25575 Autumn 2022

Individual Assignment 1
You have recently joined the advisory division in a major investment bank and as the rookie
junior analyst on the team you have been asked to take a first go in assessing the value of
company your bank is looking at as a possible candidate for an acquisition.

Your boss has recently fallen in love with the concept of meme stocks and the Reddit s
WallStreetBets discussion board. A company that has captured his interest is Nikola
Corporation (NKLA). According to him, because gravity-powered vehicles (link) are
revolutionary, this company could be an interesting target. Your job is to apply comparable
companies and DCF valuation to this target and provide:

A reasonable valuation range

A final investment advice (i.e. whether the company is, at the current trading price, a
good acquisition target). By convention we will consider "current trading price" $7.90 as
of Feb 25.

The output for this assignment will be one Excel file with the result of your valuation. The file
Assignment 1_XXXXX.xlsx provided in Canvas will be the shell in which you will do your
valuation. Prior to submitting the file, you should change the XXXXX in the file name with your
student ID number.

In performing this valuation, you are not allowed to use any information outside of what can
be found in FactSet. The company has been in the media a lot recently, due to being a meme
stock and having experienced some wild price movements so it is ok to google around to get
your bearings on the situation. You cannot base any of your valuation on information outside
FactSet. So, it is ok if you get some idea from a newspaper article and then you apply it with
FactSet numbers, it is not ok that you say that your expected growth is 5% because you read
Warren Buffet said so.

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1. Comparable Companies
For CCA you should use at least 8 comparable companies. You should also choose a variety of
multiples (at least two) calculated on different time horizons (LTM and forward multiples).

You should divide your comps in two groups. The first group should be based on financial
similarity (similarly to what we have seen in class) and the second group more focused on
firms with very similar business model (in this second group you are willing to accept firms
with different growth, profitability, size etc. if they have a very similar business model).

Please notice that:

While group 1 is based on financial similarity, firms should still be in the same
industry/sector.
There is no limit on the size of the groups. One group could be made by a single comp, as
long as the total number of comps is at least 8.

In the Benchmarking worksheet. You should report relevant business and financial
information on your comps. From this table the reader should understand that your
comparables are similar enough to your target to provide useful valuation insight.

In the Valuation worksheet you need to estimate the valuation range of the company based on
each of the multiples you have chosen.

You will then select only the multiples that you think offer a better estimation of the value and
report these in the Football Field.

In the worksheet Questions, you should explain your choice of comps, multiples and valuation
ranges in Questions 1, 2 and 3.

ATTENTION
The Questions worksheet is protected. You can only write in the appropriate cells. You cannot
change the size of the cells or the size of the font. We will only mark what is visible in the cell.
Keep the length of your answer so that all of it is visible in the cell.

2. Discounted Cash Flows

For DCF you should provide three scenarios

A Baseline or normal scenario.

An Optimistic scenario.
A Pessimistic scenario.

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The optimistic and pessimistic scenario should capture the idea of a particularly good/bad
period for the company, but not exceptionally so. For example, the pessimistic scenario should
capture the idea of fe tough ears and not a major crisis.

The two alternative scenarios (optimistic and pessimistic) should affect multiple assumptions
(at least 3), and not only the sales growth.

In the worksheet Questions, you should explain your assumptions and DCF valuation range in
Questions 4, 5, 6 and 7.

3. Football Field Chart

The chart should contain:

A aluation range based on each of the best multiples that ou ha e selected among all
the ones that you have built (In this case with the word multiple we refer to one
multiple and one time period for e ample FY EV SALES or LTM P E
A valuation range based on the DCF
The 52-weeks trading range of the company
A vertical line with the current market price of the company of $37.16 (as of
17/08/2021).
A vertical band representing the final valuation range you will recommend to your team.

Both the vertical line and band can be drawn (with Insert Shape in Excel) on top of the graph
and do not have to automatically created by the graph.
You should also report your final valuation range manually in the cells B20:C20 of the Chart
Worksheet.

In the worksheet Questions, you should explain your final valuation range and your investment
advice in Questions 8 and 9.

4. Data and Timeline

Financial data can be found in FactSet. Instruction on how to access the data can be found in the
videos of the guided valuation exercises.

The knowledge necessary to complete the assignment will be covered in the subject, with
the theoretical aspects analysed in class and the technical components (including how to use the
excel models and how to access information in FactSet) explored in the valuation exercises.
Specifically:

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 Component Covered in
Valuation on
Weeks 2 and 3
Comparables

DCF Valuation Week 4

You could start working on the assignment as soon as possible.

5. Submission
You will submit:

1. A modified version of the provided Excel file Assignment 1_XXXXX.xlsx

Where XXXXX is replaced with your Student ID. Files with wrong names or wrong format will
attract 5% penalty.

Your Excel files should not contain links to any external spreadsheet. So be careful with your
cut and paste.

ATTENTION
To check if your worksheet has links to external sources you can use the Excel tool available in
Data Tab >> Queries & Connections Group >> Edit Links button. You can find a more complete
explanation at this LINK.

The file will be submitted electronically using the electronic drobox that can be found in Canvas.
The same place where you have downloaded the assignment file from.

The Deadline for the submission is: 9.00am Friday September 10 2021

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 6. Marking Guide
Component Value Below Expectations (1 – 4) Meets Expectations (5 – 7) Exceeds Expectations (8 – 10)
Valuation based on Comparable Companies
Comps Choice The comps are not well chosen
10 The comps are reasonable The comps are among the best possible
(group 1) & Q1 The total number of comps is below 8
Comps Choice The comps are not well chosen The comps are reasonable The comps are among the best possible
10
(group 2) & Q1
The choice of multiple is not explained or
Multiple Choice & motivated The choice of multiple is adequately motivated
The justification is well founded and based on
10 objective elements
Q2 The motivation is incorrect or non-relevant
The valuation range are missing or not well
Valuation Ranges & constructed The justification is well founded and based on
10 The choice of valuation ranges is well motivated
Q3 The choice of valuation ranges is poorly objective elements
motivated
Valuation based on DCF
The justification of the assumption is well
Baseline Scenario The assumptions are poorly motivated The assumptions are well motivated founded and based on multiple objective
10
& Q4 elements
The scenario is poorly built The scenario is economically coherent
Optimistic Scenario The assumptions are not well motivated The scenario is well built The justification of the assumptions is well
10
& Q5 The scenario does not involve multiple The assumptions are well motivated founded and based on multiple objective
assumptions elements
The scenario is poorly built The scenario is economically coherent
Pessimistic The assumptions are not well motivated The scenario is well built The justification of the assumptions is well
10
Scenario & Q6 The scenario does not involve multiple The assumptions are well motivated founded and based on multiple objective
assumptions elements
DCF Calculation & There are errors in the DCF calculations The DCF calculations are correct The valuation range is intuitive and compelling
10
Q7 The valuation range is well built or justified The valuation range is well built and justified The justification is well founded
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 Component Value Below Expectations (1 – 4) Meets Expectations (5 – 7) Exceeds Expectations (8 – 10)
Football Field and Valuation advice
The chart is missing essential elements
Football Field Chart 10 The chart is complete and well formatted The chart is informative and visually compelling
The chart is poorly formatted
The final valuation range is missing The justification of the valuation range is well
The valuation range is coherent and well-
Final Valuation & The justification for the range is missing or founded and based on multiple objective
10 motivated
unconvincing elements
Q8, Q9 The investment advice is well motivated
The investment advice is missing or incoherent The investment advice is compelling
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