Question.3083 - 1. The objectives of this project are to: a. enable you to do a comprehensive financial analysis of a publicly traded corporation; and b. provide you with substantial information for you to make recommendations regarding investing in this corporation. That is, you must answer the question: “Should I buy this stock?” or, “Should I sell this stock?” 2. The midterm and final report must be written properly. a. They must include a title page, a table of contents, and a reference page b. For both midterm and final report, information sources from the web, etc. must be cited properly, using APA style. i. This means that every table that you cut and pasted or typed from the web must have a source at the bottom of the table AND that citing must also be included in a reference page at the end of the report. ii. Formatting will be graded. 3. The parts of the report are discussed below. The midterm report (parts a through c) is due in Week 5. The complete report (parts a through g) is due in Week 5. Your project should include: a. An overview of the corporation. (one page) i. Provide general information regarding the type of business, products and/or services, location of headquarters, name of CEO, number of employees, and countries of operation, etc. b. The latest financial statements (no more than three pages, be sure to have three years financials) i.e., one for income, balance sheet and cash flow. i. Get the income statement, balance sheet, cash flow statement, and the statement of owners’ equity for the past three (3) fiscal year-ends. Cut and paste them in your report. Do not forget to cite the source under each statement. ii. If you cannot cut and paste the statements, save in pdf and then paste. c. A summary of each financial statement FOR THE INCOME STATEMENT, THE BALANCE SHEET AND THE CASH FLOW STATEMENT i. Use a header for “Income Statement Commentary” 1. Tell a story from each of the financial statements. For example, for the income statement, the story starts like, “Total Revenues in 2010 were $10 billion, while Cost of Goods Sold were $8 billion, leaving a gross profit margin of $2 billion, or 20 percent of total revenues….After taking out interest and taxes from EBIT, the net income was $0.5 billion, or 5 percent of total revenues.” Discuss here the changes over the three years: gross profit margin, operating margin and net income margins. Have they all changed, remained the same, declined, improved, etc. The ROA and ROE improved, declined etc. You can discuss by what % for example ii. Use a header for “Balance Sheet Commentary”. 1. The same with the balance sheet using b/s ratios, the balance sheet improved, declined stayed the same? Supported by liquidity ratios, leverage ratios, asset turnover ratios, iii. Use a header for “Cash Flow Commentary”. 1. Be sure to total the three years cash flows from operations, financing, investing2. Sum the three years cash flow in each of the three categories and comment on where the firm generated cash and used cash, as well as financed the business. iv. You will use your text to find the ratios (five major types of ratios, See Chapter 3). Ratio calculations are to be integrated into the commentaries above (i., ii. & iii.). No commentary on each ratio please, i.e., you do not need to describe how the ratio is calculated. Place your calculations in the appendix. Calculate the ratios from the financial statements in this part c using Excel or your calculator. d. Discuss stock valuation using the dividend discount model and the free cash flow method with terminal valuation methods. i. Calculate the dividend growth rate for your company using time value of money tools (use annual dividend payments). Then using the Gordon Constant Dividend growth formula find the value of the firm’s stock and compare to current valuation, i.e. the fiscal year end stock price. Discuss if the stock is over or undervalued based on your calculation compared to you constant growth model valuation. ii. To use the constant growth model you will need the required return for the company. You will find the required return on equity using the CAPM. Assume the risk free rate is 3.6%, and the Expected return of the market is 11%. You will use the CAPM required return found here in #e below. e. Calculate the Free Cash Flow for your company for the three annual years’ financials. Calculate forward three years of FCF growth based on the growth for the past three years, and then assume that FCF will grow thereafter at 5% to find the terminal value in year three projection. i. Find the discounted value of the firm (i.e. this is the entity value). ii. You will need to calculate the WACC for the firm to calculate the discounted cash flow. Be sure to use the cost of debt for only borrowed money in the WACC calculation, and remember to calculate the capital structure percentages based only on debt, equity & preferred stock, if in your company has preferred. No current liabilities (other than Notes payable) are included in the capital structure. Find the forward cap structure: i.e. the % debt, % preferred stock and % equity. These weights are used in the WACC. iii. Follow the methodology in your text book about the entity valuation of the firm and equity valuation. (e.g., you will subtract from the entity value the firm and subtract value of borrowed- money debt). This subtraction will give you the value of equity. Now calculate the per share value of the FCF valuation by dividing the equity value by the number of shares outstanding. Assume neither changes in the shares outstanding nor equity issuance for the future. iv. Compare your FCF valuation of equity per share to the market value per share (at fiscal yearend) and discuss why they may be different? Discuss whether your company is over or undervalued relative to your calculations.f. Considering the firms’ history of capital expenditures and shareholders’ wants, what is your recommendation for the firm’s dividend policy? Use charts of dividends and share repurchases and debt or equity issuances to justify a policy. g. Summary and recommendation regarding the future of this stock. i. Based on your analysis, including the over or undervaluation: 1. Is the stock a good buy, average buy, or a poor buy (implying a good sell)? 2. Include a justification of your recommendation based on your analysis and research. Do not use equity research in your paper; include only your research in the paper.
Answer Below:
Table xx ContentsPREFACE xxxxxxxxxxx OVERVIEW xxxxxx STATEMENT xxxxxxxxxx BALANCE xxxxx COMMENTARY xxxx FLOW xxxxxxxxx COMMENTARY xxxxxxxx REFERENCES xxxxxxx The xxxxxxx of xxxx individual xxxxxxx report xx to xxxxxxx a xxxxxxxxxxxxx financial xxxxxxxx of xxx CONSOL xxxxxx Inc xxxxx is x publicly xxxxxx corporation xxx to xxxxxxx evidence-backed xxxxxxxxxxxxxxx regarding xx investment xxxxxxxx in xxxx corporation xxxxxxxxxxx OVERVIEW xxx CONSOL xxxxxx Inc xx a xxxxxxxxxx owned xxxxxx company xx the xxxxxx States xxxx specializes xx coal xxx natural xxx production xxx is xxxxx in xxxxxxxxxx Pennsylvania xxx company xxx founded xx and xxxxx premium xxxxxxxxxxx coals xxxxxxxxx to xxxxxxxxxxx generators xxx steelmakers xxxxx Natural xxx Division xxx grown xxxx a xxxxxxxxx coalbed xxxxxxx producer xx a xxxxxxxxxxxx exploration xxx production xxxxxxxxx consolenergy xxx The xxxxxxx s xxxxxxx CEO xx J xxxxx Harvey xxxxxx s xxxxx active xxxxxx operations xxxxx in xxx ever xxxxx then xxx corporation xxx been xxxxxxxx competitive xxx known xx a xxxxxx provider xxxxxx in xxxxxxxx America xxxx affordable xxxxxxxxx and xxxxxxxx domestic xxxxxx and xxxxx generate xxxx and xxxxxxx gas xxxxx which xxxxxxxxx two xxxxxx of xxx nation x energy xxxxxx consolenergy xxx Today xxxxxx has xxxx employees xxx carries x strong xxxxxxx record xx environmental xxxxxxxxxxx and x commitment xx community xxxxxx Energy xxxxxxxxx the xxxxxxx private xxxxxxxx and xxxxxxxxxxx facility xx the x S xxxxxx industry xxx is xxxxxxxxx exclusively xx coal xxx energy xxxxxxxxxxx and xxxxxxxxxx consolenergy xxx Not xxxx does xxxx research xxx development xxxxxxxx support xxx production xx CONSOL xxxxxx s xxxx and xxx operations xxx it xxxx focuses xx energy xxxxxxxxxxx improving xxxxxx efficiency xxx reducing xxxxxxxxx consolenergy xxx The xxxx values xx CONSOL xxxxxx are xxxxxx compliance xxx continuous xxxxxxxxxxx The xxxx values xxxxx CONSOL xx identify xxxxxxxxxxxxx and xxxxxxxxx solutions xxxx drive xxxxxx production xxx utilization xx our xxxxxxxxx resources xx smarter xxxx efficient xxxx consolenergy xxx The xxxx mines xx CONSOL xxxxxx are xxxxxx technical xxxxxxxxx environments xxxx require xxxxxxxxxxx training xxx expertise xxx coal xxxxx utilize xxxxxxxxxxxxxxx advanced xxxxxxxxx such xx longwall xxxxxx enhanced xxxxxx protocols xxxxxxx technologies xxx sophisticated xxxxxxxxxxxxxx technologies xxxx as xxxxx employed xx their xxxxxxxxxxx Communications xxxxxx at xxxxx corporate xxxxxxxxxxxx located xx Canonsburg xx within xxx suburb xx Cecil xxxxxxxx in xxx Southpointe xxxxxxx just xxxxxxx of xxxxxxxxxx Pennsylvania xxxxx technological xxxxxxxx help xxxx the xxxxxx process xxxxx and xxxx productive xxxxx more xxxx doubles xxxxxxxx recovery xxxxxxxxxxxx com xxxxxx Energy x natural xxx operations xxxxxxx coal xxx methane xxxxxxxxxx and xxxxxxxxxxxx and xxxxx gas xxxxxxxxxxx and xxxxxxxxxx CONSOL xxxxxx continues xx advance xx safety xxx environmental xxxxxxxxx as xxxx as xx techniques xxx equipment xxx all xxxx improves xxxxxxxx enhances xxxxxx and xxxxxxxx more xxxxxxxxxxxxxxx protective xxxxxxx consolenergy xxx INCOME xxxxxxxxx COMMENTARY xxxxx revenues xxxx in xx in xxx in xxxxxxx and xxxxx revenue xxxx by xxx declined xx between xxx Cost xx revenues xxx in xx in xxx in xxxx of xxxxxxx gradually xxxx from xx and xxxxxxxx decreased xx Resulting xxxxx profits xxxx in xx in xxx in xxxxxxxxxx of xxxxx revenues xxx gross xxxxxxx for xxxx year xxxx to xxxxxxxxxxxx were xxx There xxxx no xxxxxxxxxxxx for xxxxxxxx and xxxxxxxxxxx operating xxxxxxxx but xxxxxxxx of xxxxxxxxx expenses xxxx spent xx sales xxxxxxx and xxxxx Operating xxxxxx was xxxxxxx in xxx considerably xxxxx in xxxxxxxxx income xxx in xx in xxx in xxx income xxx operations xxxxx tax xxxxxxxxxx was xx in xx and xx Total xxx income xxx in xx in xxx in xxx net xxxxxx margin xxx been xxxxxxxxxxx up xxx down xxxx - xxx company xxxx the xxxx income xxx in xxxxxxx SHEET xxxxxxxxxx Total xxxxxxx assets xxxx in xx in xxx in xxx the xxxx significantly xxxxxxx total xxxxxxx assets xxxx had xxx most xxxxxxxxx investments xx while xxx the xxxxxx amount xx long-term xxxxxxxxxxx at xxx amount xx fixed xxxxxx has xxxx relatively xxxxx No xxxxxxxx or xxxxxxxxxx assets xxxx realized xxxxx assets xxxx in xx in xxx in xxx the xxxxxxx liquidity xxxxxx for xxxxxxx the xxxxxxx ratio xx was xxxxx current xxxxxxxxxxx accounts xxxxxxx were xx in xx and xx After xxxxxxxxxx debt xxxxxxxxxx total xxxxxxx liabilities xxxx in xx in xxx in xxxxx liabilities xxxxxx into xxxxxxx long-term xxxx and xxxxx liabilities xxxx in xx in xxx in xxxxx stock xxxxxxx equity xxxxxxx surplus xxxxxxxx gradually xx did xxxxxxxx earnings xxxxx Equity xxx in xx in xxx in xxxxx liabilities xxx equity xxx in xx in xxx in xxx total xxxxxxxxxxx and xxxxxx rose xx nearly xxxx to xxx then xxxxx then xxxxxxxx at x stationary xxxxx in xxx range xxx ROA xxx income xxxxx assets xxxx oscillating xx and xxxx from xx going xxxx and xxxxxxxxxxxx The xxx net xxxxxx shareholder x equity xxxxxxx it xxx in xx in xxx in xxxx FLOW xxxxxxxxx COMMENTARY xxx cash xxxxxxxxxxxxxx was xx in xx and xx Net xxxx flow-investing xxx in xx in xxx in xxx cash xxxxxxxxxxxxxx was xx in xx and xx Total xxx cash xxxxx were xx in xx and xx The xxxx generated xxxx from xxx net xxxxxx changes xx inventories xxxxx operating xxxxxxxxxx other xxxxxxxxxx activities xxx borrowing xxx other xxxxxxxxx activities xxx firm xxxx cash xx accounts xxxxxxxxxx liabilities xxxxxxx expenditures xxxx and xxxxxxxx of xxxxx and xx times xxx borrowings xxxxxxxx CONSOL xxxxxx INCOME xxxxxxxxx - xxxxxxxxx NASDAQ xxx Quotes xxx Research xxx rights xxxxxxxx CONSOL xxxxxx BALANE xxxxx - xxxxxxxxx NASDAQ xxx Quotes xxx Research xxx rights xxxxxxxx CONSOL xxxxxx CASH xxxx STATEMENT x Copyright xxxxxx OMX xxxxxx and xxxxxxxx All xxxxxx reserved xxxxx CALCULATIONS xxx Total xxx Income xxxxx Assets xxxxxxxxx Ratios xxxxxxx Ratio xxxxx Current xxxxxx Total xxxxxxx Liabilities xxx Net xxxxxx Shareholder xxxxxx REFERENCESCONSOL xxxxxx INC xxxxxxx information xxxx website xxxxxxxxx from x http xxx consolenergy xxx ii xxxx www xxxxxxxxxxxx com xxxxxxxx about- xxxxxxxxxxxxx aspx xxxxxx OMX xxxxx CNX xxxxxxx Financials xxxxxxxxx from xxxx www xxxxxx com xxxxxx cnx xxxxxxxxxx query xxxxxxxxxxxxxxxx Chapter xxxx Kit xxx Analysis xx Financial xxxxxxxxxx Financial xxxxxxxxxx are xxxxxxxx by xxxxxxxxxxx certain xxx ratios xxx then xxxxxxxxx them xxxx the xxxxxx of xxxxx firms xxx by xxxxxxxxx the xxxxxx in xxxxxx over xxxx We xxx also xxxxxxx ratios xx make xxx analysis xxxx revealing xxx below xxx exceptionally xxxxxx for xxxx type xx analysis xxxxx ANALYSIS xxxxxxx Input xxxx Year-end xxxxxx stock xxxxx Year-end xxxxxx outstanding xx millions xxx rate xxxxxxxxx cost xx capital xxxxx payments xxxxxxxx sinking xxxx payments xxxxxxx Sheets xx millions xx dollars xxxxxx Cash xxx equivalents xxxxxxxxxx investments xxxxxxxx receivable xxxxxxxxxxx Total xxxxxxx assets xxx plant xxx equipment xxxxx assets xxxxxxxxxxx and xxxxxx Accounts xxxxxxx Notes xxxxxxx Accruals xxxxx current xxxxxxxxxxx Long-term xxxxx Total xxxxxxxxxxx Preferred xxxxx shares xxxxxx stock xxxxxx Retained xxxxxxxx Total xxxxxx equity xxxxx liabilities xxx equity xxxxxx Statements xx millions xx dollars xxx sales xxxxxxxxx costs xxxxxxxx before xxxxxxxx taxes xxxx amort xxxxxx Depreciation xxxxxxxxxxxx Depreciation xxx amortization xxxxxxxx before xxxxxxxx and xxxxx EBIT xxxx interest xxxxxxxx before xxxxx EBT xxxxx Net xxxxxx before xxxxxxxxx dividends xxxxxxxxx dividends xxx income xxxxxxxxx to xxxxxx stockholders xxxxxx dividends xxxxxxxx to xxxxxxxx earnings xxxxxxxxxx Data xxxxxxxxx Performance xxx Cash xxxxx Net xxxxxxxxx working xxxxxxx NOWC xxxxx operating xxxxxxx Net xxxxxxxxx Profit xxxxx Taxes xxxxx Net xxxx Flow xxx income xxxxxxxxxxxx Operating xxxx Flow xxx Free xxxx Flow xxx N x Calculated xxxx Per-share xxxxxxxxxxx Earnings xxx share xxx Dividends xxx share xxx Book xxxxx per xxxxx BVPS xxxx flow xxx share xxxx Free xxxx flow xxx share xxxxx N x LIQUIDITY xxxxxx Section xxxxxxxx Average xxxxxxxxx ratios xxxxxxx Ratio xxxxx Ratio xxxxx MANAGEMENT xxxxxx Section xxxxxxxx Average xxxxx Management xxxxxx Inventory xxxxxxxx Days xxxxx Outstanding xxxxx Asset xxxxxxxx Total xxxxx Turnover xxxx MANAGEMENT xxxxxx Section xxxxxxxx Average xxxx Management xxxxxx Debt xxxxx Debt-to-Equity xxxxx Market xxxx Ratio x A xxxxx Interest xxxxxx EBITDA xxxxxxxx Ratio xxxxxxxxxxxxx RATIOS xxxxxxx Industry xxxxxxx Profitability xxxxxx Profit xxxxxx Basic xxxxxxx Power xxxxxx on xxxxxx Return xx Equity xxxxxx VALUE xxxxxx Section xxxxxxxx Average xxxxxx Value xxxxxx Price-to xxxxxxxx Ratio xxxxxxxxxxxxx Flow xxxxx Price-to-EBITDA xxxxxxxxxxxxxx Ratio xxxxx ANALYSIS xxxxxx SIZE xxxxxxxx AND xxxxxxx CHANGE xxxxxxxx Section xxxxx ANALYSIS xxxxx analysis xxxxxx you xx see xxx a xxxxxx results xxx changing xxxx time xxx instance x firm's xxx may xx slightly xxxxx the xxxxxxxxx but xx it xxx been xxxxxxxx rising xxxx the xxxx four xxxxx that xxxxxx be xxxx as x good xxxx A xxxxx analysis xxx graph xxxx been xxxxxxxxxxx on xxxx data xxxxxxxxx MicroDrive's xxx over xxx past xxxxx MicroDrive xxx indusry xxxxxxx data xxx earlier xxxxx has xxxx provided xxx MicroDrive xxxxxxxx Figure x Rate xx Return xx Common xxxxxx COMMON xxxx ANALYSIS xx common xxxx income xxxxxxxxxx all xxxxx for x year xxx divided xx the xxxxx for xxxx year xxxxxx - xxxxxx Size xxxxxx Statements xxxxxxxx Composite xxxxxxxxxx Net xxxxx Operating xxxxx Earnings xxxxxx interest xxxxx depr xxxxx EBITDA xxxxxxxxxxxx and xxxxxxxxxxxx Earnings xxxxxx interest xxx taxes xxxx Less xxxxxxxx Earnings xxxxxx taxes xxx Taxes xxx income xxxxxx preferred xxxxxxxxx Preferred xxxxxxxxx Net xxxxxx available xx common xxxxxxxxxxxx profit xxxxxx In xxxxxx sheets xxx items xxx a xxxx are xxxxxxx by xxx total xxxxxx for xxxx year xxxxxx - xxxxxx Size xxxxxxx Sheets xxxxxxxx Composite xxxxxxxxxx Assets xxxx and xxxxxxxxxxx Short-term xxxxxxxxxxx Accounts xxxxxxxxxx Inventories xxxxx current xxxxxx Net xxxxx and xxxxxxxxxMore Articles From
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