Case Study 8, Project Description The course project is designed to synthesize your financial studies into a comprehensive real life case study. Students are to assume they have been recently hired to work for a financial consulting company that is providing advice to investors. The main task is to identify an industry (or market sector) and then research the industry to identify the leading companies in the industry, analyze their finances and provide your own " analyst's opinion " on the prospects for the industry and to identify which companies are best positioned to lead that industry. I will decided several weeks before the assignment is due whether or not this will be a group or individual project (as determined by your instructor) that will involve significant research and in-depth financial analysis. The ultimate goal is to decide which company is best positioned to provide the most shareholder value in the future. (Please see your LEO classroom for specific instruction and grading rubric.) Project example: The company you select should be a publicly held company and be listed on a U.S. stock exchange. Your approach should include a discussion of the company's business model, core products or services, growth prospects and key cost items. If the company that is selected is engaged in foreign markets you will need to discuss the potential for growth of those markets and any special risks those markets may pose, and risk management techniques for managing those risks effectively. The ultimate goal is to decide which company is best positioned to provide the most shareholder value in the future. This would require you to conduct the following analysis: 1) Identify an industry to focus on (It is suggested that you use an industry that is expanding rather than consolidating, but the choice is yours to make). Explain why you chose this industry and its environment. 2) Identify the top companies in the industry using your own selection of criteria (market capitalization, ROE, or any other financial criteria you wish to develop.) Your decisions on which set of criteria to use, are to be considered part of the project and your rationalization must be explained. 3) Compile a ratio analysis of the top competitors in the industry using the companys financial statements. You should limit the number of companies you are researching to between 3-5. The ratio analysis should include: a) a 5 year trend analysis of each company selected and compared to the industry averages and b) a competitive analysis of the selected major competitors using four main standards: profitability, liquidity, debt and return on equity. 4) Establish growth projections for the top competitors using established methods, including pro forma income statements and balance sheets for the coming year. 5) Analyze the following elements of the major competitors: [It is expected that you will discuss why you selected the measures used, interpret the data and explain what this information suggests about the companys financial situation and future financing needs.] a) Each companys capital structure b) Cost of capital, capital structure, CAPM, cash flow, value of common stock and MVA. 6) Using the financial data form your research, select the company that offers the best shareholder value. The consider potential takeover targets for the company you selected. 7) You are expected to look at a potential takeover target for the company (within the industry or closely related to the industry), evaluate the takeover and the price to be paid for the target using established valuation criteria. It is expected that you will discuss the selection of the criteria used and to comment on its relative value in the analysis. The primary goal of the assignment is to utilize the concepts and formulas you have learned in your course of study and apply them to full effect in looking at this industry and its environment. It is expected that you will comment on the industrys environment, as well as the business and financial risks that face the industry and the major competitors in that industry. It will be necessary to discuss the near term economic forecast and include a discussion of any important changes that may take place in terms of the potential growth of the market, impact on the availability and cost of capital and any basic resources the company will need to succeed. After selecting the main competitors and conducting your analysis you will need to choose one company as the projected future industry leader and project its future stock price in light of your review and analysis. Your research should include a survey of business periodicals, industry data from scholarly sources, analyst reports, news articles and journals as appropriate. When using financial calculations, you must show your math. How did you do the calculations? Using a financial calculator is fine, Excel is recommended, but I need to know if you understand the data. For example, if you did a ROE calculation on a financial calculator, I need to see more than just the end result, i.e. what data you used to make the calculations. The discussion portion of the paper should be 8-10 pages in length, double spaced, and employ APA style criteria. Also in text citations and a reference page is required when using other authors' works. Keep in mind that supporting data should be submitted in less than 4 separate attachments. The attachments and title page are NOT counted toward the total page count. For example attachments should include, proforma income statement, balance sheets, etc.