FIN 369 Beijing Institute of Technology Investment Analysis and Calculations
familiar with Excel and data analysis
Please answer the following items in your deliverable for your assigned company. This project’s main deliverable
should not exceed 8 pages, front & back, 12 font, double spaced (although you may include an appendix of any
length). To simplify this assignment, you may want to follow the following template provided below …. Please, do
not wait until the last days of that week to begin this deliverable as I believe you will find it too much to complete
in a single setting. Please see the syllabus for the due date.
- 1) Provide a short paragraph suggesting the story that is being told by the historical fundamentals – for
example, profitability, growth, abundant free cash, etc. - 2) Highlight the abbreviated forecast of the next five-year DCF or FCFF forecasts (i.e., year by year) and the
normalized, constant growth calculation for forecast years 6 to infinity. Explain your assumptions. - 3) Provide a DCF or FCFF model-based valuation range, explaining in brief your inputs. This range will serve
as an “absolute valuation” metric and will be calculated by discounting your individual five-year FCFF
forecasts by a realistic WACC, discounting the constant growth by the WACC, subtracting out debt and
dividing by shares outstanding. Highlight this absolute valuation range. - 4) Provide historical 10-year price/earnings, price/book, and price/sales charts, commenting on today’s
relative valuation AND providing the forecasted P/E, etc. metrics that you selected to use in your
forecasts. For example, substantiate your P/E ratio and earnings per share forecast inputs that will
provide your P/E valuation. This “relative valuation” will serve as range value inputs for your final
valuation range. Highlight this relative valuation range.
Note: The DCF absolute value range will be combined with the P/metric relative value ranges to form
a “final range of value”. For example, if the DCF suggests $37-38/share and the P/metrics suggest $34–37,
your valuation range – combining the absolute and relative values – would be $34–38/share. - 5) Discuss the important “systematic factors” (value, growth, capitalization, quality, momentum, inflation,
interest rates, industrial production, etc.) that you believe will drive this security’s return, explaining why
you chose to include the ones that you did. You may wish to supply a simple regression to prove your
point (hint)…. - 6) Discuss the important “fundamentals” (profitability, growth, cash flows, etc.) that you believe will drive
this security’s future return, explaining why you chose the ones that you did. Comment on the
“embedded expectations” that you believe the market is focusing on (recall that any good analysis is
about understanding the embedded expectations in the market price and how those expectations will
change so as to drive a higher or lower price in the future). - 7) Given your analysis, would you recommend a buy or a sell on this equity security? Explain your
recommendation in a “summary paragraph” that you would provide as an executive summary with your
employer. Highlight this in a single paragraph, seeking to make sure it is an accurate and complete
storyline of your analysis. - 8) Provide the duration, convexity, and yield to maturity of any fixed income instrument of this company
that matures after 2025. Use any excel, Bloomberg, etc., highlighting the inputs that you used. - 9) Provide the Black-Scholes valuation of any option of this company that expires within the next 12 months
(please be sure to provide your inputs as well as a brief discussion of your volatility assumptions). Briefly
compare your valuation (V) to that last price (P) traded in the market. Explain what you would do with
this information.
