Here is two questions from Fin425 project. The mean idea of this project isanalysis a firm. I attachedproject description.

Iselected the "Chesapeake energy(CHK)" as the firm.

1.Is there a possible financing motive? Assume the acquirer is AA-rated and has a WACC of 7%. Ifyour firm has a higher WACC (because of higher debt costs, higher risk or inefficient capitalstructure) then it could be made more valuable by being acquired by a stronger firm (this is a basicmotive behind many of Berkshire Hathaway?s acquisitions). Thus, determine your firm?s WACC andEVA (percentages). If the EVA is positive it is a good sign that the firm is finding attractiveinvestment projects.

2.Here are the steps you need to take to get the cost of equity:

a. Determine the beta

b. Determine the riskfree rate: the one-year government bond yield (fromhttp://www.federalreserve.gov/releases/h15/update/default.htm). Yields are shown aspercentages so .55 means .55% not 55%.

c. Pick an equity risk premium (6% or 7%).

The purpose of this project is to apply this course's concepts and theories to a comprehensive analysis of a publicly-traded firm. The project assignment comprises four parts, with separate due dates indicated above. The final grade will be determined by your final deliverable; the interim grades are merely to indicate the current evaluation of your project. Your client is the board of directors of a large US conglomerate that is considering acquiring the company that you have selected; they have hired your group as consultants. In conducting the analysis, you may use any sources you find helpful: textbook(s), public documents, academic papers, discussions and analysis from internet sources, discussions with classmates &/or professors, etc. However, the work you submit must be your own in the sense that it represents your group's own synthesis & analysis of information gathered from multiple sources and is written in your own words. Be sure to carefully document all your sources, calculations and assumptions. The objective of this project is to apply the key concepts from the course to a real firm that you are interested in and to create a document that you could show to a prospective employer as a sign of your great financial acumen. The firm must be a US firm with price data available for at least 2 years on Yahoo.com (or other source). It must have publicly traded debt (from Trace, Morningstar or other source) and a market value between $500 million & $10 billion. It should also have publicly traded comparable firms (otherwise performance evaluation and valuation are much more difficult). The objective of the project is to make a recommendation to the board of directors: acquire or not. This decision requires balancing all the positives and negatives that your analysis has uncovered. While your final format is up to you, it should include at least the following components, which make up the required parts of the project. 1. Is there a possible financing motive? Assume the acquirer is AArated and has a WACC of 7%. Ifyour firm has a higher WACC (because of higher debt costs, higher risk or inefficient capitalstructure) then it could be made more valuable by being acquired by a stronger firm (this is a basicmotive behind many of Berkshire Hathaway's acquisitions). Thus, determine your firm's WACC andEVA (percentages). If the EVA is positive it is a good sign that the firm is finding attractiveinvestment projects. 2. Here are the steps you need to take to get the cost of equity: a. Determine the beta b. Determine the riskfree rate: the oneyear government bond yield (fromhttp://www.federalreserve.gov/releases/h15/update/default.htm). Yields are shown aspercentages so .55 means .55% not 55%. c. Pick an equity risk premium (6% or 7%). FIN 425: Fall 2016 Class Project The purpose of this project is to apply this course's concepts and theories to a comprehensive analysis of a publicly-traded firm. The project assignment comprises four parts, with separate due dates indicated above. The final grade will be determined by your final deliverable; the interim grades are merely to indicate the current evaluation of your project. Your client is the board of directors of a large US conglomerate that is considering acquiring the company that you have selected; they have hired your group as consultants. In conducting the analysis, you may use any sources you find helpful: textbook(s), public documents, academic papers, discussions and analysis from internet sources, discussions with classmates &/or professors, etc. However, the work you submit must be your own in the sense that it represents your group's own synthesis & analysis of information gathered from multiple sources and is written in your own words. Be sure to carefully document all your sources, calculations and assumptions. The objective of this project is to apply the key concepts from the course to a real firm that you are interested in and to create a document that you could show to a prospective employer as a sign of your great financial acumen. The firm must be a US firm with price data available for at least 2 years on Yahoo.com (or other source). It must have publicly traded debt (from Trace, Morningstar or other source) and a market value between $500 million & $10 billion. It should also have publicly traded comparable firms (otherwise performance evaluation and valuation are much more difficult). The objective of the project is to make a recommendation to the board of directors: acquire or not. This decision requires balancing all the positives and negatives that your analysis has uncovered. While your final format is up to you, it should include at least the following components, which make up the required parts of the project. Project Part I: Overview & performance (due September 28) 1. Has your firm performed well over the past 2 years? Describe your firm, including the nature of the products and services it provides, a brief history of its industry, and its current competitive position (e.g. market share etc.) 2. What is its beta? Here take the last 2 years of daily data from Yahoo.com on your firm and the S&P500. Regress the firm returns on the S&P500 returns. Does the CAPM work (i.e., is the beta estimate plausible; is the R2 > .2)? 3. What is its alpha? Compute the beta from data up to the end of 2015 and estimate the daily and the cumulative from that point until the present. Explain your results (has the firm done well or poorly)? 4. How do analysts view the firm? Look on the Yahoo Analyst coverage section & summarize the results. Are they favorable or unfavorable? 5. Institutional & insider ownership and short sales. Look at the Yahoo Key statistics page. In general we would like high insider ownership (e.g. > 1%) to align owners and shareholders; high institutional ownership (e.g. > 60%) to show that professional investors like the company; low % of shares shorted (