FINC 430 Week 2/3 Discussions and Projects

Acquisition Proposal Research Paper Part 2 – Beta Study

INTRODUCTION: The Beta statistic is a measure of correlation and relative volatility (typically relative to

a market benchmark) found at the core of financial management theory. Part 2 of the Acquisition

Proposal is necessary because it lays the foundation for evaluation of cost of capital typically used as a

valuation discount rate. It is also quite helpful beyond the course, as this metric is often described in

static form, using historical data when it is sure to be dynamic during a forward-looking forecast period.

Understanding its derivation and upper and lower bounds is a critical skill in the professional world. For

example, a deterministic derivation of beta is typically used to derive a discount rate used for many

years going forward as a constant. However, relatively small variations in beta would have significant

impact on valuation modeling of dividends or cash flow.

If you discover issues with your selected company’s financial statements, please let me know. Additional

information on writing a short research paper is posted in our course, under the Content-Student

Resources-Checklists – be sure to take advantage of this, as it will prove quite helpful for this and

following papers. Finally, although we don’t grade your writing process directly– plan to start on time

with preliminary research, draft, revision(s), and finalize steps.

Contact EWC (Resources Menu-EWC) to make sure your paper is written in a manner that is in scope

and carries the most impact. Let me know if you feel like you might be getting stuck or need clarification

on developing analytic perceptions or have scope questions.

SPECIFICS OF THE ASSIGNMENT. In this assignment, you will write a 1-1 1/2 page narrative analysis of your selected company’s beta derived with market and industry returns. Base your analysis on descriptive statistical analysis of 3-5 years of historical data. No year over year, point to point recitations please. Calculate and use descriptive statistics (e.g., mean, median, standard deviation, geometric mean, rolling average, min, max, etc.) see example Excel worksheet [Content] or other sources. Use descriptive statistics in your narrative analysis for best grade (e.g., discuss mean relative to median, standard deviation, reversion to the mean, scenarios, rolling average trend, etc.). Your paper must include thesis-evidence-discussion-conclusion. Use Annual Performance: find or calculate annual price return performance for 3-5 years for your target financial services company, SP500 and Industry Index. TECHNICAL: Start your assignment on time: Monday, August 31, 2015 Due date: September 12, 2015 draft by: Friday, September, 11, 2015 final – September 12, 2015; 12-point Times New Roman font … must include an APA-formatted Title Page; double-spaced; Place Tables and charts in Appendix. Use Company 10k and UMUC Library Mergent Online only for financial statement information. Show all work-calculations; Cite all sources including page numbers where appropriate.