Question 1Find at least 5 years of financial information for your task firm and download all the data you need for an equity valuation from DatAnalysis databases. All the other information or data should be downloaded from reliable data sources. For example, you need financial data, stock prices, firms’ annual reports, risk free rate of returns, and stock market risk premium, etc. You need clearly explain your data sources, timeline of the data, and data items used in your calculations. You are required to submit your data in Excel format as part of your project. (4 marks) Choose an appropriate Discounted Cash Flow model and explain why you choose this specific valuation model for the firm in your report. (1 mark)Question 2Estimate the discount rate or rates to use in the valuation. Your estimation Excel files should be submitted as part of your project. (3 marks) In the report you need to briefly explain how you calculate the discount rate(s) including the model you used for the calculations. (2 marks)Discount rate is Weighted Average Cost of Capital.This section should also include information about how you estimate your free rates, expected returns on the market index, and debt-equity ratio.Question 3Define the value driver of your valuation. Calculate the converting ratios of financial variables to the value driver. (3 marks) You also need to analyze your firm and decide an appropriate fixed-asset model and the PLUG for your modelling template. Explain the reasons for your choices. (2 marks)Question 4Build your pro forma model and forecast your future financial ratios and free cash flows. (3 marks) You need to explain how you decide your short-term growth rate, the length of forecast period, and the stable growth period. (2 marks)Compute the current cash flows from financial statements.Estimate the future earnings and cash flows on the firm being valued.Estimate when the firm will reach “stable growth” and what characteristics (risk & cash flow) it will have when it does.Question 5Estimate the fundamental value of the firm’s equity. (2 marks) Explain why your estimated share value might differ from the trading price observed in the stock exchange. Please discuss whether there are possible ways to improve the precision of your estimation. Use a Data Table to conduct a sensitivity analysis along two dimensions, growth rate and discount rate and discuss the findings of your sensitivity analysis. (3 marks)Question 6Use Search Tool at DatAnalysis to construct a sample of firms (at least 10 firms) within the same Global Industry Classification Standard (GICS) Industry as your task firm. If the GICS Industry has limited number of firms, you can either use GICS Industry Group or GICS Sector to enlarge your selection sample. (5 marks)Question 7Construct a table with Price to Book (PB) ratios and all the fundamental variables that define the PB ratios for all these firms in the GICS group, including your task firm. (5 marks)Question 8Compare the PB ratio of your task firm with those comparable firms in the same industry. Is your firm over-valued or under-valued and why? You need to use all the financial information collected to justify your arguments. (5 marks)
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