You have been hired as an analyst for a company. The Chief Financial Officer (CFO) has asked you to prepare a corporate valuation report for the upcoming annual Board of Directors meeting. The data, written report, and Excel analysis will provide insights into the historical performance and trends, capital structure, and outlook of the company. As a follow-up to that report, the CFO has asked you to coordinate with the financial leadership team to develop a briefing on the risks and challenges that may impact corporate value and decision-making. This report will examine both internal and external risks and challenges to the company. Your report will be extremely useful for the effective management of the company. It will be used by financial managers in both short-term and long-term planning to minimize the potential impact on shareholder value.
Your report should analyze your chosen corporation from the provided list and estimate its overall value.
To complete this assignment, you will submit both a written report and the completed Excel template with the “Financial History,” “Capital Structure,” and “Valuation” tabs filled in.
Specifically, you must address the following rubric criteria:
Overview: Select a company from the provided list. Then, write a thorough overview of the corporation’s background. Specifically, you must address:
Describe the market to which your corporation belongs. Identify the products or services your corporation sells and the share of the market it has.
Describe the customer base of your corporation. What are the top competitors for this customer base? What motivates the customers? What challenges does the corporation face in keeping the customer base?
Describe the supply chain, key resources for corporate operation (such as staff, facilities, technologies, and so forth), and other key inputs used to create the products or services. To what extent does attaining all these resources present a challenge to the company?
Analyze the key market trends and issues within the industry that pose potential risk to the corporation.
Financial History: This section of your report focuses on the financial history and capital structure of your organization. Specifically, you must address:
Analyze three years’ worth of the corporation’s finances using the provided Excel template. Submit this template along with your written report. You may embed pieces of the Excel template into your written report to show key financial highlights for the following section.
Please note that, for Milestone One, you only need to complete the “Financial History” tab in the spreadsheet.
Summarize the financial highlights you determined from your analysis in the Excel template. Explain the significance of the key ratios for the overall financial health of the corporation.
Capital Structure: This section of your report discusses the capital structure of the corporation. Specifically, you must address:
Outline the most recent year’s debt, equity, and total capital to show the overall capital structure of the corporation using the provided Excel template.
Please note: To complete this, you will use the same Excel template you used in support of Milestone One, but this time you will complete the “Capital Structure” tab.
In your written report, describe the corporation’s dividend policy and what impact it has on the investors.
Analyze the relationship between capital structure, cost of capital, and risk for this corporation. Use real-life examples from your chosen corporation to analyze these relationships.
Explain how the relationship between capital structure, cost of capital, and risk maximize corporate value. How do these relationships help inform decision making?
Valuation: This section of the report focuses on calculating current value, outlining assumptions, and estimating the future value of the corporation through forecasting the cash flows. Specifically, you must address:
Using the company’s three-year history, calculate the current market value of equity for your corporation using the provided Excel template. In your written report, explain what this means for the corporation.
Please note: This is the same Excel template you used in Milestone One, but this time, you will complete the “Valuation” tab.
You will submit the Excel template along with your written report. You may embed pieces of the Excel template into your written report to help support your work in this section.
In your written report, outline any assumptions you have made in calculating the current value and estimating the future value of the corporation. Explain why you made these assumptions and why they are important. (Hint: assumptions can include growth rates, margins, trends, etc.)
Using the provided Excel template, estimate the current value of your corporation by forecasting the cash flows over five years. Calculate EVA, NPV, IRR, and MIRR. Explain your findings.
Risks and Challenges: This section of your report expands on several forms of risk and explains how each impacts corporate value and decision making. Specifically, you must address:
Describe the challenges financial managers can face about working capital management (WCM) in short-term planning.
Analyze economic and political risk in relation to your chosen corporation. Focus on potential impact on shareholder value maximization. If there are no current risks related to economics and politics facing the industry or your corporation, analyze economic and political risk in general terms instead. Discuss how economic and political risks could impact shareholder value in general.
Analyze industry-specific risks for their potential influence on financial decision making within your chosen corporation. Consider risks such as competition, supply chains, and technological disruptions. Provide specific examples to illustrate your claims.
Analyze company-specific challenges that could impact corporate success in the long- or short-term. These challenges may include things like access to key talent, facilities, natural resources, or patents.
Corporate Social Responsibility (CSR) and Ethics: This section of your report discusses the importance and impact of corporate social responsibility and ethics in financial decision making and a corporation’s value. Specifically, you must address:
Identify the key CSR and ethical issues involving your company’s major stakeholders. These stakeholders are the investors, customers, employees, suppliers, communities, and the environment.
Explain how the CSR and ethical issues you identified can impact the corporation’s value.
Discuss the role that financial managers should play in monitoring and managing these issues.
Reflect on the importance of ethics and CSR in financial decision making, explaining your reasoning.
Your corporate valuation report should be 8–12 pages in length
