New/Additional Items:
·Extended DuPont Analysis
oDiscuss results of extended DuPont analysis for past 3 years.Include discussion of profit margin, asset turnover ratio and equity multiplier.
oDiscuss how the various factors/inputs into the Model impacted the performance of your organization.
·Historical Free Cash Flow Analysis
oDiscuss results of FCF analysis for past 3 years.
oUse the historical FCF to factor into and compare with estimates for FCF Valuation
·Valuation based on Free Cash Flow Analysis
oDiscuss the basis for your estimation of weighted average cost of capital (WACC)
oUse Excel templates to assess if your firm’s capital structure is ideal as it currently is
oScenario analysis to see if another capital structure results in a lower cost of capital
oUse the calculated WACC as the basis for your discount FCF valuation.
oIf not enough data to calculate WACC use the industry averages (Damodaran)
oExplain assumptions, risks and uncertainties relating to free cash flow forecast.
oCheck the soundness and logic of your forecast by comparing parameters (such as NOPAT, profit margin, net investments, NWC etc.). Are your growth estimates producing performance metrics that look realistic when comparing year 5 with year 0?If not, make some adjustments.
oRemember the rule of 72 when quickly assessing doubling times in years.
oBased on the above, discuss results of forecast and present value of free cash flow.Explain why you agree / disagree with resulting valuation.
oNote: If your organization is privately held, you might only able to address total value of common equity and not the value of a single share of common stock.
·Valuation Based on Market Multiples
oIf your organization is a publicly traded company:
oExplain what companies you are using for comparison and why you selected them.
oDiscuss market multiples for your organization vs comparison organizations.
oExplain why your organization appears to be receiving higher or lower market multiples than comparison organizations.
oHow might your firm be able to increase its market multiple based valuation?
oUse WACC template to assess if your firm’s capital structure is ideal as it currently is
oIf your organization is a privately held company:
oExplain what companies you are using for comparison and why you selected them.
oDiscuss market multiples for your organization vs comparison organizations.
oExplain why you agree or disagree with the resulting valuation.
·About the organization
oInclude any additional information about the firm that may impact its future growth
oAny strategic issues of the firm that you may not have covered
·Accounting Policies
oProvide additional information on how the organization recognizes revenue
oDiscuss any areas of concern about accounting policies (review notes to financials)
oDiscuss if anything has or is going to change in terms of accounting policies
·Control Environment and Business Ethics
oWhat major ethical issues confront your business and/or industry?
oDoes your organization have a published corporate code of conduct?
§If yes, how is this code of conduct implemented within the organization?
§If no, should the organization consider implementing a code of conduct?
§What resources and commitments would be needed to implement it?
oDiscuss any other Aspects of your organization’s internal control structure and control procedures, including but not limited to:
§How does management ensure that assets are protected?
§How do you ascertain that financial information is reliable?
§Are financial statements audited by a public accounting firm?If so, which one?What was the audit opinion?
§Discuss any issues / concerns relating to audit process.
§Discuss any major actual or contingent liabilities (e.g. potential litigation).
§Discuss any internal control problems experienced by the organization in recent years.
·Check list for ASRP3
oCompany background & Mission
oOverview of the industry and its main competitors
oBalance Sheet & Income Statement (horizontal & vertical analysis)
oReview the financial performance metrics, ratios & multiples
oGenerate the Statement of Cash Flows for your firm
oProduce Common-size Balance Sheet and Income Statement
oDetailed Industry/Competitor Analysis based on Common-size Financials
oDupont Ext.
oCalculate historical free cash flow
oValuation based on discounted free cash flow
oValuation based on market multiples (P/E is preferred)