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Please check previous entries before indicating your choice - none of the students can work on the same
companies. (First Sign-in, First Take-out)
Part 1. Calculating Betas and Expected Stock Returns for publicly traded companies from the same
sector/industry.
A. Collect 5 years of monthly data for each of these stocks and appropriate market index. Why do you think this
market index is appropriate for the given companies?
B. Calculate and analyse the betas of each of these stocks you need to explain what is the meaning of these
betas).
C. Calculate the average annual returns and standard deviations for both stocks and markets indices chosen in
part A.
D. Calculate the required rate of return based on CAPM for both stocks. For the risk-free rate use a 10-year
Treasury Bond rate of the county where the majority of the company's operations are located.
E. Analyse which of these stocks have been a good/bad investment over the last 5 years.
Part 2. Calculating WACC for both publicly traded companies.
A. Calculate the current market value of equity of each of the above stocks;
B. Using the most recent financial statements of both companies, calculate the value of their total debt. Please
note that you need to include all interest paying debt and might need to look at the notes to their financial
statements.
C. Find the amount of annual interest expense from the most recent financial statements of these companies.
Estimate the interest rate on their debt using the total value of debt found in part B.
D. Estimate the average tax rate for each of these companies using the average of the ratio of tax expense to
profit before tax from the last three annual financial statements.
E. Calculate the WACC for each of these companies.
Part 3. Calculating Intrinsic value of stock using the discounted free cash flow model. e
mycourses.hult.edu/courses/3460843/assignments/36424783
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E. Calculate the WACC for each of these companies.
Part 3. Calculating Intrinsic value of stock using the discounted free cash flow model.
A. Calculate the FCF to the firm for each of the two companies for the last 5years;
B. Calculate the compound annual growth rate of FCF to the firm over the last five years. Do you think the FCF
to the firm are likely to grow at this rate in the future? Explain why or why not. If not, what alternative growth rate
you can suggest?
C. Using the discounted cash flow model, and your outputs in Part 2 and Part 3A&B, calculate the intrinsic value
of both company's stock. Is the value obtained sensible compared to the current market price? Is the stock
undervalued or overvalued?
Part 4. Estimating the value of the stock using the multiples approach.
A. Find 3 comparable companies to each of the companies (if two companies you are analyzing are comparable
to each other, you only need 3 comparable companies). Analyze why/how companies found are comparable to
your companies.
B. Calculate P/E, P/B and P/S ratios for all companies. You can substitute these ratios with more pertinent ones
for your companies, but be sure to justify the replacements.
C. Using the above calculations analyze your two companies. Are they under- or overvalued? How does this
analysis compares to analysis you have done in Part 3.C?
Please note that you need to:
- submit all your answers and calculations in a Word document showing your calculations. Supporting Excel files
(if any) and Financial Statements should be uploaded in addition, but not be considered while grading.
Please do not refer to your Excel file for answers and calculations.
- review submissions by two other students, which will be released on the due date/time of the assignment.
Peer reviews should contain positive and constructive feedback and should be completed within 2 days after
the assignment due date. Please enter your reviews in comment box for the assignment- you don't need to
complete the rubric and give any grade for the assignments.
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