GUIDELINES FOR THE GROUP PROJECT

Purpose of the Project

• Pick a Company (please clear the company with me)

O Select a public company you want to investigate

▪ Make sure you provide compelling reasons why you picked your company

▪ your objective is to identify an overvalued or undervalued company

▪ Selection and justification of your company is critical

• Control firm

o Pick another company from the industry for comparative purposes

o Also consider industry mean/median numbers as benchmark

• Analyze

o Financial statements and key footnotes to assess the risk and the current/future profitability of the
company)

• Ratios o Use key ratio analysis, common size analysis, financial statements to understand (chapters
6-8)

▪ the risk of the company

▪ the profitability (current and future)

▪ growth rates

▪ drivers of profitability

▪ Use benchmark companies (do time series and cross sectional analysis)

• Valuation o Use the residual income model (free cash flow or earnings) and the P/E model to
compute the intrinsic value and then compare to the current stock price of the company (chapter
11)

▪ For valuation, justify a discount rate

▪ Use independent forecasts (e.g., Value Line), don’t bother making your own

▪ Using the 2 models and your plugs, compute the intrinsic value of the company

• Notes Analysis o Analyze in detail 3 notes from your selected public company’s financial statement
and to justify your valuation

• Research conclusions o Buy or sell Course Outline Strategic Value Addition through Financial
Analysis

• The project must be submitted via LMS by the designated date (no exceptions)

• The project must include no more than 4-5 pages of analysis (double spaced with 1” margins on all
sides)
o It should have an introduction why you picked your company

o The analysis

o Conclusions

o Supporting materials attached

• Include all supporting materials at the end of the project report Groups

• The project is to be completed as a group which includes 3 members

• No two groups can have the same company, please clear the company names with the professor

• No discussion among groups is allowed •

Points are awarded based on o Model appropriateness and computations

o Analyses

o Qualitative, structure, professional presentation, conclusions logical consistency