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Determine a recommended price to invest in the stock

Assignment Help Financial Management
Reference no: EM131496840

Financial Management Project

1) Select a public company from the S&P 500 index that pays dividends and obtain 3 years of financial statement data for that Company

2) Analyze the credit worthiness of the Company and write a memo (3 - 5 Pages double-spaced) to the CFO with a recommendation regarding whether or not we should invest in a 5-year bond of the selected Company. Memo should include the following:

a. Analysis of the Company's ability to generate operating and free cash flow
b. Analysis of the Company's liquidity (liquidity ratios)
c. Analysis of the Company's level of indebtedness (debt ratios)
d. Determine an appropriate market yield (YTM) for a 5-year bond of the company using a risk-free rate and a credit spread.

NOTE: ALL RATIO ANALYSIS SHOULD BE BENCHMARKED AGAINST OTHER COMPANIES IN THE INDUSTRY AND AGAINST HISTORICAL RESULTS (TREND) - PROVIDE CONTEXT!

3) Analyze the Company stock as a potential investment and write a memo to the CFO (3 - 5 pages double-spaced) with a recommendation regarding whether or not to invest in the stock. Memo should include the following:

a. Analysis of the Company's profitability (profitability ratios)

b. Analysis of the Company's market valuation (market ratios)

c. Determine a recommended price to invest in the stock using the Constant Growth Valuation Model with the following inputs:

i. Required return (r) = Cost of equity: use CAPM, the 10 year treasury rate as the risk-free rate, a recent Beta for the company, and assume a market risk premium of 6.00%.

ii. Use the actual dividend per share and base the growth rate (g) on the recent dividend growth of the company (subject to adjustment if recent growth exceeds expected future growth).

d. Comparison of actual stock price to recommended stock price

NOTE: ALL RATIO ANALYSIS SHOULD BE BENCHMARKED AGAINST OTHER COMPANIES IN THE INDUSTRY AND AGAINST HISTORICAL RESULTS (TREND) - PROVIDE CONTEXT!

4) Include an Appendix with all of the Company's financial statements (3 years) and any other calculations (free cash flow, ratios, etc.) used to support your analysis in the 2 memos.

Attachment:- Template_for_Project.rar

Reference no: EM131496840

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