Final Project

Company Analysis

Instructions

This project will serve as your final for the semester. As such, it will be due during your class$$s

final exam period. In this project, you will analyze a real company using the tools and theories

we have developed over the course of the semester. The purpose of this project is to allow you to

apply what we have learned to real$-$world data.

To start off, pick an S&P $500$ company that has paid a dividend in the last year$1.$ For your chosen

company, proceed to answer the questions below. The questions are a mix of qualitative and

quantitative questions. For questions requiring calculations, be sure to show your work. If you do

not show your work you will not get full credit. Please let me know if you have any questions.

Section $1$: Getting to Know Your Company

$1.$ What is your company, and what is its ticker symbol? The company I have chosen is walmart

$2.$ What industry is your company in$?$ What are two or three of its biggest competitors?

$3.$ Briefly describe what the company does.

$4.$ Compare your company$$s stock performance to the performance of the overall stock

market $($i$.$e$.$ S&P $500).$

$5.$ Did your company under$-$perform or over$-$perform the overall stock market? Why do you

think this happened?

Section $2$: Your Company$$s Future

$6.$ Look for recent news stories about your company. What are some major projects or

initiatives your company is considering? Why do you think your company is considering

these projects?

$7.$ Do you think these potential investments would make sense for your company? Why or

why not? $($Note: For this question, you don$$t need to do any calculations. You just need

to discuss the project$($s$)$ from a business perspective.$)$

$8.$ How do you think the overall stock market will perform over the next year? Be sure to

provide evidence to support your answer.

$9.$ How do you think your company will perform compared to the overall stock market over

the next year? Be sure to provide evidence to support your answer.

Section $3$: Your Company$$s Capital Structure

$10.$ Find the amount of long$-$term debt for your company based upon its latest $10$Q filing.

$1$ While some of the largest companies $($e$.$g$.$ Amazon, Tesla, Berkshire Hathaway$)$ on the S&P $500$ don$$t pay a

dividend, over $80\%$ do pay regular dividends. Further, it will be much easier to analyze dividend payers.

$11.$ Find the book value of equity based on the company$$s latest $10$Q filing.

$12.$ Find the current market value $($i$.$e$.$ market capitalization$)$ of your company.

$13.$ Why might the book value and market value of equity differ?

$14.$ What is the weight of debt and equity in your company$$s capital structure?

Section $4$: Your Company$$s Debt Profile

$15.$ What is your company$$s long$-$term credit rating?

$16.$ What does the company$$s credit rating tell you about the company$$s risk of default?

$17.$ How many different bonds does the company currently have outstanding?

$18.$ Pick $3$ bonds. What is the maturity date of each bond?

$19.$ Do any of the company$$s bonds have any special features $($e$.$g$.$ call provisions, sinking

fund requirements, conversions, etc.$)?$

$20.$ What is the current yield$-$to$-$maturity for the most recently issued bond?

Section $5$: Your Company$$s Dividend History

$21.$ What is your company$$s current annual dividend? $($Note: Most companies pay dividends

quarterly. You will need to add up the prior four dividends to get the annual amount.$)$

$22.$ Determine the annual dividend for the past five years.

$23.$ Is there a pattern to the dividends? Are the dividends constant, growing, or uneven?

$24.$ What has been the average dividend growth rate over the last five years.

$25.$ Find the company$$s current stock price.

$26.$ Using the information above, calculate the cost of equity using the dividend discount

model $($DDM$).$

Section $6$: Systematic Risk and Your Company

$27.$ Estimate your company$$s beta. $($Note: You can download the historical stock return and

market return from Yahoo!Finance$)$

$28.$ Find the current risk$-$free rate. How did you estimate the risk$-$free rate?

$29.$ Assume the market risk premium is $5\mathrm{.}6\%.$ Using the information above, calculate the cost

of equity using the capital asset pricing model $($CAPM$).$

Section $7$: Calculating Your Company$$s Weighted Average Cost of Capital

$30.$ Compare the cost of equity that you found using the DDM and the CAPM. Why might

you get two different estimates using the two different models?

$31.$ Do you believe the DDM or the CAPM provides a better estimate of the cost of equity for

your company? Why?

$32.$ Based on your company$$s most recent $10$Q filing, what is its tax rate?

$33.$ What is the WACC for your company?

Section $8$: Capital Budgeting

Suppose your company is considering two projects $($Project A & Project B$)$