Company Analysis Project- GE Electric The Company Analysis project is designed to give you a chance to practically apply the material covered during the course in a “real-world” scenario as well as to familiarize you with the business research resources available to you. After you have completed the project, you should be comfortable researching any company in which you may want to invest, seek employment, or do business. Company Selection: Pick a firm that has been publicly traded for at least five year, pays dividend and has debt. Report: Your written report should be 8-10 pages long (typed and double spaced; tables and graphs can be submitted as appendices) and should include the following information: 1) Title page: · The company name. · Ticker symbol · Stock exchange where your company trades. · Recent stock price. You may use the stock price on the day you started working on this report. (provide the date). 2) Company and Industry Description: Provide an introduction and description of the company and the industry. What is the mission of the firm and what does the firm do? Provide a brief history of the firm as well as a brief summary of any recent major news events related to the company. Please remember to cite all your sources. · Use the following link to find the Annual Report for your company: https://www.sec.gov/edgar/searchedgar/companysearch.html 3) Financial Statement and Ratio Analysis: 2 pages 1) Siemens. 2) Hitachi. As competitors · Use the financial statements from “Yahoo Finance”. Use the “Excel Template file – Company Financial Ratios” to help you calculate the ratios. · Provide a brief discussion of the Balance Sheet, Income Statement and Statement of Cash Flows. This discussion should highlight a few key items that you consider particularly noteworthy and not be a rehash of numbers from the statements themselves. · An analysis of the financial ratios, including trends, and explanation of their significance. The most important part of this section is your interpretation and analysis of ratios rather than the ratios themselves. (You can focus your discussion on the financial ratios listed in the excel file.) · Compare your company to other companies in the industry based on the above ratios. Make sure you compare your company to at least two other companies. 4) Cost of Debt: · Provide an analysis of the credit-worthiness of your company (incorporate debt and liquidity ratios). This section should include a discussion of the bond-rating and resulting cost of debt capital. · Use the following link to find the list of traded bonds and bond-rating for your company: https://finra-markets.morningstar.com/BondCenter/Default.jsp?part=3 5) Cost of Common Equity: · CAPM Model: o This section should include your company’s Beta and the resulting cost of common equity using the CAPM model. o Compare the Beta of your firm to the Beta of two other firms in the same industry. (You can use the Beta from Yahoo finance for the Beta of the comparable firms.) o Provide a discussion of the riskiness of your company’s stock in terms of Beta. · Discounted Cash Flow (DCF) Model: o How much and how often does the firm pay common stock dividends? What is the dividend payout ratio? Do the comparable firms pay dividends and what is their dividend payout ratio? o Has the company significantly changed its dividend payments over the past 5 years? If so, what factors could possibly explain the shift? You may consult the firm’s annual report to see if there is any discussion and/or explanation for these changes. o Use the DCF model to calculate the Cost of Equity. (You can use the analyst estimates from Yahoo Finance for the growth rate.) 6) Cost of preferred stock: · Does your firm have preferred stock? If yes then use the DCF model to calculate the cost of preferred stock. 7) Capital Structure: · Provide a pie-chart (only for the most recent year) showing the breakdown of the firm’s capital into the various components, e.g., long-term debt, preferred stock, and common equity capital. Include the weight and value of each component in the pie-chart. · Has the company significantly changed its capital structure over the past 5 years? If so, what factors could possibly explain the shift? You may consult the firm’s annual report to see if there is any discussion and/or explanation for these changes. 8) WACC Calculation: Use the “WACC calculation excel worksheet” to help you with this section. · Cost of Debt: Use the Yield to Maturity on existing bonds. · Cost of Equity: Use the CAPM model and the discounted cash flow model. To calculate the cost of equity. Take an average of the two estimates as your cost of equity. · Find the tax rate for your company from its Annual Report. · Use your capital structure weights and then find the WACC. 9) Discuss the recent developments and issues facing your firm now and in the foreseeable future. Talk about the firm’s future prospects. Address both positive and negative aspects of the firm’s current condition and outlook. 10) Provide a conclusion with recommendations (buy, sell, hold) based on your analysis.