MBA Financial Management Global Case Study Assignment: Corporate Valuation & Investment Analysis

Page 1 (Tips) :

In this page you have some useful recommendations to be considered in overall assignment. Before you start with Page 2 it is fully advised that you read carefully all tips with separate recommendations what is advised (+) and what is not (-) advised in assignment preparation. It does not mean that you will get negative points if you do not respect all recommendations but if you respect what is there advised your global case will be more exact, complete and in accordance with assignment expectations.

Page 2 (History) – 5 points :

In this page you have to add missing data in blue parts. You have to add in blue parts for 3 last years (Year N, Year N-1, Year N-2) : Balance sheet data, Income statement (P&L) and Cash flow statement. You have to choose the company listed on stock exchange from your choice from one of the following web sources : www.nasdaq.com, www.finance.yahoo.com, www.marketwatch.com, www.reuters.com, or other. Please add the name of source in blue part at end of financial statements.

Page 3 (Inputs) :

In page inputs you have to add all your assumptions: growth/decline rates of Revenues and
Expenditures and other various inputs you will use in the financial model. On this page all
inputs are manually entered in green color cells.

All Model can be modified if you change the assumptions in this page. It helps you as CFO to
do the scenarios or sensitivities simulations in order to present to your management the
possible project outcomes or company valuations.

Page 4 (Assets Amortization) – 5 points :

Make an Amortization calculating page for all your assets including the new CAPEX annually during the life of your project (7 years). Consider the amortization cost for annual future amortization of existing Assets same as average annual amortization of last 3 years from your realized financial statements in P2 History. If in your Financial Statements there is no
amortization of assets cost then you just add 0 in P4 in line for Existing annual assets amortization. If you do not have all last 3 past years you can take only the amortization cost of the last year.

In a separate line for the new amortization cost of your new CAPEX calculate annual amortization costs using the linear or straight line amortization method from Year N+1 to the end of your project.

To do this task let we assume that Company will start a new large investment (CAPEX) in the beginning Year N+1 with an assumption that CAPEX is equal to 10% of the Total Revenues of the Year N+1.

Page 5 (Cost of Capital) – 15 points :

On this page your task is to calculate the WACC. The discount rate (cost of capital) is the weighted average of the cost of capital (WACC) of all your long-term (Bank loan, bonds and equity) funding sources.

As CFO of your company your goal is to reduce the overall cost of financing of your CAPEX from Page 4. So, your management accepted your proposal to finance your CAPEX equally with bank loan, bonds and equity.

To determine WACC you have to calculate the cost of lenders (Bank loan), the cost of bondholders (bonds) and the cost of shareholders (equity).

Based on inputs from page 3, make a table of amortization of loan and bonds, calculation of interests and coupons, principals using formulas (PMT or other)

Bank Loan has an interest rate defined in P3 inputs and is repaid in annuities over 7 years. Bonds have a coupon rate defined in P3 inputs and with face value paid at maturity in year 7. Both debt sources of funding are received one shot and used for the investment financing at beginning of year N+1. We assume there are no finance fees to be calculated and considered.

For cost of bank loan or bonds (rates) you can either use the same rates as the existing bank loans (use the lowest loan rate) or bonds (yield) if any in company, or you can also use rates from your peers or comparative companies of similar risk which is published on web pages such as www.bloomberg.com/markets/rates-bonds or other source.

Please add each time a source you are using if any. If you do not use any of proposed rates then you can estimate your rates in which case please add a short explanation of such estimated rates.

Calculate the shareholder’s cost using the DDM model (Gordon).

For the purpose of calculation of cost of equity only we shall assume that your dividends are same forever, starting from Year 0, with an annual increase forever defined in P3 Inputs.

For all long term financing sources here let we assume that the corresponding rates are same for each source of financing until the end of project.

Page 12 (Instructor):

In this Page the Pages 2,4,5,6,7,8,9,10 and 11 will be evaluated based points given by Instructor that you can find on top of each page. The total will give the total number of points which will be added in cell and corresponding student grade based on grading scale will be added here. The Total number of points is the same as percentage number.