Questions:
- What is the name of the company? What is its industry sector?
- What are the operating risks of the company?
- What is the financial risk of the company (the debt to total capitalization
ratio)? - Does the company have any preferred stock?
- What is the capital structure of the company: short-term portion of long-term
debt, long-term debt, preferred stock (if any), and market value of
common stock issued and outstanding, Non-Controlling Interest (NCI, if
any)? - What is the company’s current actual beta (or equity beta)
- What is the cost of debt before and after taxes?
- What is the cost of preferred stock (if any)?
- What is the cost of common stock equity? (Use the Capital Asset Pricing
Model.) - What is the weighted average cost of capital of the company?
- How has the company’s stock been performing in the last 5 years?
- What is the annual cash dividend yield of the common stock?
- How would you assess the overall risk structure of the company in terms
of its operating risks and financial risk (debt-to-capitalization ratio)? - Would you invest in this company? Why or why not?
- The last page of your paper should be a bibliography of the sources that
you used to prepare this paper.
Sample Solution