term Notes Payable
Accrued Expenses
Total Current Liabilities
Long-term Debt
Total Liabilities
Common Stock
Retained Earnings
Total Shareholder’s Equity
Total Liabilities and Owners’ Equity
2018
Ratios
Current Ratio
Quick Ratio
Inventory Turnover Ratio
Accounts Receivable Turnover Ratio
Average Collection Period
Fixed Asset Turnover
Total Asset Turnover
Total Debt Ratio
Long-Term Debt Ratio
LTD to Total Capitalization
Debt to Equity
Long-Term Debt to Equity
Gross Profit Margin
Operating Proft Margin
Net Proft Margin
Return on Total Assets
Return on Equity
Return on Common Equity
Your company Comparable Company
Analysis