Download FIN 3403 - Course Project

FIN 3403 - Course Project
2009 Fall Term
The purposes of the project are to (1) make students familiar with online services and
financial databases that allow individuals to research and better understand the financial
aspects of a company, and (2) help students learn about the difficulties of extending
financial theory and data to real world applications. The first part of the course project
will familiarize students with a number of services and databases. The second part will
require students to actually use financial data to analyze such things as a firm’s cost of
capital, its economic value added, the fairness of its stock price, and whether the stock
is currently a reasonable investment.
Your first step is to download this document to your personal computer. Answers to the
following questions/activities should then be posted directly to the Word Document that
has been saved to your personal computer (we suggest that you highlight or use a
different font color for your answers to make it easier for the TA’s to distinguish your
answers form the original document and grade your assignment). After you have
completed the assignment, the final step will be to “attach” or “upload” this document
when you submit your assignment on the class “assignment” webpage (this is a
different process than the graded class discussion boards).
As a student at the University of Florida, you have free access to many of the online
services that usually require a subscription. However, you will either need to access
these services through a Library-related computer, or go through a “Proxy Server” using
your GatorLink account username and password. To access the online Business
Library section of the Smathers Library, go to
http://businesslibrary.uflib.ufl.edu/
On the right of the top line, click on “Off-Campus Access”. This will take you to a page
that allows you to connect to on-campus services using the Library Proxy Server:
http://www.uflib.ufl.edu/ufproxy.html
At the top left of the screen, fill in your GatorLink Account Username and Password, and
then click Login. This will take you back to the UF Library page:
http://www.uflib.ufl.edu.lp.hscl.ufl.edu/ufproxysuccess.html
At the top/middle on the left of the page click the drop-down arrow for “UF Smathers
Libraries” and choose, “Business Library”
This takes you back to the Business Library main page, but using the Proxy Server:
http://businesslibrary.uflib.ufl.edu.lp.hscl.ufl.edu/
FIN 3403 - 2009 Fall Term - Course Project
Page 1 of 19 Pages
Part 1 of the Course Project
You may go to the FIN 3403 class website and click on “My Grades” in the left-hand
toolbar. Within the grades file you will find the “Company Ticker Symbol” and “Company
Name” for the company that you have been assigned.
The following is a series of questions and activities that will familiarize you with a large
number of the online business resources and databases. In some cases you are asked
to obtain the same information, but from different sources. You may find that some of
this information is not always the same: instead, it is source dependent. 
All answers should be added to this file after each (or part of each) of the
questions/activities. You should change your font color (or highlight) so that your
answers can be easily seen when contrasted against the corresponding question.
Not all data is available for all companies! If data is not available for your specific
company, for a specific question, you should state that the data is not available. If a
specific webpage is not available for your specific company, you should list the date,
time, and the “url” you are trying to access and then state that the webpage is not
available.
ABI/INFORM (ProQuest)
Access the online Business Library through the UF Proxy Server.
Click on the Business Databases link under Popular Guides (located in the lower part of
the middle of the page).
Click on ABI/INFORM Complete in the middle of the page under All Business
Databases:
1.
In the first line of “Advanced Search” put in the name of your company and then,
using select multiple databases or specific databases of your choosing (dropdown box), hit “Search”.
2.
Choose, read, cite, and summarize at least two substantive articles. (One solid
paragraph for each article).
BUSINESS SOURCE PREMIER (EBSCO)
Access the online Business Library through the UF Proxy Server. Click on the Business
Databases link under Popular Guides (located in the lower part of the middle of the
page).
Click on Business Source Premier (EBSCO) in the middle of the page (or click B to get
you to that part of the alphabet) under All Business Databases:
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1.
Put in the name of your company under search field on the top of the page and
then hit “Search”.
2.
On the left hand side, under the green “Narrow Results By” heading, choose
“Trade Publications”.
3.
Choose one of the choices listed, cite the “Source (first line of new page), and cut
and paste the “Abstract” for that choice.
Lexis-Nexis
Access the online Business Library through the UF Proxy Server. Click on the Business
Databases link under Popular Guides (located in the lower part of the middle of the
page).
Click on LexisNexis Academic in the middle of the page (or click L to get you to that part
of the alphabet) under All Business Databases:
1.
Enter the name of your company in the “Search Terms” box. Check “Major U.S.
and World Publications,” and Specify date as “Previous 2 years.” Then hit
search.
2.
Choose, read, cite, and summarize at least two substantive articles. (One solid
paragraph for each article).
ProQuest National Newspapers
Access the online Business Library through the UF Proxy Server. Click on the Business
Databases link under Popular Guides (located in the lower part of the middle of the
page).
Click on ProQuest National Newspapers in the middle of the page (or click P to get you
to that part of the alphabet) under All Business Databases:
1.
As you will see, this is exactly the same as what you called up for ABI/INFORM,
except that the database selection is now listed as “News – ProQuest
Newspapers” (if not, change it to that).
1.
In the first line of “Advanced Search” put in the name of your company and then,
using the ProQuest Newspapers database, hit “Search”.
2.
Selecting either the “Magazines” or “Newspapers” tab (both may not be present),
choose, read, cite, and summarize at least two substantive articles. (One solid
paragraph for each article).
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Standard & Poor’s NetAdvantage
Access the online Business Library through the UF Proxy Server. Click on the Business
Databases link under Popular Guides (located in the lower part of the middle of the
page).
Click on Standard & Poor’s NetAdvantage in the middle of the page (or click S to get
you to that part of the alphabet) under All Business Databases:
1.
Go to the Stock Report Features Guide under NetAdvantage Guides at the
bottom right of the page.
2.
Call up, read, and summarize the Stock Report Features Guide. (One solid
paragraph).
3.
Go to The Outlook under Quick Links in the right-hand column. Call up the issue
for 10/07/2009. Look at “Market Measures” on the bottom of Page 2 and fill in
the Past 52-week % Change for the following items:
A)
B)
C)
D)
E)
500 Composite:
Midcap 400:
Smallcap 600:
DJI:
NASDAQ Composite:
3.
Go back to the main homepage (back arrow) and click on “S&P 500” under Quick
Links. Within the “S&P 500 Overview,” summarize the section “How stocks get
into the S&P 500.” (One solid paragraph.)
4.
Look at the left-hand directory column and click on Companies under S&P
Indices / S&P 500, and then answer the following questions:
A)
B)
5.
How many companies in the index have a company name that begins with
the letter E?
List the Companies in the Index that begin with the letter Y.
Go back and then look at the left-hand directory column and click on Vital Stats
under S&P Indices / S&P 500, and then answer the following questions:
A)
B)
C)
How many sectors are there in the S&P 500?
How many companies are there from the following exchanges?
1.
NYSE:
2.
NASDAQ National Market:
What is the Total Market Value of the S&P 500?
Go back to the Home page (top row buttons).
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6.
Enter your ticker symbol under Database Search, and hit the arrow (you may
have to select your company from a list -- this will take you to Companies - top
row). Look at the left-hand directory column and click on Overview, and then
answer the following questions:
A)
B)
What is the formal name of your company? :
Who is the S&P Analyst for your company? :
7.
Look at the left-hand directory column and click on Quote, and then list the:
A)
Date :
B)
Time :
C)
Company Price (Last) Quote :
8.
Look at the left-hand directory column and click on Chart, and then list the:
A)
“P/E” ratio :
B)
“Yield” :
9.
Look at the left-hand directory column and click on Valuation, and then answer
the following questions:
A)
B)
C)
D)
E)
10.
Look at the left-hand directory column and click on Financials, and then answer
the following questions:
A)
B)
C)
D)
E)
11.
What is the company’s beta?
What is the company’s Market Cap?
What percentage is held by institutions?
What is the company’s most recent 12-month P/E Ratio?
What is the company’s P/E Ratio relative to the S&P 500 P/E Ratio?
How much Long-Term (LT) Debt does the firm have in the most recent
year listed?
How much Interest Expense does the firm have in the most recent year
listed?
What was the firm’s cash flow in the most recent year listed?
What was the firm’s % ROE (Return on Equity) in the most recent year
listed?
What was the firm’s % ROA (Return on Assets) in the most recent year
listed?
Look at the left-hand directory column and click on Dividends & Stock Splits, and
then answer the following questions:
A)
B)
C)
D)
Has the firm paid a dividend?
If yes, what was the most recent Ex-Dividend date?
Has the firm had a stock split (at bottom)?
If yes, what was the day of the most recent split?
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12.
Look at the left-hand directory column and click on Industry Information, and
determine its “Average STARS Ranking”.
13.
Look at the left-hand directory column and click on Competitors (All), and then
answer the following questions:
A)
B)
14.
Look at the left-hand directory column and click on Competitors (S&P Covered),
and then answer the following questions:
A)
B)
15.
B)
C)
D)
What exchange(s) does the stock of your company trade on?
What is your company’s Primary NAICS (North American Industry
Classification System) number?
Look at the left-hand directory column and click on Corporation Records, look at
the firm’s capitalization and then answer the following questions:
A)
B)
C)
D)
18.
What is the company’s
1.
GICS Sector
2.
Sub-Industry
3.
Peer Group (If Listed)
What is the Fair Value price calculated by S&P?
What is the 12-Month Target Price?
How many analysts rate the company as a “Buy”?
Look at the left-hand directory column and click on Register, and then answer the
following questions:
A)
B)
17.
What is the S&P STARS Ranking of the first company listed?
What is the P/E ratio of the first company listed?
Look at the left-hand directory column and click on Stock Reports - PDF, and
then answer the following questions (will need to look beyond the first page):
A)
16.
What is the company’s largest competitor in terms of Market Cap?
What is the beta of its largest competitor?
How many common shares have been Authorized?
How many common shares are Outstanding?
What is the Par Value per share?
How much Long-Term Debt does the firm have?
Look at the left-hand directory column and click on Industry Surveys - PDF, and
then list the date and number of pages for this document.
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Hoover’s Online
Access the online Business Library through the UF Proxy Server. Click on the Business
Databases link under Popular Guides (located in the lower part of the middle of the
page).
Click on Hoover’s Online in the middle of the page (or click H to get you to that part of
the alphabet) under All Business Databases:
http://premium.hoovers.com.lp.hscl.ufl.edu/subscribe/
1.
Enter your company’s Ticker Symbol in the Search box and hit “Search”. This
will take you to Search Results. Click on your company (this will take you to the
Browse Company Record page), and then answer the following questions:
A)
B)
C)
D)
E)
F)
G)
H)
I)
J)
What is the company’s corporate address?
What is the company’s phone number?
What is the company’s web address?
Which analyst(s) covers the company for Hoovers?
What is the company’s D&B (Dun & Bradstreet) D-U-N-S Number?
What is the company’s fiscal year-end?
What was the company’s latest 1-year sales growth rate (%)?
What was the company’s latest 1-year net income growth rate (%)?
Who is the company’s chairperson?
Who is the company’s CEO?
2.
Look at the left-hand directory column and click on Full Overview, then cut and
paste the first paragraph of this overview.
3.
Look at the left-hand directory column and click on History, then cut and paste
the first paragraph of this history.
4.
Look at the left-hand directory column and click on People, and then answer the
following questions:
A)
B)
C)
5.
What is the age of the company’s CEO?
Click on the name of the CEO. What was the CEO’s most recent salary?
What was the CEO’s most recent bonus?
Look at the left-hand directory column and click on Products/Operations, and
then answer the following questions:
A)
B)
What are the latest sales for the US ($ or %)?
What are the latest sales for other countries ($ or %)?
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6.
Look at the left-hand directory column and click on Industry, and then answer the
following questions:
A)
B)
C)
7.
Look at the left-hand directory column and click on Competitors, and then answer
the following questions:
A)
B)
8.
How many US SIC codes are listed for your company?
What is the first US SIC code listed for your company?
What is the Heading/Definition for this SIC Code?
How many “Top Competitors” does Hoover’s Online list for your company?
What is the name of the first Top Competitor listed by Hoover’s Online for
your company?
Look at the left-hand directory column and click on News, and then answer the
following questions:
A)
B)
How many total news reports are listed for your company?
How many total press releases (below reports) are listed for your
company?
Go To the left-hand directory column and click on Financial Data.
9.
Look at the left-hand directory column and click on Income Statement, and then
answer the following questions:
A)
B)
C)
10.
Look at the left-hand directory column and click on Historical Financials, and then
answer the following questions:
A)
B)
C)
11.
What was the company’s expense for Discontinued Operations for the
most recent year?
What was the company’s Diluted EPS from Total Net Income for the most
recent year?
What was the company’s Dividend per Share for the most recent year?
What is the earliest year reported under Income Statement?
What was the company’s high and low P/E ratio for the earliest year
reported under Stock History, and what year was this?
What was the company’s Dividend Payout rate for the most recent year
reported?
Look at the left-hand directory column and click on Interactive Stock Chart. Use
the dropdown window and choose 5 Years. Overlay the S&P 500 (Benchmark S&P 500), and state whether your firm appears to have under-performed or outperformed the Dow Jones average over this period and then discuss the basis for
your conclusion.
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12.
Look at the left-hand directory column and click on Market Data, and then answer
the following questions:
A)
B)
C)
D)
13.
What is the company’s Price/Sales Ratio?
What is the company’s Price/Book Ratio?
What is the company’s Price/Earnings Ratio?
What is the company’s Price/Cash Flow Ratio?
Look at the left-hand directory column and click on Comparison Data, and then
answer the following questions:
A)
B)
C)
D)
E)
What is the company’s Price/Earnings Ratio?
What is the industry’s Price/Earnings Ratio?
What is the market’s Price/Earnings Ratio?
How is Hoover’s Online defining the market (footnote)?
What is the industry’s 36-Month Dividend Growth Rate?
Thomson One Banker Analytics
Access the online Business Library through the UF Proxy Server. Click on the Business
Databases link under Popular Guides (located in the lower part of the middle of the
page).
Click on Thomson One Banker Analytics in the middle of the page (or click T to get you
to that part of the alphabet) under All Business Databases: [Note 1: I have problems
calling this database up using Firefox, but I can call it up using Internet Explorer.] [Note
2: regardless of your browser, you will probably get a window saying “This site requires
browser cookies. Please enable cookies setting, then reload.” If you already have
cookies enabled, then simply hit “OK”, wait a second, and then proceed.]:
1.
Enter your company’s Ticker symbol and click Go. Make sure that you are under
Overview (Top Row), and then answer the following questions:
A)
B)
C)
D)
E)
2.
Look at the left-hand directory column and click on Prices, and then answer the
following questions:
A)
B)
C)
3.
What exchange is listed for your company?
What is the Forward P/E Ratio for your company?
What is the source of this P/E Ratio?
What is the Beta for your company?
What is the source of this Beta?
What is the 1-Year Total Return for your company?
What is the 3-Year Total return for your company?
What is the dividend yield listed for your company?
On this same page, click on the Interactive Charts link (under Prices box), set
Time Frame to 10 years (use a shorter time period if no graph appears for 10
FIN 3403 - 2009 Fall Term - Course Project
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years), hit Draw (you may have to expand the bottom box - Chart Style & Data
Options to see the “Draw” box at the bottom right-hand corner), then discuss your
company’s performance relative to the S&P 500 over this period. (At least one
solid paragraph.)
4.
Look at the left-hand directory column and click on Financials > Financial
Statements > Thomson Financials > Income Statement > 10 YR Income
Statement, and then answer the following questions:
A)
A)
D)
E)
A)
5.
Look at the left-hand directory column and click on Estimates (you should now be
on Estimate, Overview, Thomson Estimate Tearsheet), and then answer the
following questions:
A)
B)
C)
6.
What are the EPS Estimate Forecasts listed for your company?
What is the mean long-term estimated growth rate (LTG) of earnings per
share for your company?
How many analysts are recommending a “Strong Buy” for your company?
On the left-hand directory column, click on Consensus Estimates > Thomson
Forecast Report (you should now be on Estimate, Consensus Estimates,
Thomson Forecast Report), and then answer the following questions:
A)
B)
C)
7.
What was the level of Sales for the earliest year reported?
What was the level of Sales for the latest year reported?
What was the Earnings Before Interest and Taxes (EBIT) for the latest
year reported?
What was the Interest Expense on Debt for the latest year reported?
What was the Net Income Available to common for the latest year
reported?
What is the 5-Year Historical EPS Growth Rate for your company?
What is “actual” P/E Ratio listed for your company?
What is the Beta that is listed for your company?
Look at the left-hand directory column and click on Filings > Content Profile, and
then do the following:
A)
Call up the latest 10-K (may not be on the first page shown), click on
“Table of Contents” under the Navigational Listing (this is the first,
highlighted listing that you see that allows you to jump to other sections of
the report), then cut and paste the first 20-30 lines of the Table of
Contents.
B)
Go back (Filings > Content Profile) click on “Management Discussion” (if it
exists) under the Navigational Listing (this is the first, highlighted listing
that you see that allows you to jump to other sections of the report), then
cut and paste the first several paragraphs of this discussion.
FIN 3403 - 2009 Fall Term - Course Project
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C)
8.
Go back (Filings > Content Profile) and call up the latest US Annual
Report (it may take a while to download) and then list the date of this
report and the number of pages.
Look at the left-hand directory column and click on Comparables, and then
answer the following questions:
A)
B)
What is your company’s free cash flow per share?
What company’s are listed as Peers of your company by Thomson One?
Value Line Research Center
Access the online Business Library through the UF Proxy Server. Click on the Business
Databases link under Popular Guides (located in the lower part of the middle of the
page).
Click on Value Line Research Center in the middle of the page (or click V to get you to
that part of the alphabet) under All Business Databases: (you may need to click the
continue to log in prompt, but you do not have to log in!):
Look at the top row and click on Education tab.
1.
Look at the left-hand directory column and click on Subscriber Guides, and then
summarize one of the Value Line publications. (2-3 good paragraphs).
2.
Look at the left-hand directory column and click on How to Use the Value Line
Page, and then click on Explore the Value Line Investment Survey Page. Click
on each of the circled numbers (1-8) and give the definition “title” for each
number
1)
2)
3)
4)
5)
6)
7)
8)
3.
Look at the left-hand directory column and click on Suggestions for Building an
Investment Portfolio, and then explain what you should do in terms of “timeliness”
for stocks. (One solid paragraph.)
4.
Look at the left-hand directory column and click on Educational Programming
Video, and then state how many video lessons there are for “The Value Line
Investment Survey”.
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5.
Click on Home (top row), then look at the left-hand directory column and click on
The Value Line Record, and then page down to the “Record of Value Line Ranks
for Timeliness” from 1965 to the present (2008). Now discuss what this graph is
attempting to show and whether Value Line’s ranking by timeliness appears to
work. (2-3 Good paragraphs.)
Click on Home (top row of tabs), enter the Ticker Symbol for your company (also top
row, on the right) and then hit “Quote” (This should then take you to My Value Line; also
top row. If not, click on My Value Line).
6.
Call up the PDF “VL Survey Page” for your company, and then answer the
following questions:
A)
B)
C)
D)
E)
What is your company’s Timeliness Rating?
What is your company’s Safety Rating?
What is your company’s Beta as reported by Value Line?
What is the 1-Year % Total Return for your company?
What is the 5-Year % Total Return for the Value Line Arithmetic Index?
Yahoo! Finance
Access the online Business Library through the UF Proxy Server.
On the left hand column under “Browse by Subject” click on Investment Information.
When directed to another Business Library page, click on the link to the Investment
Information database (right-hand/middle column). On the right hand column go down to
the bottom of the column labeled “Investment Websites” and click on Yahoo! Finance:
1.
Enter the Ticker symbol for your company in the symbol window at the top of the
page, then hit “Get Quotes: and then Quotes > Summary, and then list the time,
day, and price of the last trade for your company.
2.
Look at the left-hand directory column and click Basic Chart, and then answer the
following questions:
A)
B)
3.
Has the company had any stock splits (if they have, they will be listed
immediately under the basic chart)?
If yes, assume that you bought a single share of stock before the
company’s first stock split. Given the stock splits listed, calculate how
many shares you would now own today.
Look at the left-hand directory column and click Basic Tech. Analysis. Choose
the “max” date range, and then check that you want to compare your company to
the S&P, NASDAQ, and the Dow, hit the compare button. Briefly discuss your
performance against these three indices over this time period (2-3 good
paragraphs.)
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The technical indicators and overlays can be confusing. Go to the following page for
the definitions of these terms:
http://biz.yahoo.com/charts/guide10.html
4.
Now explain what the following acronyms stand for:
A)
B)
C)
D)
PSAR
MFI
ROC
RSI
Go back to Yahoo! Finance (enter your company’s Ticker symbol and search again if
needed).
5.
Look at the left-hand directory column and click on Analyst Opinion, and then
answer the following questions:
A)
B)
C)
6.
Look at the left-hand directory column and click on Analyst Estimates, and then
answer the following questions:
A)
B)
C)
D)
E)
F)
7.
What is the per annum estimated growth rate for your company for the
Next 5 Years?
What is the Price/Earnings (average) for your company?
What is the Price/Earnings (average) for the industry?
What is the Price/Earnings to Growth (PEG) Ratio (average) for your
company?
What is the Price/Earnings to Growth (PEG) Ratio (average) for the
industry?
Define how the PEG Ratio (Hint: Price/Earnings to Growth) appears to be
calculated here.
Look at the left-hand directory column and click on Star Analysts, and then
answer the following questions:
A)
B)
8.
What is the mean recommendation (this week)?
What is the mean price target?
How many analysts recommended your company as a strong buy last
month?
How many star analysts cover your company (if any)?
How many total analysts are listed for your company.
Look at the left-hand directory column and click on Insider Transactions, and
then answer the following questions:
A)
What were the “Net Shares Purchased (Sold)” for the last six months for
your company?
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B)
9.
Look at the left-hand directory column and click on Income Statement (make sure
you are looking at quarterly data), and then answer the following questions:
A)
B)
10.
B)
What was the “Total Cash Flow from Operating Activities” for the latest
quarter?
What was the “Change in Cash and Cash Equivalents” for the latest
quarter?
Look at the left-hand directory column and click on Options, and then answer the
following questions:
A)
B)
C)
13.
What was the “Accounts Payable” for the latest quarter?
What was the “Net Tangible Assets” (at bottom) for the latest quarter?
How does Yahoo! Finance appear to calculate “Net Tangible Assets”
(often a function of stockholders’ equity, goodwill, and intangible assets) ?
Look at the left-hand directory column and click on Cash Flow (make sure that
you are looking at quarterly data), and then answer the following questions:
A)
12.
What was the “Gross Profit” for the latest quarter for your company?
How much did your company spend on “Selling General and
Administrative” expenses for the latest quarter?
Look at the left-hand directory column and click on Balance Sheet (make sure
that you are looking at quarterly data), and then answer the following questions:
A)
B)
C)
11.
Who provides the data for “Insider Transactions Reported”?
Does your company have put and call options listed?
If yes, what is the furthest expiration date for the call options (month, day,
and year)?
If yes, what is the lowest strike price listed for this furthest expiration date?
Look at the left-hand directory column and click on Historical Prices, and then
answer the following questions:
A)
B)
C)
What was the closing price for your company on June 19, 2003?
What was the closing price for your company on October 2, 2009?
In terms of closing price, what does Yahoo! Finance adjust for each day?
14.
Look at the top bar and click on Investing, then click on Bonds from the dropdown menu, then go to the left-hand column and click on Composite Bond Rates.
Scroll down and state what the yield was last month for a AA 20-year corporate
bond. (You may end up using this table in Part 2 of the project).
15.
Look at the top bar and click on Investing, then click on ETFs from the drop-down
menu, then click on “how ETFs work” under ETF Education (under Features in
middle column), and summarize. (One solid paragraph.)
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16.
Look at the top bar and click on Investing, then click on Mutual Funds from the
drop-down menu, then go to the left-hand column and click on Types of Mutual
Funds. How many different types are listed in the middle column?
Bloomberg
Access the online Business Library through the UF Proxy Server.
On the left hand column under “Browse by Subject” click on Investment Information.
When directed to another Business Library page, click on the link to the Investment
Information database (right-hand/middle column). On the right hand column go down to
the bottom of the column labeled “Investment Websites” and click on Bloomberg:
www.bloomberg.com
1.
Go to the top row and click on Market Data, then go to the left-hand directory
column (or use drop-down menu) and click on Rates and Bonds, then page down
to “U.S. Treasuries Notes/Bonds”.
On 10/09/2009 (1:31 PM), the yield on a 10-Year U.S. Treasury bond was 3.39
percent, while the yield on a 30-Year U.S. Treasury was 4.23 percent.
Specify today’s date and list the yields today for 10-year and 3-year U.S.
Treasury bonds.
2.
Enter your company’s Ticker symbol at the top left of the page, hit the “QUOTE”
key, and then answer the following questions:
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A)
B)
What is the “Estimated P/E” for your company for the coming year?
What is the “Return on Equity” for your company?
U.S. Securities and Exchange Commission
Access the online Business Library through the UF Proxy Server.
On the left hand column under “Browse by Subject” click on Investment Information.
When directed to another Business Library page, click on the link to the Investment
Information database. On the right hand column go down to the bottom of the column
labeled “Investment Websites” and click on SEC Investor Education:
http://www.sec.gov/investor.shtml
Now look at the left-hand directory column and click on Filings & Forms, then click on
and read “Quick EDGAR Tutorial”.
1.
Hit back key and click on “Form Descriptions”, and then answer the following
questions:
A)
B)
2.
What is the definition of a 10-K Report?
What is the definition of a Form N-PX?
Hit back key and click on “Search for Filings”, then click on “Company or fund
name, ticker symbol, CIK (Central Index Key), file number, state, country, or SIC
(Standard Industrial Classification).” Enter your company’s name (or Ticker
Symbol) and hit “Find Companies”, then put in “10-K” as the filing type (at the
top), and click on “Search.” What is the filing date of your company’s latest 10-K
Report and what is its File Number (usually in Red)?
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Part 2 of the Course Project
When companies invest their money they need to earn a rate of return that exceeds
their cost of capital. We can estimate a company’s cost of capital in the following way:
WACC = (rD)(1-T)(W D) + (rS)(W S)
Go to one of the databases from Part 1 of the Course Project and look up the most
recent 10-K for your company, paying special attention to the balance sheet and the
footnotes. Although we should use market value weights when determining a firm’s
cost of capital, this may be difficult to determine for a firm with multiple bond/debt
issues. Often times we can simply assume that the book value of the firm’s debt is a
good proxy for the market value of the firm’s debt.
1.
What is the date of this 10-K?
2.
What is the book (market) value of your company’s debt? [Note: Often times you
can look at the footnotes to determine the average interest rate on your
company’s debt.]
3.
What is the average interest rate or cost (rD) for your company’s long-term debt?
[Note: if you can not find interest rate information about your company, use the
corporate rates table from the Yahoo Composite Bond Rates section from Part 1
of the project -- Question 14.]
4.
How many shares outstanding does your company have?
5.
Using the price of your company’s common stock on October 2, 2009, determine
the total market value of your company’s equity.
6.
If the betas for your company that you found in Part 1 of the Course Project
differ, then which beta will you use to determine your company’s cost of equity
using the CAPM/SML, and why?
Go to Course Project directory on the class webpage and read the handout titled,
“Equity Costs - Some Conventions on Using the CAPM”. For our purposes here, you
may assume that the long-run geometric market risk premium has averaged 5.4
percent.
7.
In Part 1 of the Course Project you were given the 10-Year and 30-Year yields on
U.S. Treasuries. Which one of these will you use within the CAPM/SML?
8.
Determine the cost of stock (rS) for your company using the CAPM/SML and
show your calculations.
9.
Using expected dividends and expected long-run growth rates that you have
already found in Part 1 of the Course Project, and the price of your company’s
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stock as of October 2, 2009, determine the cost of your company’s stock (rS)
using the DCF model and show your calculations (if your firm does not pay a
dividend, think about the components of an investor’s return).
10.
If the cost of stock using the CAPM/SML differs from the cost of stock using the
DCF model, then which one will you use, and why?
11.
What are the debt and equity market value weights for your company?
12.
Calculate the WACC for your company and show your calculations.
EVA (Economic Value Added) can be defined as the additional value that management,
through their actions and capital budgeting decisions, has added to the firm and,
therefore, its shareholders. It can also be defined as the cash flow, per year, that is left
over after the firm meets its initial obligations to its creditors (rD), it stockholders (rS), and
the government (T). The present value of all EVAs to be added by a project should
equal the net present value of the project. The present value of all EVAs added, and to
be added, by a company should equal the market value added for the company. We
can calculate the EVA for a company as follows:
EVA = NOPAT - (WACC)(Invested Capital)
Where,
NOPAT = (EBIT)(1 - T)
13.
Assume that we can define the company’s Invested Capital as Long-term Assets
plus NOWC (Net Operating Working Capital), which, in general, is equivalent to
Total Equity, plus Total Long-Term Debt and Other Liabilities, plus those Current
Liabilities that do pay interest. Determine the Invested Capital for your company.
14.
Determine NOPAT (Net Operating Profit After Taxes) for your company.
15.
Determine EVA (Economic Value Added) for your company and explain whether
the value you calculated is a good or bad signal for the company, and why.
16.
Compare your company’s ROE to rS and explain why ROE is above or below rS.
That is, what is your company’s competitive advantage/disadvantage, or,
alternatively, is there something unusual about the company’s earnings in the
year you looked at (massive gain on an asset sale, massive loss due to a one
time situation, etc.) that could explain the difference?
17.
You have already found in Part 1 of the Course Project your company’s P/E
Ratio relative to the S&P 500 P/E Ratio, as well as the industry and market P/E
Ratios as defined by Hoovers Online. Explain why your company’s P/E Ratio
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might be higher or lower than the industry and/or market’s P/E Ratio (risk, growth
opportunities, etc.).
18.
Explain whether Value Line, analysts, and insiders appear to like or dislike the
prospects for your company’s stock.
19.
Explain whether the stock seems to you like a reasonable investment, given its
current price, and why.
20.
How confident are you of your assessment in the question (#19) above, and
why?
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