ease read very carefully.The project consists of i) an individual report and ii) aoral presentation. The company youre assigned at the top of this page is your company for the semester. The instructions are different for each company, so make sure that you do not share the instructions with another student. The entire projectis an individual assignment, and you may not collaborate on the report, except for the Canvas discussion. The estimated number of hours to be spent on this project is at least 25-30 hours in total. So please do not wait until the last minute. I will frequently send out reminders so that you can complete each stage in a timely manner. By the end of the course, you have to prepare a professional report of analysis on this company. You will be analyzing and dissecting this companys business, finance, operations, andrisk in order to come up with a valuation. IMPORTANT: Please save your work as frequently as possible. A sudden crash or shutdown will not be a valid excuse for extension.Requirements:i)Professionalism: To become a professional rather than an amateur, we can start by emulating the looks of professionals. Make your report look good, look like something done by a professional. In the business world, the looks are just as important as the content. People wont bother to look at unattractive, messy reports, no matter how excellent the content might be.ii)All reports must be completed in Microsoft Word: 8-10 pages long, single-spaced, Times New Roman, and 12 pts. As for other things, go out of your way and be creative. But dontoverdoit. Sometimes, the simplicity is the virtue. Tables, charts, graphs are all welcome if they serve appropriate purposes and needs. The appropriate use of italics, bold, and underlines is also permitted. You may alsouse color.iii)You may have a cover page but it wont count towards the 8-10 page length requirement of the report.iv)Math equations and formulas can be typed with the math applications embedded in Microsoft Word. Different versions of Word support different equation tools. For help, please consult the Google search.v)Youre required to show all your calculations to prove that you did your own work. However, if they make the report look messy, please make the appendix sectionat the very end of the report where you can show me all your calculation (tables can be imported from Excel and be modified to look nice). Use your judgement to decide whether showing the calculation is critical as part of the report or is more appropriate in the appendix. The appendix does notcount towards the designated length of the report. For the appendix section, you may hand-write the formulas(you will have to scan)if youre not familiar with typing math equations on Word.

vi)You can utilize all the resources and tools available outside of class, including the web documents, Excel, Powerpoint, Words,etc.vii)Please submit your report in pdf file (please do not attach the Word document or Excel spreadsheets) on Canvas. viii)Extra credit opportunities: a.Up to +10 Points: If your report is determined to be one of the few top state-of-the-art reports in class, I will grant up to 10 extra points. Part I (15Points). Company Description (<=1 page)We have to command a thorough understanding of the firms nature of businessin order to come up with the right valuation. First, please download the annual 10-K filings for the company. The document can get as long as 100 pages. It is a comprehensive financial report that includes explanations, details, and commentaries on the companys performance for the year and is audited by an independent auditor. While there is no need to read every single page (because other financial sources already have a nice summary of many aspects on the 10K), there are some important parts worth a thorough read, or at least a skim, to successfully understand the company. Find the Table of Contents in the 10-K, and quickly get a big picture of how the 10-K is structured. I recommend that you read the overview of the firm businesses, which is provided by the companys management itself. Youre welcome to supplement your understanding of the firm with other resources out there besides the 10-K. Whatever resources you decide to use, be sure to cite your sources and include the following areas, at the least, in describing the company: i)A brief history, the management, the location(s) of the headquarter and businesses, the fiscal year, etc.ii)Business, strategy, products, services, etc.iii)Competition, risk factors.Part II (50 Points). Financial Ratios (<=2 pages)Financial ratios are helpful for analyzing the companys financial condition and performance. We will evaluate the company for the year 2019and 2018.Go to http://finra-markets.morningstar.com/MarketData, search for your company, and download the Excel files of income statement, balance sheet, and cashflow statement on the Financials tab by using Export function on the page. When you export, the Excel files will be automaticallyexported as.csv files. Please re-save your work as .xls or .xlsx file to fully enable the Excel functionalities. On a blank sheet, you can choose a cell, simply type in the equal sign =, and select the cells that contain the relevant numbers for computation. Please consult any basic Excel tutorial online for help. i)Calculate the liquidity, leverage, turnover, profitability, and market value ratios for the most recent two years (check the fiscal year and month.). In total, you should calculate 20 (ratios)x 2 (years) = 40 ratios. Please also provide the formulas and the numbers you use to calculate each ratio in the appendix. ***Note*** To calculate market value

ratios, you will need the number of shares outstanding for that year. Onthe income statements on Morningstar, you will see the number of weighted average shares outstanding in two versions, basic and diluted. Please use the basicshares.ii)Please provide sufficient interpretations of the ratios and explain their change (or no change) from the year before, in 2-3paragraphsfor all the ratios. If theres anything unusual or notable, please explain. Please be cautious about the signson financial statement figures, especially on the income and cash flow statement. Some companies choose to report expense items as negative numbers because they get subtracted from the revenue to obtain the net income. When calculating the ratios, use your judgement to adjust their signs appropriately.iii)In the appendix, please show the formulas (with actual numbers used) for all 20 ratios for just one year.iv)After calculating all the ratios, please decompose the companys profitabilityover the two yearsusing the Dupont analysis. Explain the composition of the profitability for your company. Has each component of Dupont increased or decreased from the previous year? How has that affected the companys overall profitability?Is there room for improvements? *Some financial ratios are already available on lots of sources including the actual 10K filings. For the purpose of learning, do not use those ratios. They may be differentfrom what you calculate.Part III (40 Points): Cost of Equity (2-3pages)In Part III, we are going to calculate the companys cost of equity in two different ways, first using the dividend growth model and then the CAPM method. Please review this content from the workbook before starting. First, we will start with the dividend growth model.i)Use the year-end price in 2019 (the last price that is available in that year)as the current price(We are going to pretend that were at the year-end of 2019. This is because we dont have 2020 data in full. Were still in the middle of it.). That is, what was the adjusted closingprice of the stock on the last trading day of the year 2019?ii)Findthe companys annualdividends during the 5-year period 01/01/2015-12/31/2019. Make sure they are sorted in the ascendingorder of dates. Plot the dividends with the dates on the horizontal axis and the dividends on the vertical axis. Describe the plot and check whetherthe dividends have beenpaid in a constant growth pattern.iii)Calculate the dividend growth rateas discussed in class. Use the most recent annual dividend(the sum of all quarterly dividends in year 2019)as the current dividend and multiply it by 1+g to calculate !.iv)Calculate the cost of equity using the formula and the dividend growth rate calculated above.Alternatively, we canuse the CAPM methodto compute the cost of equity.

v)Download the companys monthly historical prices during the 4-year period 01/01/2016-12/31/2019from finance.yahoo.com. Make sure they are sorted in the ascending order of dates (oldest to newest). Download the S&P500 (ticker: ^GSPC) monthly historical prices during the same period. Using the adjusted closing price for both series, calculate the monthly returns forthe companyand the S&P500. Show a snapshot of your work in this part (5-10 lines, not the entire series) in the appendix.vi)Calculate thevariance of the market returns, covariance between market and the company. Then, calculate the companys beta. vii)Use the CAPM formula to calculate the cost of equity. Assume that the riskless rate of 2% and the average market return of 8%.We can compare the costs of equity obtained using two different approaches and determine what to do with them.viii)In many cases, we use the CAPM cost of equity. However, we may also take the average of the twovalues (cost of equities from (iv) and (vii)). What is the averaged cost of equity? Part IV (40Points): Equity Valuation (2-3pages)We are going to value the stock of the company using the methods learned in class and compare it to the market price(the adjusted closing price on the last trading day of 2019). Please review the entire content on equity valuation before proceeding.i)Use the averaged cost of equityfrom Part III (viii) as the companyscost of equity for the following: Please come up with the valuation of the stock in each of the following three scenarios: 1. Zero-growth dividends: Assume that annual dividends in the future will stay the sameand not grow larger thanthe sum of all quarterly dividends in 2019.2.Constant-growth dividends: please estimate the price of the stock for each of the following possiblegrowth rates of the dividends:1%, 1.5%, 2%, 2.5%, and 3%. Which constant growth rateyields the valuation that is closest to the market price?3.Non-constant growth dividends: Assume that dividends will grow at the rate calculated in Part III(iii)for the next two years and then come down to a lower growth rate,thereafter.Estimate the price in each of the two possible second-stage growth rates: 2% or 2.5%.In which scenario is the price you calculated closest to the market price? Which scenario do you think is most applicablefor the company?ii)Suppose that the stock market is less than perfectly efficient (that is, the stock price that is quotedin the marketcan be incorrect and poorly reflects the true value of the company). Youthink that the constant growth rate model provides a good framework for this companyand that the correct growth rate isprobablycloser to2%. If so, do you suspect overvaluationorundervaluation in stocks by the market? What if you think the

correct growth rate isactually closer to2.5%? Please explain your findings in 2-3 sentences.iii)Suppose now that the stock market is quite efficient (that is, the stocks market price is generally correct and reflects almost all the information onthe true value of the company). Suppose that you believe the companyprobably fits best as a constant-growth company, and you established your belief, after a thorough examination of the company, that the constant growth rate most sensiblefor the company is 2%. However, you acknowledge that the estimation of the cost of equity is more susceptible to errors. Therefore, you decide to back out the cost of equity given the stocks market price, assuming theconstant growth rate of dividend of 2% in the future, and the recent dividend history. (That is, you decide to ignore the cost of equity that you calculated in Part III).What is thecost of equity estimated this way? That is, what is therequired rate of return by the investorsin the market, given the assumptions?**I suggest that youtry anduse the Excel to guess the value of cost of equity that can get you closest to the market price of the stock.Part V (15Points): Discussion, Conclusion, and Citations (<=1 page)Provide a 2-3paragraph concluding remarks on the report. What are your overall thoughts on the company and this project? Try to ask yourself the following questions: what did I learn about the companys fundamental value? What else do I like to know about this company? Do I want to invest in this company or recommend others to invest? Would I like to work for this company? What do I want to see happening in this company as a potential prospective investor, employee, or analyst? What are some external conditions (in terms of the economy, market, business cycle, industry, etc) that would help or jeopardize the companys stock performance? This project excluded the year 2020, so our analysis did not examine the effect of the COVID-19 pandemic on the companys cost of capital and valuation. How do you think the pandemic may have affected the company? Can you find any news articles relating the pandemic and the company (or its industry)? What do you predict for the companys cost of equity and stock valuation for the year 2020? On a separate page at the very end of the report, please cite all the outside resources you have used to complete your report (For APA-style reference rules: https://owl.english.purdue.edu/owl/resource/560/10/