Objective Estimate the risk parameters for your company and use these parameters to

estimate costs of equity and capital for the firm.

Key Steps

1. Looking at the stock price history of your company, evaluate both its riskiness and its performance as an investment, relative to the market and after adjusting for risk.

2. Develop a measure of equity risk in the company and compute a cost of equity for it. If the company is in multiple businesses and regions, estimate the cost of equity for each.

3. Develop or find a measure of default risk in the company and compute a cost of debt for it.

4. Based on the mix of debt and equity used by the company, estimate an overall cost of capital for the company. If it is in individual businesses and regions, estimate the cost of capital for each.

Framework for Analysis

1. Estimating Risk free rate and Equity Risk Premium (4 marks)

a. Choose a currency to do your analysis in and estimate a risk-free rate in that currency. If there is a Aaa rated entity issuing long term bonds in the currency, you can use the interest rate on those bonds as your risk-free rate. If not, you will have to subtract out the default spread for the entity from the interest rate on the entitys bonds to get to a risk-free rate.

b. Based on the geographical risk exposure of your company, estimate an equity risk premium for the company. You should be able to find at least a revenue breakdown by region, in your companys financial reports, and sometimes asset and income breakdowns. You can find equity risk premiums for individual countries, as well as regions, on http://www.damodaran.com (under updated data).

2. Estimating relative risk (5 marks)

a. Run a regression of returns on your firms stock against returns on a market index, preferably using monthly data and 5 years of observations. Use the regression to evaluate your companys performance on a risk adjusted basis during the period of the regression and its riskiness, relative to the market, and break down the risk into firm specific and market components. To run the regression, you will need to get data on past returns for your stock and for a market index.

What is the intercept of the regression? What does it tell you about the performance of this company's stock during the period of the regression?

What is the slope of the regression?

o What does it tell you about the risk of the stock?

o How precise is this estimate of risk? (Provide a range for the estimate.)

What portion of this firm's risk can be attributed to market factors? What portion to firm-specific factors? Why is this important?

How much of the risk for this firm is due to business factors? How much of it is due to financial leverage?

b. Based on your companys business mix, estimate a bottom up beta for your companys operating businesses. You should be able to find the breakdown by business in your companys financial filings, though the details are richer in some than others. To get the beta for each business, you will need to find other publicly traded companies that operate primarily in that business, average their betas and correct for financial leverage and cash holdings.

Break down your firm by business components, and estimate a business beta for each component

Attach reasonable weights to each component and estimate an unlevered beta for the business.

Using the current leverage of the company, estimate a levered beta for each component.

c. Estimate the market value of debt outstanding in the company (see below), compute a market debt to equity ratio for the entire company, and use that ratio to compute a levered beta for the company. If you can allocate the debt across the different businesses, compute the debt to equity ratio and levered beta for each business. (If not, use the companys debt to equity ratio for all of the businesses).

d. Use the levered betas, in conjunction with the risk-free rate and equity risk premium, to compute costs of equity for each business and for the overall company.

3. Estimating Default Risk and Cost of Debt (2 marks)

a. If your company is rated, find the bond rating and estimate a default spread based on the rating. Add the default spread to the risk-free rate to estimate a pre-tax cost of debt.

b. Estimate a synthetic rating for your company, based upon financial ratios. If the company has an actual rating, compare the synthetic rating to the actual rating and explain the reasons for differences. If your company does not have an actual rating, use the synthetic rating to estimate a default spread for the companys debt and a pre-tax cost of debt based on that spread.

c. Estimate the marginal tax rate for your company, based on the country of incorporation and use that tax rate to compute an after-tax cost of debt for the company and its divisions (if they have their own costs of debt)

4. Estimating Cost of Capital (3 marks)

a. Compute the market value of all of the companys equity.

b. Compute the market value of the companys interest-bearing debt, using the interest expenses and weighted maturity of the debt, if need be. Compute the present value of lease and other contractual commitments that your company has contractually obligated itself to pay. Add the two values to estimate the market value of debt (which you will need to use for the levered beta computation in the earlier section)

c. Compute a debt to capital ratio, using the market values, and a cost of capital based on this ratio for both the company and its individual business units.

the company is puma

Question 1:

A: Voting Structure: calsses of shares Situation previous to the triggering transaction number of voting rights 466,125 ,Resulting situation after the triggering transaction ,number of voting rights 119,600 ,The total number of voting rights therefore amounts to 15,082,464.

B: Ownership structure:

Puma have a 150,824,640 stockholders who managing the firm.

institutional investors held more than 5% of the company and intends (or intended) to actively pursue a change in business strategy and the number of shares is 6,948,879.

Puma SE (DE:PUM) has 245 institutional owners and shareholders.

95.09% of the total float, a percentage that is typical for companies in the Biotechnology industry.

some of insiders for 2020 of puma: ZAVRL FRANK,WILSON TROY EDWARD,SENDEROWICZ ADRIAN,O'DOWD HUGH,NOUGUES MAXIMO F.

5.Puma Exploration insiders have spent a meaningful amount on shares. Not only was there no selling that we can see, but they collectively bought CA$106k worth of shares. That shows some optimism about the company's future,On this analysis the only slight negative we see is the fairly low (overall) insider ownership; their transactions suggest that they are quite positive on Puma Exploration stock.

it seems that Puma Exploration insiders and employees own 6.2% of the company, worth about CA$255k.

PUMA SE insiders own under 1% of the company. But they may have an indirect interest through a corporate structure that we haven't picked up on,nsiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual.

insider was happy to buy shares at above the current price of CA$0.13,becausbut they buy them for only one reason: they think the price will rise.

C: Name of top 10 shareholders and their Ownership

Financire Pinault SCA 28.74%

Kering SA 15.83%

BlackRock, Inc. 5.83%

Carmignac Gestion S.A 1.87%

The Vanguard Group, Inc. 1.66%

Norges Bank Investment Management 1.52%

Deutsche Asset & Wealth Managemennt 1.31%

Fidelity International Ltd 1.12%

Lyxor International Asset Management S.A. 0.87%

GLG Partners, Inc 0.71%

Financire Pinault SCA and Kering SA togather have 44.57% of the share capital according to their voting rights notification .

D:-

Answer: Puma company was founded by Rudolf Dassler, as he split from his brother to have his own company Puma. The CEO is not part of the family. Bjrn Gulden who has been the CEO of Puma since 2013 was not part of the family. The reason behind Guldens achievement in being the CEO of Puma is of his previous positions. Prior to PUMA, Bjrn was CEO of Danish jewellery brand Pandora, Managing Director of Europes largest footwear retailer Deichmann, Senior Vice President of Apparel and Accessories at Adidas and he held various management positions at outdoor apparel company Helly Hansen, as well as, he is a football player.

Gulden wrote a letter about the great achievements that he did in 2019 as the CEO of the company. The letter provides that 2019 was a historic year as Puma recorded the highest income and profit with 5,502 million in revenues and 440 million in EBIT, even if 70%-80% of the global Puma shops were closed due to the Covid-19 pandemic.

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E :-

he board doesn't go up against the management at puma , they untimely answer to them.

Bjrn Gulden (*1965) has been Chief Executive Officer (CEO) of PUMA SE since July 2013. CHIEF FINANCIAL OFFICER (CFO) Michael Lmmermann (*1962) has been Chief Financial Officer (CFO) of PUMCHIEF SOURCING OFFICER (CSO Anne-Laure Descours (*1965) has been Chief Sourcing Officer (CSO) of PUMA SE since February 2019.A SE since January 2013. JEAN-FRANOIS PALUS CHAIRMAN OF THE SUPERVISORY BOARD Group Managing Director and member of the Administrative Board of Kering S.A., Paris/France, responsible for Strategy, Operations and Organization HLOSE TEMPLE-BOYER DEPUTY GENERAL MANAGER OF ARTMIS S.A.S., PARIS/ FRANCE FIONA MAY OLY INDEPENDENT MANAGEMENT CONSULTANT THORE OHLSSON DEPUTY CHAIRMAN OF THE SUPERVISORY BOARD President of Elimexo AB, Falsterbo, Sweden, Since 1990, he has been president of Elimexo AB. was elected to the Supervisory Board of PUMA SE on 21 May 1993. BERND ILLIG EMPLOYEES' REPRESENTATIVE Administrator IT systems, PUMA SE, Herzogenaurach/Germany, been on the board since 2010 MARTIN KPPEL EMPLOYEES' REPRESENTATIV Chairman of the Works Council of PUMA SE, Herzogenaurach/Germany. Since 1999.

3 executive directors are insider directors, ( Micheal Lammarmann, Bernd illig, Martin Kopel).

2 , fionna may oly, she is a customer , and bernd illig

Bjorn gulden.

yes , but not all of them.

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F:-

top managers at puma make 80k to 105k euros yearly , with an extra 5k euro as compensation(stocks, benefits, and other options), while ceos of the company make 180k-200k dollars and the most compensated(bonuses, stocks and other options) executive makes 400k dollars while the lowest compensated makes 53k dollars, and yes it did effect the price of the stock, in recent years the price of puma stocks has been going down and it isnow worth 8.67 dollars per stock.

Question 2:

a) Good debt is an investment that will grow in value or generate long-term income. Taking out student loans to pay for a college education is the perfect example of good debt. First of all, student loans typically have a very low-interest rate compared to other types of debt . Here are four types of debt that you should avoid and ways to prevent taking out a loan in the first place .

Credit Card Debt.

Student Loan Debt.

Medical Debt

Car Loan DebtDebt is an amount of money borrowed by one party from another A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interestWhen you have debt , it's hard not to worry about how you're going to make your payments or how you'll keep from taking on more debt to make ends meet. The stress from debt can lead to mild to severe health problems including ulcers, migraines , depression, and even heart attacks In accountancy , we refer to such receivables as Irrecoverable Debts or Bad Debts. Bad debts could arise for a number of reasons such as customers going bankrupt, trade disputes, or fraud. Every time an entity realizes that it unlikely to recover its debt from a receivable, it must 'write off the bad debt from its booksThat's right, a debt-free lifestyle makes it easier to save! While it can be hard to become debt- free immediately , just lowering your interest rates on credit cards, or auto loans can help you start saving. Those savings can go straight into your savings account, or help you pay down debt even fasterHow much debt is a lot? The Consumer Financial Protection Bureau recommends you keep your debt -to- income ratio below 43%. Statistically speaking , people with debts exceeding 43% often have trouble making their monthly payments. The highest ratio you can have and still be able to obtain a qualified mortgage is also 43%. Any time you borrow money, you're creating debt. The more you borrow, without repaying, the deeper you go into debt. Debt leads to a myriad of other problems and not all of them financial . Debt can lead to stress , depression , other health issues, and in some serious cases , even suicide .

b) Debt covenants are agreements between a business and creditor that the company will operate within the rules established by the lender as a condition for receiving a commercial loan. Some refer to them as "loan covenants" or "financial covenants." Examples of Financial Covenants Maintaining a certain debt to equity ratio.

Maintaining a certain interest coverage ratio

. Maintaining a certain level of cash flow

. Maintaining a minimum level of earnings before interest, tax, and depreciation (EBITD) Maintaining a minimum level of earnings before interest and tax (EBIT )Debt covenants are restrictions that lenders. ... ( creditors, debt holders. These bond issuers create bonds to borrow funds from bondholders , to be repaid at maturity ., investors) put on lending agreements to limit the actions of the borrower ( debtor ). A debt covenant violation represents a breach of contract. ... From the financial reporting perspective , when a company violates a debt covenant on a long-term debt, the company must reclassify the debt as short-term, unless the lender doesn't have the right to call the immediate repayment of the loan.

Liquidity. Liquidity covenants measure cash resources of the borrower. Some typical covenants include minimum cash on hand, working capital ratio (current assets divided by current liabilities), or quick ratio (ratio of current assets minus inventories, divided by current liabilities ) Remember that violating a covenant means that the lender can legally "call" the debt, or demand repayment in full If an organization obtains a waiver from the lender for a particular loan covenant violation, they may be able to show the debt as long term, in accordance with the payment terms of the agreement .

A loan covenant is a condition in a commercial loan or bond issue that requires the borrower to fulfill certain conditions or which forbids the borrower from undertaking certain actions, or which possibly restricts certain activities to circumstances when other conditions are met . Non - financial covenants are promises or agreements made by the borrowing party that are not financial in nature. The promises are either operational, ownership-related, positive or negative covenants, legal-related, and so on. Non-financial covenants also serve the purpose of a safety net to the lender .

A debt covenant report documents the performance of your company in relation to the targets specified by the lender as part of the debt agreement . ... Your company's management is required to provide a compliance certificate to the lenders, indicating that the targets for a particular tenure were met. Maintenance Covenant means a covenant by the borrower to comply with one or more financial covenants during each reporting period, whether or not it has taken any specified actionThe loan covenant allows borrowers to prepare for their repayment before and during the agreement . However , in case a borrower defaults in payment or breaches the covenant, the lender is entitled to claim the sum of the loan in full.

C)The interest coverage ratio is one ratio that can help determine the default risk. The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) by its periodic debt interest payments. A higher ratio suggests that there is enough income generated to cover interest payments The default risk ratio is defined as free cash flow divided by the combined annual principal payments on all outstanding loans. Free cash flow is equal to net profit plus depreciation minus dividend payments. This credit measure also carries a high weighting in the credit rating determination. Credit Risk is the risk that a lender will not get paid all principal and interest on time as scheduled on a loan or other borrower obligation. ... Default Risk (Probability of Default or PD) is the risk that a borrower will not follow the agreed loan terms . The term default spread can be defined as the difference between the yields of two bonds with different credit ratings. The default spread of a particular corporate bond is often quoted in relation to the yield on a risk-free bond such as a government bond for similar durationIn addition to the ratings , investors can measure a bond's risk of default by using the interest coverage ratio. You can calculate this by dividing a company's earnings before interest and taxes (EBIT) by its periodic debt interest payments. Companies with higher interest ratios may be less likely to default. Default is the failure to repay a debt including interest or principal on a loan or security. A default can occur when a borrower is unable to make timely payments, misses payments, or avoids or stops making payments .

Question 3

1) The total market capitalization of PUMA SE is $13.3 Billion which can be calculated by multiplying the equity price of 1 share $ 90.60 with the total volume of shares available for trading i.e 147200000(147.2 million):- 90.60 X 147200000 -13,336, 320, 000(13.3 Billion) To find the free float share of the company PUMA SE we can refer to share statistics at https://finance.yahoo.com/quote/PUM.DE/key-statistics and can find out easily that around 82.83 Million shares are free float, however, the formula is: closely-held shares for trading in the company (44%)= 44% X 147.2 million= 64.7 Million share held by institutions(27%)= 27% X 147.2 million= 39.7 Million free float shares= Outstanding shares - closely-held shares(44%) - share held by institutions(27%) free float shares for public trading = 147.2 64.7 39.7 =42.8 Million shares Bid price= $90.6 X 1000 Ask price= $90.6 X 2900 2) The company PUMA SE is listed is top platforms like DOW 30, NASDAQ, S&P 500 and according to the listing platforms the risk of the stock is moderate with a rating of 6 having PE ratio of 154.47 and EPS of $0.58. The 52-week price range is $43.01(low)- $98.05(high), the dividend yield was 0.28% as of April 2020. The stock price is expected to rise as according to sell side analysts the revenue is expected to grow to around 40% with an expected dividend of 1.24% for 2024.

Question4 :

Employee satisfaction in Puma is as follows,the turnover of the staff is strongly dependent on the share of retail business in individual regions and markets.the total turnover rate in 2017 was 22% which was lower by 3% from the previous year.the average age for all puma employees was 33.

Compensation numbers are as follows Pro-rata provisions totaling 1.9 million (0.7 million) were set up for the compensation program with long-term incentives for Managing Directors for the financial year 2015 (from the years 2013, 2014 and 2015), based on the commitments made in their employment contracts. Under the performance-based program, 70% of the compensation will be based on the medium-term performance of PUMA SEs share and 30% will be based on the medium-term performance of Kering SAs share in relation to benchmark companies. Further information on this program can be found in Section 19 of the Notes to the Consolidated Financial Statements. PUMA offers an attractive set of compensation and benefit programs worldwide, designed to attract the best talent on the market as well as to retain and re- ward talented employees.

Collective bargaining agree

The fixed compensation for the three Managing Directors amounted to 1.9 million (previous year: 2.5 million for the five Managing Directors) in the financial year and variable bonuses came to 1.5 million (previous year: 2.4 million). Non-cash compensation totaled 0.1 million (previous year: 0.2 million).

As for the qualitative assessment from employers is that Employees wellbeing is integrated in Pumas corporate culture. For example, the company has formal and informal policies and programs that address the multiple facets of workers lives, including financial and social needs inside and outside the sporting goods business. The organizational cultures social aspect supports Pumas corporate social responsibility strategies and stakeholder management efforts. With regard to employees wellbeing, the companys corporate culture promotes desirable behaviors in the workplace via high morale, high motivation, and a positive outlook about business

PUMA products are manufactured under safe, fair, legal and humane working conditions throughout the supply chain, with workplaces where human rights are respected and workers health and safety are protected.

At PUMA, they constantly are working on improving the environmental impact. Ans are determined to reduce their carbon emissions, water usage, waste and air pollution in their own offices and, even more importantly, in their supply chain.