Indstructions & Examples attached in files
Instructions Company: THE BOEING COMPANY 2022F Corporate Finance FIN325. Final Project Assignment (40%). WACC & Company Valuation with FCFF Model. Company Name: Student Name: 1. Business Description & Analysis on 10-K 1) Summarize Part I. Item 1. Business Description on 10K [Instruction. Must include all topics. Summarize every topic on Item 1 only (Not Item 1A, 1B…) within a few sentences by students own words. Do not have to paraphrase all the contents.] … 2) Summarize Part II. Item 7. Management’s Discussion and Analysis on 10K [Instruction. Must include all topics. Summarize every topic on Item 7 only (Not Item 7A, 7B…) within a few sentences by students own words. Do not have to paraphrase all the contents.] … 2. Financial Input Variables & Assumptions 1) List of all the input variables explanations. Assumptions and Calculations on CAPM and WACC [Instruction. All input variables on Excel part must be described in Word part. Hard input numbers on each cell on Excel should be explained by Where and Why this number is applied. (Justified explanation by students own words with citation) The input numbers with calculation should be explained by How this number is calculated with the clear process.] (1) All input variables. Capital Asset Pricing Model (CAPM) a. Rf (3Month T-bill, %) b. Rm (S&P500, %) c. Market Risk Premium (MRP, %) d. Beta e. Equity Risk Premium (ERP, %) f. Required rate of return on Equity (2) All input variables II. Weighted Average Cost of Capital (WACC) a. Price of CS per share ($) as of today b. CS shares outstanding (#) c. Tax rate (%) d. MV of Debt e. MV of CS f. Total MV of Capital Resources g. Cost of Debt (%) h. Cost of CS i. WACC (%) 2) List of all the assumption explanations. Project Assumption section on the Company Valuation of the Excel part. (Section 1. Project Assumptions: sales growth ~ permanent growth rate) [Instruction. All the input numbers of assumptions on Excel part must be described in Word part. Hard input numbers of the project assumptions should be explained by Where and Why this number is applied. (Justified explanation by students own words with citation) Why should be this amount? How are they obtained? Must be realistic based on your research. Students MUST adjust the assumption section by adding or dropping along with the items of the chosen company’s Income Statement.] (1) Sales growth (2) Cost of Sales (3) (4) (5) (6) … … … … 3. Valuation Model & Investment Proposal. [Instruction. All the sections on Excel part must be described in Word part. Hard input numbers on each cell on Excel should be explained by Where and Why this number is applied. (Justified explanation by students own words with citation) The input numbers with calculation should be explained by How this number is calculated with the clear process.] 1) Interpretation of Free Cash Flows of the Firm Model & Intrinsic Value (section 2 ~ 6 on the Excel part) (1) Operating cash flows [Instruction. Students MUST adjust the operating expenses by adding or dropping along with the items of the chosen company’s Income Statement.] (2) Cash flows in NOWC (3) Cash flows in capital investment (4) Free Cash Flows of the Firm (5) Intrinsic Value of Common Stock on FCFF Model … 2) Explanation of Relative Method Valuation (at least 5 relative methods, section 7 on the Excel part) (1) P/E (2) EV/EBITDA (3) … (4) … (5) … 3) Explanation of Financial Ratio Analysis (at least 10 ratios, section 8 on the Excel part) (1) EVA (2) ROA (3) … (4) … (5) … (6) … (7) … (8) … (9) … (10) … 4) Investment Proposal with Target Price with all the information combined (section 9 on Excel part. How to set up the Final target price and why?). … WACC Weighted Average Cost of Capital. [Name Your Company] Part I. Collecting price information and calcuating rate of returnPart II. CAPM & WACC 60 monthsS&P500 (SPY ETF)Name Your Company DatesPricesMonthly ratePricesMonthly ratea. Input variables I. CAPM Rf (3Month T-bill, %)* Rm (S&P500, %)* Market Risk Premium (MRP, %)** Beta (Apple Inc.)** Equity Risk Premium (ERP, %)** Required rate of return on Equity** * Hard number inputs must be explained, on the Word part, with Where this nubmer is gotten and How this number is justifiable. **Computed number inputs must be explained, on the Word part, with How this nubmer is calculated and Why this calculation is reasonable. b. Input variables II. Weighted Average Cost of Capital Price of CS per share ($) as of today* CS outstanding shares (million)* Tax rate (%)* MV of Debt ($, million)* MV of CS ($, million)** Total MV of Capital Resouces ($, million)** Cost of Debt (%)* Cost of CS (%)* WACC (%)** Company Valuation Company Valuation: Free Cash Flows of the Firm (FCFF Model). [Name Your company] Part I. Financial Statements (Income Statement & Balance Sheet)Part II. Compnay Valuation on FCFF Model * Hard number inputs must be explained, on the Word part, with Where this nubmer is gotten and How this number is justifiable. Post your company's Income statement (Don't follow Apple I/S format.)**Add or Drop the expense assumptions according to the Income statement accounts of your chosen company CONSOLIDATED STATEMENTS OF OPERATIONS (2021, year ended, $ In millions)1. Projected Assumptions.012345 Sales growth* Net Operating Working Capital (% of sales)* Fixed Assets (% of sales)* Depr. (% of fixed assets)* Tax rate* WACC*Permanent growth rate after year 5* Post your company's Balance Sheet (Don't follow Apple B/S format.)*Add or Drop the accounts according to the Income statement of your chosen company CONSOLIDATED BALANCE SHEETS (In millions, as of)202120202. Operating cash flows012345 + add back Interest after tax + add back Depreciation = Operating Cash Flows 3. Cash flows in NOWC012345 Net Operating Working capital = Cash flows of Changes in NOWC 4. Cash flows in Capital investment012345 Fixed asset (PPE) = Cash flows of Changes in fixed assets 5. Free Cash Flows of the Firm012345 Free Cash Flows of the firm (Y1~Y5) Terminal Value at the end of Y5 (Y6 ~ forever) = Total Free Cash Flows of the firm 6. Intrinsic Value of Common Stock on FCFF Model($ million, %) Enterprise Value of the firm (the Entire Business) - MV of the Debt and PS = Intrinsic Value of CS CS outstanding shares (million) Intrinsice Value (Target price) of CS per share 7. Target Prices based on Relative Methods (at least 5)($, %)Firm RatioIndustry Ratio a. Target Price by P/E Forward b. Target Price by EV/EBIDTA Forward c. Add more relative methods d. Add more relative methods e. Add more relative methods 8. Financial Ratio Analysis. (at least 10 ratios)($ million, %)industry average by sector a. EVA ($, million) b. ROA (%) c. ROC (%) d. ROE (%) e. Interest Coverage ratio f. Add more ratios g. Add more ratios h. Add more ratios i. Add more ratios j. Add more ratios 9. Final Target Price & Investment Proposal($, %) Final Target Price per share (6 Months) - Market Price of CS per share (as of today) = Expected G/L on the CS investment ($) = Expected return on the CS investment (%) Investment Proposal (BUY / HOLD / SELL) Alphabet Valuation Fin-325: Corporate Finance Professor Paul Ahn Alphabet’s Business Model Overview Alphabet encompasses many businesses, the most prominent being Google. Google pursues two segments: Google services & Google Cloud. Intuitively, Alphabet categorizes all the other endeavors as ‘’OtherBets.’’ Google Services Google Services’ essential products/platforms include Android, Chrome, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube. People are consuming digital content at an unprecedented rate; hence Google is there to meet the demand through the integration of its intellectual property and the hardware devices (Pixel 4a, Pixel 4a 5G and Pixel 5 phones, Chromecast with Google TV, and the Google Nest Hub smart display) the company employs. The monetization of Google Services is primarily based on advertisements which the company incorporates on their platform. Through extensive customer research and advanced algorithms, Google aims to match its customers base with relevant ads at a precise moment. Revenue generation for Google services is based on performance and brand advertising. Performance advertising involves direct engagement between users and advertisers as performance advertisers pay when they engage in their ads. Our ads tools allow performance advertisers to create simple text-based ads that appear on Google Search & other properties, YouTube, and the properties of Google Network Members. In addition, Google Network Members use our platforms to display relevant ads on their properties, generating revenues when site visitors view or click on the ads. Brand advertising enhances users’ awareness of and affinity with advertisers’ products and services through videos, text, images, and other interactive ads that run across various devices. We help brand advertisers deliver digital videos and different types of ads to specific audiences for their brand-building marketing campaigns. In summary, Google Services are continuously evolving; through investing in AI and quantum computing, Google strives to foster innovation across our businesses and create new opportunities. Google Cloud Google cloud empowers developers to build and deploy programs on a highly scalable and trusted infrastructure. Google collaboration tools: Gmail, Docs, Drive, Calendar, Meet, etc. The Cloud encourages innovation and promotes easier access to resources. The revenue is generated through fees for Google Cloud Platform services and Google Workspace collaboration tools. Other Projects Alphabet is continuously striving for innovation! It invests in many emerging businesses at different stages of product development. A lot of these businesses are operating independently. Revenue is generated through internet & TV services, including licensing and R&D services. Competition The best field categorization for Alphabet is disruptive technologies, which is a competitive market as companies have to constantly innovate and update their services not to fall behind the competition. An outline of Alphabet’s key competitors: Categories Companies General purpose search engines Baidu, Microsoft’s Bing, Naver, Seznam, Verizon’s Yahoo, and Yandex. Vertical Search & e-commerce Amazon and eBay (e-commerce), Booking’s Kayak (travel queries), Microsoft’s LinkedIn (job queries), and WebMD (health queries). Social Networks Facebook, Snapchat, and Twitter. Other online advertising platforms; competing against Google-Ads; the auction-based advertising platform Amazon, AppNexus, Criteo, and Facebook. Providers of digital video services Amazon, Apple, AT&T, Disney, Facebook, Hulu, Netflix and TikTok. Government Regulation Alphabet Has to abide by federal, state and foreign laws. Is facing scrutiny from different governments which could result in adverse impact on cost of doing business, competitive position, business, reputation, financial condition, and operating results. Management Analysis and Discussions on 10k Long Term Trends Impacting Business Operations · Digital economy is evolving fast; shifting more traffic online and contributing to Alphabet’s revenue growth · Increasing amounts of new gadgets(phones, tablets, smartwatches, etc.) result in new advertisement formats and widespread accessibility for Alphabet to benefit from. · Evolution of online advertising augments the possibility for monetization · Customers from emerging economies are joining the online world, which expands Alphabet’s international user base,however, foreign exchange rates could pose a problem due to fluctuations · Revenue derived from non-advertising activities is increasing, which could affect Google’s margins. Services like Google Cloud, Google Play, hardware products, and YouTube subscriptions are gaining prevalence · Heavy operating and capital expenditure investment must be conducted to meet expanding user base. Constant R&D investments and investments in land, buildings, and information technology assets(servers, network equipment). · Continuous changes in legislation, policies, and market conditions could impact business practices and financial results. For example, antitrust laws · Growing investment in employees Impact of Covid-19 Reductions in global economic activity caused a reduction in advertising revenues because advertisers reduced their spending. Credit deterioration of customers has been reflected in allowance for credit losses in account receivables, and market volatility caused fluctuations in Alphabet’s equity investments. Executive Overview Consolidated Financial Results (in millions except per share and %) As we can clearly interpret from the summary above that Alphabet’s growth continued despite Covid-19 uncertainty. However the revenues did not increase as much as they did in the year of 2019 because of the increase in total cost of revenues ($84.7 billion, an increase of 18% year over year) caused by TAC and content acquisition costs. Financial Results (Revenue by Segments) A clear increase in total revenues ( a 12.8% increase from 2019). The top 3 revenue streams saw growth in the following fashion: YouTube ads brought in 31% more revenue, Google Network members’ properties showed a 7% increase and Google search showed an increase of 6%. Revenue by Geography Even though Alphabet is a truly international company, United States is still generating the most revenue for the company, amounting to almost the same amount of revenues Alphabet gets from Europe, Middle East, Africa and Asia-Pacific countries put together. Foreign Exchange effect on International & Total Revenues As illustrated EMEA and APAC revenue percentage change was not significantly affected by the foreign currency exchange rates as the US dollar was strengthening against Turkish Lira, Russian ruble and Indian rupee but was offset against Japanese yen. Other Americas (Argentinian peso and Brazilian real) were negatively affected because they were weakening against dollar. Costs of