—- FINANCIAL RESEARCH PROJECT ——-
The specific objective of this graded written research exercise is to prepare an “executive level financial report” to the Chief Financial Officer (CFO) of a mythical company in which you are employed as a financial analyst. This report will pertain to the financial evaluation of a real, publicly-traded, company. It will require independent research (web-based or library), careful financial analysis, and the proper application of key financial theories and formulas.
The company that is to be analyzed for this project is to be a company selected by instructor.
Alternatively, you can request approval of another publicly traded company. This request must be submitted before the end of the first week of the course. The request must include
You are a financial analyst with the mythical High Technology Corporation (“HTC”). HTC is an established manufacturer of a line of electronic components, which services an international market. HTC is currently a new fully-integrated wireless communication service for world-wide use. A competitive technical and economic product evaluation has determined that THE COMPANY THAT IS TO BE ANALYZED FOR THIS PROJECT (COMPANY SELECTED BY INSTRUCTOR) (a real publicly-traded company) is the best potential candidate for a long-term commitment.
THE COMPANY (COMPANY SELECTED BY INSTRUCTOR) is offering a competitively favorable deal. However, based on some serious general concerns about the fallout of companies in the industry in general, the CEO has asked your CFO to conduct a financial analysis of THE COMPANY (COMPANY SELECTED BY INSTRUCTOR) to determine if it is prudent to commit to this company’s communication system. The cost of cutting over to the new communications system is significant and any interruption in support during the next few years would adversely affect HTC’s performance and profit.
Specifically, the primary question is: will THE COMPANY be financially viable over the next two to three years?
YOUR SPECIFIC ASSIGNMENT
Your specific assignment is to research, analyze, and prepare a report for the CFO on the actual financial performance of THE COMPANY THAT IS TO BE ANALYZED FOR THIS PROJECT (COMPANY SELECTED BY INSTRUCTOR). In addition to reviewing the traditional financial performance indicators, you are also to review THE COMPANY’S past and current stock performance. Your report includes three parts:
(1) An evaluation of THE COMPANY’S financial performance for the last three years. (See detailed description below)
(2) An evaluation of THE COMPANY’S stock performance for the last one year. (See detailed description below)
(3) Finally, a specific recommendation, with supporting rationale, as to whether or not THE COMPANY’S recent trend in financial and stock performance is of sufficient financial strength to warrant entering into a long-term commitment.
To assist you in your task, the CFO has provided the following general guidance. Since it is recognized that the industry is undergoing a major contraction, it is very important to comparatively evaluate THE COMPANY’S financial and stock performance trends against its Industry or major competitor.
www.marketwatch.com -To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.
www.morningstar.com – To find the information for your company you need to type the stock symbol in the Quotes window to get into the company’s page.
www.money.cnn.com -To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.
www.finance.yahoo.com – To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.
www.nyse.com “ Click on Data, then click on Stocks (under Quotes), and type the name of the company or the stock symbol in the window Keyword or symbol to get into the companys page.
www.nasdaq.com – To find the information for your company you need to type the stock symbol in the Search window to get into the companyâ€™s page.
YOUR SPECIFIC ASSIGNMENT
Using the information from the websites the students have to develop evaluation of the financial and stock performance for THE COMPANY (SELECTED BY INSTRUCTOR). (Totally 85% of the assignment grade)
-1″Background and Industry (one short paragraph)
-2″Analysis of the most significant financial performance results. (15% of the project grade)
-3 “Financial ratio analysis. (15% of the project grade)
Find financial ratios for the company for the last 1-3 years and its major competitor for the last year in the Internet.
-4- Evaluate Return on Equity for the company for the last three years using the DuPont analysis. (10% of the project grade)
ROE = Net profit margin x Total assets turnover x Equity multiplier
= Net income/Sales x Sales/Total assets x Total assets/Common equity
You can use Revenue instead of Sales.
b. Compare the results to main competitor. For the major competitor you can use ratios from the Internet or calculate them for the last year.
Write about 1 page of analysis of the results that you received. In your report please answer the question: If the management of the company would like to improve their return on equity, what should the management of these companies do?
-5- Evaluate other areas of financial analysis: capital spending, Beta values, credit rating service valuations (if possible), bond rating valuations (if possible), etc. (10% of the project grade)
1) Find the data for capital spending. How much did THE COMPANY spend on research, development, and engineering in the most recent year? How did this compare with the previous year?
2) Find the current beta for the company and its major competitor in the Internet.
-6- Collect and evaluate the data about stock performance of the assigned company’s for the last one year. (20% of the project grade).
1) Find the market ratios for the company for the last 1-3 years and its major competitor for the last year in the Internet.
-2) Analysis of the historical stock prices trend for the last year.
3) Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required return on THE COMPANY stock. Note that you will need the risk-free rate and the market return. Show this information in your project.
–7- Develop a specific recommendation, with supporting rationale, as to whether or not the assigned company’s recent trend in financial and stock performance is of sufficient financial strength to warrant entering into a long-term commitment (about 1 page) (15% of the project grade).
PRESENTATION OF PAPER AND WRITING (15%) of the project grade):
-Organization, Format and Presentation of Paper including the Title page, Introduction, Body, and Summary (4% of the project grade)
Use of Tables, Figures and Other Graphics to Summarize and Support Analysis Presented in the Paper (3% of the project grade)
Logical and Smooth Flowing Transitions and Relationships among Sections of the Written Report (3% of the project grade)
Research Sources and Significance of Research Information and Data, Use of APA Citation Methodology (5% of the project grade)
Your final report is to be an executive-level financial report, directed to the CFO. This report should be about 8-10 double-spaced typewritten pages (without tables and graphs). Include suitable comparative, quantitative and qualitative analyses and conclude with a specific and supported recommendation on the projected financial viability of THE COMPANY THAT IS TO BE ANALYZED FOR THIS PROJECT (COMPANY SELECTED BY INSTRUCTOR) for the next several years.
Essential research data, financial calculations and other documentation as necessary to support your recommendation should be referred to in summary form in your report and attached in detail as enclosures All major sources should be referenced There is no set limit to the size of the enclosures, but it is recommended that only essential enclosures be attached. You should use references and bibliography to identify any remaining supporting documents you wish to include.
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