Microsoft Word - AFF420-W2022 Term Project Insructions.docx 1 RYERSON UNIVERSITY School of Accounting and Finance AFF420 Principles of Finance III – Winter 2022 Term Project Instructions The term...

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RYERSON UNIVERSITY
School of Accounting and Finance
AFF420 Principles of Finance III – Winter 2022
Term Project Instructions
The term project is designed to apply the valuation techniques learned in class to real-world
companies. Students are required to work in groups of 3 to 4 members to produce a valuation
eport. The valuation report should contain detailed analysis of intrinsic valuation and relative
valuation, a
ief discussion of the option pricing model, and a final recommendation based on the
estimated equity value.
Company List:
Each member of a group will pick one company from the following list:
1. Air Canada
2. Costco Wholesale Corporation
3. Lululemon Athletica, Inc.
4. McDonald's Corporation
5. Moderna, Inc.
6. PayPal Holdings, Inc.
7. Zoom Video Communications, Inc.
Each group will submit one valuation report containing the analysis of all companies picked by
the group members. The report will be submitted in two parts. Part I is due at 11:59 pm on
Fe
uary 18 and Part II is due at 11:59 pm on April 7.
Both parts should be submitted electronically to Turnitin via D2L. Late submissions will be
penalized by 20% of the assigned marks per day. For example, a submission made one day after
the deadline will receive no higher than 80% of the assigned marks and a submission made two
days after the deadline will receive no higher than 60% of the assigned marks. Students in the same
group will receive the same grade on the term project.
Part I: Snapshot Report
The snapshot report must cover all of the companies that the group is going to value. The report
should be 4-5 pages long, i.e., one page per company and a summary page. The following
information of the companies should be included:
1) Company overview: Examples include the company’s business descriptions, strategic plans,
financial strength, competitive position in the industry, and future growth expectations.
2) Summary table:
2

Company 1
Company
2
Company
3
Company
4
Stock Exchange
Ticker symbol
Stock price as of __ (date)
Fiscal year-end
Industry
Cu
ency in valuation
Risk-free rate
Equity risk premium
Beta
Marginal tax rate
3) Sources of information: List the reference for the information collected for 1) and 2). Examples
include the links to the company’s financial reports, the company’s website, and sources of
elevant financial data and company news.
Part II: Final Project Report
The final project report must combine analysis of all companies covered by the group. The report
should include a one-page executive summary and a detailed valuation analysis of 15-20 pages.
The valuation analysis should include the following components:
1) Intrinsic Valuation
• The rationale for choosing an appropriate valuation model
• The key assumptions used to build the model (e.g., length of high growth period, stable
growth rate).
• The process of estimating the company’s cost of capital and future cash flows
• The process of estimating the company’s equity value per share based on the inputs and
assumptions above
• Sensitivity analysis of the estimated equity value to the changes in the assumptions above
2) Relative Valuation
• The list of “comparable” companies using appropriate criteria and provide the justifications
for selecting the comparable companies
• An appropriate valuation multiple for each company being valued and the justifications for
choosing that valuation multiple
• The process of estimating the company’s equity value per share based on the comparable
companies and the multiple chosen
3) Final Value Estimate and Recommendation
• A final check for whether any information and assumptions need to be updated since you
started the project
• A
ief explanation of how to reconcile the different valuations obtained from the intrinsic
3

and relative valuation models
• Possible application of the option pricing models. If applicable,
iefly describe how the
equity value may be derived from the model.
• A final recommendation for the company’s stock
4) Appendix
• Sources of financial and qualitative information
• Step-by-step valuations in Excel
• The summary table:
Company 1
Company
2
Company
3
Company
4
Fiscal year-end
Industry
Cu
ency in valuation
Risk-free rate
Equity risk premium
Beta
Marginal tax rate
Cost of debt at the start of DCF
Cost of equity at the start of DCF
Cost of capital at the start of DCF
Cost of capital in perpetuity
Length of the high growth period
High growth rate
Perpetual growth rate
Multiple used in relative valuation
Multiple value
Estimated value of equity per share (DCF)
Estimated value of equity per share (Relative)
Stock price as of __________ (date)
Final recommendation


4

Recommended Project Timeline:
Class Week Tasks
Intrinsic Valuation
1 Jan 14-20 Join a group
Pick a company from the list
Collect information about the company and the industry it is in
Obtain the company's past financial statements
2 Jan 21-27 Obtain the risk-free rate
Estimate an equity risk premium
Estimate the market value of equity and debt
Estimate the bottom-up levered beta
Estimate the pre-tax cost of debt
Estimate tax rate
Estimate the cost of capital
3 Jan 28- Feb 3 Capitalize R&D expenses
Adjust operating income after capitalizing R&D
Estimate net capital expenditures
Estimate non-cash working capital
4 Feb 4-10 Estimate the growth rates
Estimate the terminal value
Determine the length of the high growth period
5 Feb 11-17 Choose a DCF model
Estimate the equity value per share
6 Feb 18-24 Sensitivity analysis
Relative Valuation
8 Mar 11-17 Identify comparable companies
Determine candidate valuation multiples
9 Mar 28-24 Estimate the multiples for the companies
Use regression analysis to determine the appropriate multiple to use
Estimate the equity value per share
Final Recommendation
10 Mar 25-31 Update your estimates if any new information affects your estimates

Reconcile the differences in the estimated values from the intrinsic and
elative valuation models
Discuss whether and how the option pricing model may be applied
Make a final recommendation

Data Notes:

• Company filings: Filings of U.S. listed companies can be found at EDGAR:
https:
www.sec.gov/edga
searchedga
companysearch.html; Filings of Canadian listed
companies can be found at SEDAR: https:
www.sedar.com/search/search_form_pc_en.htm

5

• Macroeconomic information, such as government issued bond rates, exchange rates, GDP
growth, can be found at Federal Reserve at St. Louis site (FRED): https:
fred.stlouisfed.org
and at Statistics Canada: https:
www150.statcan.gc.ca/n1/en/ds
can
• Financial data vendors: Quick access to compiled company financial data at Mergent Online
and Capital IQ via Ryerson li
ary (may require registration): https:
li
ary.ryerson.ca/
• Aswath Damodaran’s data li
ary:
http:
people.stern.nyu.edu/adamoda
New_Home_Page/data.html

AFF420: Group 15 Valuation Project 1
AFF 420 Valuation Project 
Shopify, Uber, Beyond Meat & Novartis 
AFF XXXXXXXXXXW2020
Professor: Dr. Yi Feng
2020/3/30
Group 15
Ali A. Alibhai
Dalton Austin
Elaine Liu
Ashraf Teli
AFF420: Group 15 Valuation Project XXXXXXXXXX
Table of Contents
Executive Summary 3
Shopify 3
Uber 3
Beyond Meat 3
Novartis 3
Shopify 4
Business Overview and Drivers 4
Intrinsic Valuation 5
Relative Valuation 9
Final Value Estimate and Recommendation 11
Uber Technologies, Inc. 12
Business Overview and Drivers 12
Intrinsic Valuation 13
Key Assumptions 14
Relative Valuation 18
Contingent Valuation 19
Final Value Estimate and Recommendation 20
Beyond Meat 21
Business Overview and Drivers 21
Intrinsic Valuation 21
Relative Valuation 25
Final Value Estimate and Recommendation 26
Novartis 27
Intrinsic Valuation 28
Relative Valuation 30
Final Value Estimate and Recommendation 31
Appendix Summary 32
Appendix 34
Shopify 34
EV/Sales Comparable Table 35
Uber 35
Beyond Meat 38
Novartis 39
References 41
AFF420: Group 15 Valuation Project XXXXXXXXXX
Executive Summary
Shopify
Shopify (TSE:SHOP) is a Canadian online e-commerce giant cu
ently in a high growth
phase, providing over 1 million merchants the services needed to create their own online
usinesses. With 52 week highs & lows of $786 & $254 respectively, and a cu
ent market price
of $458.52 EOD 03/16/2020, the Value/Share from the DCF gives an ​Intrinsic value of $64.98​.
Relatively, using the P/S Ratio & EV/Sales multiples, the ​Relative Value/Shares were $232.03
and $235.08, respectively. The option pricing model doesn’t
Answered Same DayApr 07, 2022

Solution

Ayushi answered on Apr 07 2022
10 Votes
7
AFF 420: Air Canada
Contents
Company overview:    3
References:    7
Company overview:
The only national airline which is available in Canada is Air Canada. It provides both domestic as well as international services of airlines. The airports owned by Air Canada are more than 210 which cover six continents in the world. The flag ca
ier of Canada is in the top 20 airlines which are considered as largest in whole world. The number of customers served by Air Canada airlines is approximately more than fifty million. The headquarters are located in Saint-Laurent, Montreal, Quebec. 1937 was the year in which this airline was founded. It provides both passenger and cargo transport services world-wide. Air Canada cargo has many subsidiaries namely Air Canada Rouge, Air Canada Tango, Air Canada Cargo, Air Canada Vacations, Air Canada Express and many more. It has more than 30000 employees working under the airlines. The services provided in its airlines are divided under three classes which are economy class, premium economy class and signature class ("About Air Canada", 2022). The majority of the sales are generated by the passenger business but the cargo business also provides sales of approximately 25% and from the passenger transport sales around 35% belongs to the domestic travel.
From many years it can be seen that Air Canada has placed its focus on becoming a sustainable champion on a global level:
· By following the opportunities, those are profitable in the view of international growth.
· By identifying strategies and implementing them to help in reducing the cost and enhance the revenues.
· By providing satisfaction to the customers by providing better experience in their every time and providing good customer services.
· By fostering cultural changes which are positive.
The vision of Air Canada for the purpose of recovery is providing leverage to the great foundation which has been built by the company over a long period...
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