Perform a complete business analysis (all four parts)

Analysis of Accounting Data

Business Analysis Case (100 Points)

Merck is a leading worldwide pharmaceutical company that delivers health solutions via prescription medicines, vaccines, biological therapies and animal health products. Headquartered in New Jersey it is well known for its R&D intensive efforts leading to new branded drugs in the healthcare treatment for cancer and diabetes. According to IBIS the Company has a 10% share of the U.S. branded name pharmaceutical manufacturing market.

Perform a complete business analysis (all four parts) and determine if the company’s stock is fairly priced as of 3/25/19. In your analysis please be sure to discuss all major accounting issues and indicate amounts that would be adjusted even if they are immaterial and you determine no adjustment is required. Also, be sure to perform a complete financial analysis as part of your business analysis. Please start with the industry/strategy analysis followed by the accounting analysis, financial analysis and forecast/valuation. You will receive a separate grade for each part. Be advised that you should use the ratios found in the data file in the financial analysis tab and trend analysis utilizing 5 years of data for profitability ratios and at least 3 years of data for liquidity and solvency ratios.

Please make sure to support all of your assumptions in the forecast process.

Please read the documents posted in canvas that refer to the major parts of a business analysis. Class notes and guidance should be read as well. Keep in mind that the forecast/valuation is essential so please read the example from a prior exam carefully since it includes using the CAPM to estimate a company’s cost of equity capital. You will need to insert this value for Merck into the valuation parameters section of the software. You do not need to change any of the other items in that section and remember your valuation is based upon the most recent Merck annual financials provided to you in canvas. I will provide you with suitable inputs for using the CAPM with the data file at the time it is posted by March 24. Please begin with the industry/strategy analysis and follow the sequence noted above. Do not do the accounting analysis after the financial analysis.

The data file (similar in format to the one for Microsoft posted in canvas and used in class) will be used for your financial analysis and forecast/valuation to complete your exam. Instructions for downloading the Microsoft data file earlier are the same for using the Merck file. Please submit your exam via canvas and attach a section within your forecasting section that has your assumptions and includes your estimate for the cost of equity and how it was derived. In the event your forecasted price differs from the market price (it usually does) provide some sensitivity analysis on what is likely causing the difference. Please submit your exam to me through canvas assignments. The due date for the exam is 6pm on April 7th. Your submission should include a word file and your excel data file. Make sure to make a copy of both of these files for your records. Please contact me via e-mail if you have any additional questions. Remember you are under the honor code to complete the exam on your own and to cite any sources used as references when completing any part of the exam. You are not to distribute any portion of this exam or any of the material posted in our canvas site now or in the future.