BAT4M Final Summative Task Part 2 BAT4M - Financial Accounting Final Summative Task Part 2 Creating an Equity Research Report Goal: To conduct detailed research and analysis on a company of your...

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BAT4M Final Summative Task Part 2 BAT4M - Financial Accounting Final Summative Task Part 2 Creating an Equity Research Report Goal: To conduct detailed research and analysis on a company of your choosing (note: use the same company as your ISP to limit your work); to learn the formatting and structure of an equity research report; to compose your own research report supporting a recommendation you make for your company. Instructions: Follow the below steps to complete your second draft submission. Step 1: Valuations Instruction: Follow the below steps to guide you in drafting the valuations section of your report. 1. Model for intrinsic value using discounted cash flow (DCF): ● Using Google Sheets or Microsoft Excel, model for you company's intrinsic value as we learned in class and using the following assumptions: ○ Assume annual changes in free cash flow based on the average annual change over the last five years calculated as follows: ■ Calculate the free cash flow change for each of the past five years ■ Calculate the average of those percent changes ■ Apply that average to your DCF model ○ Use the WACC (Weighted Average Cost of Capital) to discount your projections. You can find the WACC by searching: “WACC for [your company]” and it should show up at the top ■ If you have any trouble finding the WACC just let me know ● Include sources for all the numbers you are inputting in your calculation above ● Write one paragraph indicating what your company’s intrinsic value indicates generally and what it might tell us when compared to the company’s price at the close of the period you are reporting on. 2. Analyse EV/EBITDA ratio using the following steps: ● Look up your company’s EBITDA at the close of the period you are reporting on. ● Calculate your company’s EV at the close of the period you are reporting on. ○ EV is also available to look up but I would like to see your calculation presented here, and if your number is different from what you look up that means something is off. ● Show your EV/EBITDA ratio and include your calculation ● Write one paragraph indicating what your company’s EV/EBITDA ratio tells us about the company’s value and how it compares to similar companies trading in the same sector. (You can likely find the EV/EBITDA for the comparison companies by searching “EV/EBITDA for [company name]”) ● Include sources for the numbers you are using in the above calculations BAT4M - Financial Accounting Final Summative Task Part 2 3. Analyse EPS and PE ratio using the following steps: ● Calculate your company’s EPS at the close of the period you are reporting on. ○ EPS is also available to look up but I would like to see your calculation presented here, and if your number is different from what you look up, that means something is off. ● Calculate your company’s PE ratio at the close of the period you are reporting on. ○ PE is also available to look up but I would like to see your calculation presented here, and if your number is different from what you look up, that means something is off. ● Write one paragraph indicating what your company’s EPS and PE ratio tells us about the company’s value and how those valuations compare to similar companies trading in the same sector. ● Include sources for the numbers you are using in the above calculations Step 2: Investment Thesis, Catalysts and Risks Instruction: Follow the below steps to guide you in drafting the investment thesis, catalysts and risks section of your report. 1. Create an investment thesis using the following steps: ● Review all the information gathered from your prior work including the following: ○ Your ISP overview of your company ○ Your work on Part 1 of the FST analyzing your company’s recent performance ○ Your above work on your company’s valuation ○ Search: “investment thesis for [your company]” and review what other sources have to say ● Drawing the above information, write 1-2 paragraphs (can include bullet points if that makes what you are presenting clearer) detailing how you think a potential investor should approach your company. For example, is it undervalued and they should buy, or overvalued and they should short, or not likely to change much? Support your thesis with the following: ○ What in the story of the company and its goals supports your thesis? ○ What in the company’s recent performance supports your thesis? ○ What in the company’s valuation supports your thesis? ○ NOTE: If not every data point supports your thesis directly, that is OK, but you should still address it and explain your thinking. For example, you might say something like “While ABC’s appears to be overvalued, I still believe the company is a buy because of….” ● Based on the thesis you laid out, identify some target prices labeled as bull, bear and base case scenarios (see video from FST part 1). ○ NOTE: Even in the best research reports, these target prices are educated guesses. In addition, the scope of our research is limited by the nature of this project and you being new to this type of analysis. So don’t sweat getting this exactly right, I am not marking you on accuracy. I am only evaluating that your price targets fit with your thesis generally and that you have given some BAT4M - Financial Accounting Final Summative Task Part 2 thought to these numbers. 2. Identify catalysts using the following steps: ● Review all the information gathered so far ● Create a bullet point list of when (ie date ranges) you expect your investment thesis to play out and explain why you selected those dates (ie “Apple will be releasing its newest i-Phone during Q4 2021”) ● This should ideally be 2-3 marks on the calendar that highlight different possible catalysts ● Include sources for you catalysts (ie where did you learn that Apple was releasing a new i-Phone) 3. Discuss investment risks using the following steps: ● Review all the information gathered so far ● In either a paragraph or bullet point list, highlight the risks inherent in your thesis and recommendation ● A good framing question to ask yourself in compiling this section is: What might I have totally wrong in the case I am making? Step 3: Preparing A Draft Submission Instructions: Review the below information before submitting this draft section of your FST. Submissions are due by the date and time on Google Classroom in order to be reviewed prior to next week’s class. ● This submission will be reviewed, commented on and marked only for completion ● The review and comments are meant to help you with your final submission ● Prepare your materials in draft form, which means the following: ○ You need to check spelling, grammar and write in clear and complete sentences ○ The information you provide needs to be accurate and verifiable (i.e. I can check it against your source) ○ You do not need to present this information in its final format since this is only a part of the final report ● The marking rubric below will not be completed until the final submission but it is included here for your reference when submitting your work Marking Criteria Max Points Points Earned Your report accurately shows understanding of all the concepts we learned in class (Knowledge) 25 BAT4M - Financial Accounting Final Summative Task Part 2 Your report appropriately applies the research you conducted to the concepts we learned in class (Application) 25 Your report demonstrates creative thinking in its ability to draw conclusions, recommendations and ideas (Thinking) 25 Your report follows all the instructions and is presented in a well formed (spelling and grammar) and clearly understandable format (Communication) 25 Total 100
Answered 6 days AfterMay 13, 2021

Answer To: BAT4M Final Summative Task Part 2 BAT4M - Financial Accounting Final Summative Task Part 2 Creating...

Harshit answered on May 20 2021
141 Votes
PART 1: Changes in Cash Flow
Discounted cash flow (DCF) is a valuation method used to gauge the worth of a speculation dependent on expected future incomes. This applies to financial backers' venture choices about organizations or stocks, like purchasing organizations, putting resources into innovation new companies or purchasing s
tocks, and entrepreneurs and supervisors who need to settle on capital planning or working expense choices (like opening new offices). Purchase or lease new gear.
    Year
    5
    4
    3
    2
    1
    Cash Flow
    1,71,08,000
    1,44,69,000
    -52,25,000
    1,33,18,000
    5,08,03,000
    % change
    23.31
    24.56
    -8.14
    26.21
    0
WACC = 8.97%
Average of Changes = 1,80,94,600
Discounted Cash Flow
    Year
    5
    4
    3
    2
    1
    Discounted Cash Flow
    1134340
    10261497
    -4037991
    11215667
    46621088
Inborn worth is a proportion of what a resource is worth. This action is shown up at through a target computation or complex monetary model, instead of utilizing the presently exchanging market cost of that resource.
Starting today (2021-05-15), Apples Intrinsic Value: Projected FCF is $59.17. The stock cost of Apple is $127.45. Hence, Apples Price-to-Intrinsic-Value-Projected-FCF of today is 2.2. During the previous 13 years, the most exorbitant cost to-Intrinsic-Value-Projected-FCF of Apple was 5.67.https://in.finance.yahoo.com/quote/AAPL/cash-flow?p=AAPL
PART 2: Analysis EV/EBITDA ratio
EBITDA (profit before interest, charges, devaluation and amortization) is a proportion of the organization's generally speaking monetary presentation and can be utilized as an elective strategy for total compensation now and again.
Enterprise Value (EV) is a proportion of the all out worth of an organization, and is frequently utilized as a more extensive choice to securities exchange capital.
The EV/EBITDA proportion is utilized to analyze the complete worth of an organization with the measure of EBITDA it gets every year. This marker tells financial backers the amount EBITDA they should pay on the off chance that they get a large portion of the business. Normally, EV/EBITDA is utilized to decide the numerous of the organization's present exchange (for instance, multiple times). DCF limited income model while arranging the obtaining of a privately owned business (that is, the purchaser gives multiple times the EBITDA) while computing the organization's value focus in the capital examination report
    Market Value of Common equity
    2107.147 
    Total Balance of Common Equity
    2107.147 
    Add: As per books balance of Commercial paper
    4.996 
    Add: As per books balance of term debt
    8.773 
    Add: As per books balance Non-current portion of term debt
    98.667 
    Book balance of Total equity and debt
    2219.583
    Less: Value of balance of cash and cash equivalents
    19
    Enterprise value (EV)
    22.0
    Market Value of Common equity
    18.50
    Total Balance of Common Equity
    18.50 
    Add: As per books balance of Commercial paper
    4.996 
    Add: As per books balance of term debt
    8.773 
    Add: As per books balance Non-current portion of term debt
    9.8667 
    Book balance of Total equity and debt
    19.63 
    Less: Value of balance of cash and cash equivalents
    8.016 
    Enterprise value (EV)
    11.0 
The ratios of EV/EBITDA for both the quarters are
30/03/21 = 22/23.630 =...
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