Help Manual

This lists some of the questions that may come up in the context of the project. You may also find answers to your questions in my emails relating to the project, which are listed here.

I. Corporate Governance Analysis

    1. The Chief Executive Officer
      • Who is the CEO of the company? How long has he or she been CEO?
      • If it is a family run company, is the CEO part of the family? If not, what career path did the CEO take to get to the top? (Did he or she come from within the organization or from outside?)
      • How much did the CEO make last year? What form did the compensation take? (Break down by salary, bonus and option components)
      • How much stock and options in the company does the CEO own?
    2. The Board of Directors
      • Who is on the board of directors of the company? How long have they served as directors?
      • How many of the directors are ìinsideî directors? (i.e. employees or managers of the company)
      • How many of the directors have other connections to the firm (as suppliers, clients, customers..)?
      • How many of the directors are CEOs of other companies?
      • Do any of the directors have large stockholdings or represent those who do?
    3. Share Voting Structure
      • Are there differences in voting rights across shares?
      • If so, do incumbent managers own a disproportionate share of the voting shares?

  1. Financial Market Concerns

  1. Societal Constraints

II. Stockholder Analysis

  1. Who holds stock in this company?
  2. Insider Holdings

III. Risk and Return

  1. Estimating Historical Risk Parameters (Top Down Betas)

Run a regression of returns on your firm's stock against returns on a market index, preferably using monthly data and 5 years of observations (or)

If you have access to Bloomberg, go into the beta calculation page and print off the page (after setting return intervals to monthly and using 5 years of data)

  1. Comparing to Sector Betas (Bottom up Betas)
  2. Choosing Between Betas
  3. Estimating Default Risk and Cost of Debt
  4. Estimating Cost of Capital

IV. Measuring Investment Returns

  1. Accounting Returns on Projects
  2. Economic Value Added

V. Capital Structure Choices

To answer these questions, you might want to look at the following

  1. Benefits of Debt
  2. Costs of Debt

VI. Optimal Capital Structure

  1. Cost of Capital Approach
  2. Building Constraints into the Process

  1. Relative Analysis

VII. Mechanics of Moving to the Optimal

  1. The Immediacy Question
  2. Alter Financing Mix or Take Projects

  1. Financing Type

VIII. Dividend Policy

  1. Historical Dividend Policy
  2. Firm Characteristics

IX. A Framework for Analyzing Dividends

  1. Affordable Dividends
  2. Management Trust
  3. Changing Dividend Policy

  1. Comparing to Sector and Market

X. Valuation

  1. Cash Flow Choice
  2. Growth Pattern Choice
  3. Valuation
  4. Value Enhancement