Question: Pick two companies in the same industry to evaluate, compare, and contrast. (You may pick any companies youd like as long as they are in

Pick two companies in the same industry to evaluate, compare, and contrast. (You may pick any companies youd like as long as they are in the same industry and their financial information is public.) 1. Which companies did you choose and what are their stock tickers? From which industry? 2. Collect the following information for each company. Go to Morningstar.com and search for your company. Use the most current information available. ? Find the following on the Quote tab: ? Current Assets ? Current Liabilities ? Total Assets ? Total Liabilities ? Net Income ? Sales/Revenue ? Latest Indicated Dividend Amount ? Price/Earnings ? Price/Book (aka Market/Book) ? Beta ? Find the following on the Financials tab: ? Common stock ? Retained earnings ? Additional Paid-In Capital (if available) ? Use the following assumptions: ? Base the risk-free rate of return on the latest long-term US Treasuries composite (>10 years), which can be found here. ? Base the expected market return on the 10-Year Trailing Total Returns (on the Daily tab - under 10-year) return of the S&P 500, which can be found here. 3. Complete parts A-E for each metric below. ? Current Ratio ? Debt Ratio ? Net Profit Margin ? ROA ? ROE A) Calculate the metric. Show the formula you use and the numbers you plug in. B) What does the metric illustrate about each company? C) Compare the answers you found for each company. Which is better off and why? D) What could the company who is worse off do to improve? 4. What price/earnings and price/book (market/book) ratios did you find for each company? Discuss these ratios and what they say about your companies. Do you think the companies could be undervalued or overvalued? 5. Use CAPM to calculate and answer the following questions. Show the formula you use and the numbers you plug in. A) What is the equity risk premium for each company? B) What is the required rate of return? C) What do your answers say about each company? Which is riskier? 6. Evaluate the dividend policy of each company by answering the following. A) Does each company pay a dividend? If so, what was the last dividend paid? B) Consider the industry and the maturity of each company. Explain why you think the companies do or dont pay a dividend. 7. Identify the strengths and weaknesses of each company. What would you recommend each company focus on to improve? 8. Which company do you believe is financially healthier? Explain your answer. Extra Credit (5 points):? Calculate WACC for each company. Show the formula you use and the numbers you plug in. Compare the WACC you calculated for each company and explain what this means.

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