The Module 5 course project assignment let’s you get examine the company’s risks, returns and equity costs. The requirements of the assignment are as follows:
- Use the same company that you analyzed previously. Prepare a paper which discusses the below items.
- Identify Risks: Identify and discuss some of the primary risks the company faces in the near future. These should be at the company, industry and economy-wide levels. Discuss ways, if any, that the company can mitigate these risks. (Good sources include: the company’s annual report, analyst reports, recent news about the company, Yahoo! and Google Finance, Mergent, Hoover’s, etc.)
- Annual Stock Prices and Returns:
- Create a table showing the stock prices for the past five years (you can either use an average annual price or the ending price at a given date). These data can be found at Yahoo! Finance. Choose “Historical Prices” and then you can select a range of dates by month and download as a table. You will need to convert the monthly data to annual data.
- Calculate the annual returns for each year.
- Calculate the average stock price, average return and standard deviation over this period.
- Stock Beta and Cost of Equity:
- Identify the beta for your company. (You can find this at Yahoo! Finance choosing “Key Statistics” and look for the beta.)
- Using the CAPM equation and beta you identified, calculate the company’s cost of equity. Note, you will need the risk-free rate and the market risk premium. For the risk free rate you can use the 10 year rate of the US Treasury Bonds (which you can find through a Google search). For the market risk premium use 10.5% minus the risk-free rate.
- Paper Mechanics should be as follows:
- There is no minimum page length requirement for this paper.
- The paper should be in APA format (i.e. cover page, double-spaced, 12 pt font, reference section at end, etc.).
- The paper should include at least 2 sources, such as the annual report, Yahoo! Finance or Google Finance, the company’s web site, etc.
- The paper should be divided into the sections indicated above (label each section clearly).
- 2-4 pages in lengh.
Submit your completed assignment to the drop box below. Please check the Course Calendar for specific due dates.
Save your assignment as a Microsoft Word document. (Mac users, please remember to append the “.docx” extension to the filename.) The name of the file should be your first initial and last name, followed by an underscore and the name of the assignment, and an underscore and the date. An example is shown below: