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The Corporate Finance Project: The Resource Room

 


While I have highlighted some of the key data and spreadsheets that you will use for the project, you can find more data at this link, especially for non-US companies, and more spreadsheets at this one. For supporting material on the webcasts, try this link.

Section Questions Useful data/links Spreadsheet(s) Webcast
I. Corporate Governance
  1. Is this a company where there is a separation between management and ownership? If so, how responsive is management to stockholders?
  2. What are the other potential conflicts of interest that you see in this firm?
  3. How does this firm interact with financial markets? How do markets get information on the firm?
  4. How does this firm view its social obligations and manage its image in society?
  1. CEO pay (WSJ)
  2. Corporate governance scores
  3. CSR rankings
  4. Analyst following (for NASDAQ firms)
 
  1. Corporate governance
II. Stockholder composition
  1. What is the breakdown of stockholders in your firm - insiders, individuals and institutional?
  2. Who is the marginal investor in this stock?
  1. Insider & Institutional holdings by sector (Mine)
  2. Top activist investors
 
  1. Stockholder composition
III. Risk & Return
  1. What is the risk profile of your company? (Overall risk, sources of risk, changes over time)
  2. What return would you have earned investing in this company’s stock? Would you have under or out performed the market? How much of the performance can be attributed to management?
  3. How risky is this company’s equity? What is its cost of equity? How risky is this company’s debt? What is its cost of debt? What is this company’s current cost of capital?
  1. Alpha & R-squared by sector (Mine)
  2. Moody's ratings
  3. CDS spreads
  4. Beta by sector (Mine)
  5. Cost of equity, debt & capital by sector (Mine)
  1. Do your own regression
  2. Read the regression beta page
  3. Implied ERP
  4. Bottom up beta calculator
  5. Debt & Cost of debt

  1. Riskfree Rate
  2. Implied ERP
  3. Regression Beta
  4. Bottom up Beta
  5. Webcast: Debt & its cost
V. Measuring accounting returns
  1. Is there a typical project for this firm? If yes, what does it look like in terms of life (long term or short term), investment needs and cash flow patterns?
  2. How good are the projects that the company has on its books currently?
  3. Are the projects in the future likely to look like the projects in the past? Why or why not?
  1. Accounting returns & EVA by sector (Mine)
1. Return Calculator
  1. Investment Returns
  2. A typical project
V. Current Financing Mix & trade off on debt
  1. What are the different kinds or types of financing that this company has used to raise funds? Where do they fall in the continuum between debt and equity?
  2. How large, in qualitative or quantitative terms, are the advantages to this company from using debt? How large, in qualitative or quantitative terms, are the disadvantages to this company from using debt? From the qualitative trade off, does this firm look like it has too much or too little debt?
  1. Debt fundamentals by sector (Mine)
  2. Marginal tax rate by country (Mine)
  3. Effective tax rate by sector (Mine)
 
  1. The trade off on debt
VI. The optimal financing mix
  1. Based upon the cost of capital approach, what is the optimal debt ratio for your firm?
  2. Bringing in reasonable constraints into the decision process, what would your recommended debt ratio be for this firm?
  3. Does your firm have too much or too little debt relative to the sector? How about relative to the market?
  1. Cost of capital by sector (Mine)
  2. Market debt regression (Mine)
  1. Cost of capital optimal
  2. APV optimal
  1. Cost of capital approach to optimal
VII. Moving to the Optimal
  1. If your firm’s actual debt ratio is different from its “recommended” debt ratio, how should they get from the actual to the optimal?
    1. In particular, should they do it gradually over time or right now?
    2. Should they alter their existing financing mix (by buying back stock or retiring debt) or should they take new projects with debt or equity?
  2. What type of financing should this firm use? In particular
    1. Should it be short or long term?
    2. In what currency?
    3. Fixed or floating rate?
  1. Duration averages by sector (Mine)
  1. Debt design worksheet
  1. Designing the perfect debt
VIII. Existing Dividend Policy
  1. How much dividend has this company paid over time?
  2. How much cash has the firm accumulated over time?
  3. Given this firm’s characteristics today, how would you recommend that they return cash to stockholders (assuming that they have excess cash)?
  1. Dividend fundamentals by sector (Mine)
 
  1. Chronicling existing dividend policy
IX. Assessing Dividends
  1. How much cash could this firm have returned to its stockholders over the last few years? How much did it actually return?
  2. Given this dividend policy and the current cash balance of this firm, would you push the firm to change its dividend policy (return more or less cash to its owners)?
  3. How does this firm’s dividend policy compare to those of its peer group and to the rest of the market?
  1. Dividends & FCFE by sector (Mine)
  2. Market dividend regression (Mine)
  1. Dividend Analyzer
  1. Assessing cash return policy
X. Valuation
  1. What growth pattern would you pick for this firm? How long will high growth last?
  2. What is your estimate of value of equity in this firm? How does this compare to the market value?
  3. What is the “key variable” (risk, growth, leverage, profit margins) driving this value?
  4. If you were hired to enhance value at this firm, what would be the path you would choose?
  1. Key inputs for valuation by sector (Mine)
  1. Valuation spreadsheet (for non-financial service firm)
  2. Valuation spreadsheet (for financial service firm)
  1. Valuing a firm