Assignment #1 Use Excel Spreadsheet.

For this assignment, each of you should choose two companies. When you choose two companies, you should make sure that the two companies are from the same industry. One company is considered your company and the other is considered a competitor. Once you make a decision about two companies, you should let me know what your choices are via email before you proceed. The following are the questions you should answer. You can find the 2019 & 2020 Balance Sheet and Income Statement at finance.yahoo.com.

1. (Common-size Balance Sheet & Common-size Income Statement Analysis) (25 points)

1) With 2019 & 2020 balance sheet & Income statement for each company, create common-size balance sheets and common-size income statements.

2) Using 2020 common-size balance sheet and income statement, compare your company with the benchmark, and describe how your company is similar to or different from the benchmark.

3) Using 2019 & 2020 common-size balance sheet and income statement of each company, do the time trend analysis and describe how each company changes over time.

2. (Financial Ratio Analysis) Using 2019 & 2020 Balance sheet & Income statement for each company, compute the following financial ratios for each company: (25 points)

1) Current ratio,2) Quick ratio,3) Debt-to-equity ratio, 4) Times interest earned ratio (Interest coverage ratio),5) Inventory Turnover,6) Receivable turnover,7) Total asset turnover

8) Profit margin,9) Return on Asset (ROA),10) Return on Equity (ROE),11) Price-earnings ratio,12) Market-to-book ratio

3. (Financial Ratio Analysis) Select the benchmark for peer group analysis. You'll use two kinds of benchmarks in this assignment. One is your competitor's ratios and the other is industry averages (you can find industry averages from finance.yahoo.com or www.reuters.com or investing.money.msn.com). Make sure that you cite the source of industry averages. (25 points) 1) Using the 2020 ratios from Question 2, compare your company's ratios to both competitor's and industry averages. Then describe how good or bad ratios of your company are considered. 2) Using 2019 & 2020 ratios for your company, compare your company's 2019 ratios with 2020 ratios and describe the similarities and differences.

4. (DuPont Identity) (25 points) 1) Using the DuPont Identity equation, compare your companys 2020 ROE with competitors 2020 ROE. Find out what makes differences in ROEs between your company and competitor. 2) Using the DuPont Identity equation, compare your companys 2019 ROE with 2020 ROE. Find out what makes differences in ROE between two periods if there is any difference

1. Using the past dividend payout information between 2016 and 2020, compute the growth rate (g) for these companies. Your companies must have a complete history of dividend payout during these periods.

Company A - Dividend Yield Summary

	2016	2017	2018	2019	2020	2021
Dividends	2.22	3.33	3.34	3.51	3.60	2.70
Average Price	53.10	60.90	58.95	54.68	44.94	61.80
Yield	4.18%	5.47%	5.67%	6.42%	8.01%	4.37%

The above Dividend, Average Price, and Yield values for 2021 are year-to-date.

2. First, lets assume that the required return (R) is 10% for all these companies. Using R, dividend information, and growth rate (g) from question 1, compute the stock prices of these companies. Second, lets assume that the required return (R) is 20% for all these companies. Using R, dividend information, and growth rate (g) from question 1, compute the stock prices of these companies (40 points)

3. Compare your estimated stock prices with actual stock prices as of January 4, 2021. Then tell me whether each stock is undervalued or fairly-valued or overvalued based on your estimation. Whats your decision if you hold these stocks? Whats your decision if you dont hold these stocks? (20 points).

Company B - Dividend Yield Summary

	2016	2017	2018	2019	2020	2021
Dividends	1.93	1.64	1.80	2.15	2.05	1.20
Average Price	12.66	16.74	19.46	21.51	17.89	28.28
Yield	15.25%	9.80%	9.25%	10.00%	11.46%	4.24%

The above Dividend, Average Price, and Yield values for 2021 are year-to-date.

2. First, lets assume that the required return (R) is 10% for all these companies. Using R, dividend information, and growth rate (g) from question 1, compute the stock prices of these companies. Second, lets assume that the required return (R) is 20% for all these companies. Using R, dividend information, and growth rate (g) from question 1, compute the stock prices of these companies (40 points).3. Compare your estimated stock prices with actual stock prices as of January 4, 2021. Then tell me whether each stock is undervalued or fairly-valued or overvalued based on your estimation. Whats your decision if you hold these stocks? Whats your decision if you dont hold these stocks? (20 points).