Need math help - for stock company

This is the start of your final

4. Section II should be labeled Capital Market Efficiency. Precisely define an efficient capital market. What causes a capital market to be efficient? Why does the efficiency of the capital market matter to the managers of the firm you are studying? Be sure to number this question #4.

5. Section III should be labeled Wall Street Journal news . Carefully choose one Wall Street Journal article about your firm between January 2022 and December 2022. Follow the format of your syllabus and respond to the questions asked there. Provide a link to the article in this question and identify its date. You may want or need to do some research about your firm to put this article in the context of the news contained in your article. Be sure to number this question #5. {If you are having trouble finding one appropriate article, you may ask Ms. Nestory for assistance, or you may go back to earlier dates one year at a time.}

6. Section IV should be labeled WACC . Calculate the WACC for your firm. Use the SSRN pdf under the web campus document in the section labeled “Quick Access Link for your midterm and final” for the risk-free rate and the market risk premium. Be sure to estimate the required return on equity using three methods discussed in class and in your text. For each parameter in the WACC calculation carefully explain why you are choosing it. Use the one bond from your midterm and the FINRA quote to estimate the bond’s YTM. Explain and document your market price and your YTM estimate in your appendix. Do not include short term debt in your WACC calculation. Most firms do not fund long term assets with short term debt. Be sure to number this question #6

9. Section VII should be labeled ESG. If you were the manager or executive of your public firm, what data would you need to evaluate whether a CSR/ESG project under consideration was a worthwhile investment for the shareholders as shareholders (or from the shareholder’s point of view)? What is the difference between a publicly traded firm, a private firm, and a not-for-profit firm? How does this impact your answer to this question? Be sure to number this question #9

10. Section VIII Should be labeled ESG Project. Assume your firm is contemplating an ESG or CSR project that will last for 4 years only. Assume the project requires a 10% change in your firm’s net working capital (calculated on the Midterm) for each of 4 years below. Assume there is no cannibalization of revenues from existing projects. The cost of the new capital equipment including shipping and installation is $3,100,000. The equipment will last for 4 years. Use MACRS deprecation and show that schedule in the appendix. The salvage value of the new equipment is $400,000. For the four years, revenues from this project are expected to be $4,000,000, 4,000,000, 4,200,000, and 4,200,000; and operating expenses, $2,800,000, $2,800,000, $2,700,000, $2,750,000 . IF you need to scale these numbers (i.e., increase or decrease them by 000s) it is permissible to do so. Simply state your scaling. Clearly label and use your firm’s WACC from question 6 and effective tax rate. Show the effective tax rate information in the appendix. Show the working capital calculation from the midterm in the appendix. Show the MACRS depreciation schedule in the appendix.

Complete the Project cash flow statement below and then the question below

Determine the Net Present Value for this project. What is the decision rule for NPV decision making? Should your firm undertake this project? Is this project likely to be riskier or less risky than your firm? Why? How would you quantify that to know for sure? Be sure to number this question #10

11. Section IX Should be labeled Regression. Look at the excel data that came with your exam. Notice that this information is price data. (Its ok to use the data as is, even though there is no price data on a January 1. There is no need to include dividends in your return calculation unless you want to) Run an excel regression of your firm’s stock return against a market proxy. Which market proxy did you choose? Why? What is the intercept from this regression? What is the beta estimate from this regression? What is the R-squared? What does this mean? Look at 3 different data bases on the library resource guide and indicate what the beta estimate is for your firm in those data bases. Why are these estimates (yours and those from three data bases) different? Be sure to number this question #11. Show your regression output in the appendix. (It is permissible to contact UTAC if you have forgotten how to run a regression in excel)

12. Section X Should be labeled Stock Valuation vs SML. Calculate your firm’s DCF valuation model (stock valuation model) required return compared to your stock’s required return using the SML. Demonstrate the calculations. Are the required returns different? Why? Be sure to use Value Line to calculate the growth rate in the stock valuation model and show the Value Line pdf page in the appendix along with the growth rate calculation cash flow or dividend per share over a 5-year period. Calculate the growth rate for each sequential year over this 5-year period. Choose your stock valuation model based on this growth rate calculation. If needed or appropriate, due to an uneven growth rate, you may draw a timeline in the appendix and follow your power point or class example. Use the SSRN pdf under the web campus document in the section labeled “Quick Access Link for your midterm and final” for the risk-free rate and the market risk premium Be sure to number this question #12

13. Section XI Options. Discuss the two agency problems of the firm. Provide an example of any one day’s option transactions. Explain them thoroughly. How do options potentially help mitigate the agency problem between stockholders and managers . What parameters impact the call or put’s price? In what direction? Explain. Show a screen shot of the options transactions in your appendix. Be sure to number this question #13

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