Company: Wysinco Group

Risk and Return

• What is the risk profile of your company? How much overall risk is there in this firm? Where is this risk coming from (market, firm, industry or currency)? How is the risk profile changing?
• What return would you have earned investing in this companys stock? Would you have under or outperformed the market? How much of the performance can be attributed to management?
• How risky is this companys equity? What is its cost of equity?
• How risky is this companys debt? What is its cost of debt?
• What is this companys current cost of capital?

Required:

• KEY RISKS: EXAMPLES

Economic Risk (Low/ Moderate/ High):

Regulatory Risk (Low/ Moderate/ High):

Operational risk: (Low/ Moderate/ High):

Competitive Risk (Low/ Moderate/ High:

Political Risk: (Low/ Moderate/ High)

• Return an investor would have made if they had invested in the stock over the assessed horizon.
• Benchmark with market return over the same horizon.
• Calculate and comment on Beta (Comparing the stocks Beta with the Market Beta) & Calculate cost of equity.
• Hows the risk changing from on period to another.
• Calculate weighted average cost of debt, comment on solvency ratio.
• Calculate WACC.

IV. Measuring Investment Returns

• Is there a typical project for this firm? If yes, what does it look like in terms of life (long term or short term), investment needs and cash flow patterns?
• How good are the projects that the company has on its books currently?
• Are the projects in the future likely to look like the projects in the past?
• Why or why not?