Corporate Finance CFM640 Spring 2014 Project Help

Your presentation and reporting should be a comparative report on the companies that
you have chosen. You had been given ten topics on which to evaluate your companies
but it has now been reduced to eight to make your work easier. Again my advice is for
you to pick companies for which you can easily get data. Do not waste your time trying
to do an analysis on privately held companies or subsidiary of companies for which data
is difficult to get. I removed Investment Return and Real Option topics because I feel
they would have been difficult to get a handle on.
1. Corporate governance analysis
a. Is there a separation between management and ownership? If so, how
responsive is management to stockholders?
b. Are there any other potential conicts of interest in this rm?
c. How does this rm interact with nancial markets? How do markets get
information on the rm?
d. How does this rm view its social obligations and manage its image in
society?

2. Shareholder analysis
a. What is the breakdown of stockholders in your rm - insiders, individuals
and institutional?
b. How has the shareholder profile changed over the years?
c. Who is the marginal investor in this stock?

3. Risk and Return analysis
a. What is the risk prole of your company? How much overall risk is there in
this rm? Where is this risk coming from (market, rm, industry or
currency)? How is the risk prole changing?
b. What return would you have earned investing in this companys stock in
the last one year or five years?
c. Would you have under or out-performed the market? How much of the
performance can be attributed to management?
d. How risky is this companys equity? What is its cost of equity?
e. How risky is this companys debt? What is its cost of debt?
f. What is this companys current cost of capital?

4. Capital structure analysis
a. What are the different kinds of nancing the firm has used to raise funds?
Where do they fall in the continuum between debt and equity?
b. How large, in qualitative or quantitative terms, are the advantages and
disadvantages to this company from using debt?
c. From the qualitative trade off, does this rm look like it has too much or
too little debt?
d. Is there a optimal debt to equity mix for the firm? What should it be its
debt ratio?
e. How does the capital structure of the firm compare to its peer in the
industry?

5. Dividend policy analysis
a. Does the firm have a dividend policy? How has it changed over its
lifecycle?
b. How has the firm returned cash to its owners (dividends, buybacks, both)?
c. What is the cash position of the firm? How much cash could the firm have
returned to shareholders in the last few years? How much did it actually
return?
d. Given this rms characteristics today and assuming it had excess cash,
how would you recommend that they return cash to stockholders?
e. Given the current dividend policy and the current cash balance of this
rm, would you push the rm to change its dividend policy (return more
or less cash to its owners)?
f. How does this rms dividend policy compare to those of its peer group
and to the rest of the market?

6. Risk Management analysis
a. Does the risk analysis you performed earlier match what the risk the firm
says it has?
b. What kind of risk management policy does the firm adhere to?
c. What kind of hedging instruments does the firm use if any?
d. How much of its exposure does the firm hedge? How effective has it been?
e. Do you have any recommendation on how the firm could improve its risk
management activities?

7. Mergers & acquisition analysis
a. What is the history of mergers and acquisition of this firm?
b. Has the firm gained value from these mergers and acquisitions?
c. Pick one recent acquisition or merger and determine the cost for the firm
of the merger and whether it has achieved the objective that was touted
for the merger.

8. Valuation analysis
a. What growth pattern (Stable, 2-stage, 3-stage) would you pick for this
rm? How long will high growth last?
b. What is your estimate of value of equity in this rm? How does this
compare to the market value?
c. What is the key variable (risk, growth, leverage, prot margins...)
driving this value?
d. If you were hired to enhance value at this rm, what would be the path
you would choose?

Data sources: SEC Edgar online, Professor Damodaran, Morningstar, Relevant Stock
exchanges, Relevant companys web site.