1

Term Project

Business 771 Equity Asset Valuation 1712

George Z. Li, Ph.D., CFA

Purpose

Real world application of equity asset valuation models.

Hands-on experience on equity analysis, recommendation, and presentation.

Requirement

• Select one company or ideally a pair of companies (for example, two

competing firms, a big vs a small player, a winning vs. a losing stock, a public

vs. a private equity, an established vs. a start-up companies) in an industry you

have interest and /or experience; conduct detailed valuation analysis applying

the Dividend Discount Model, Free Cash Flow Model, Price Multiples, and

Residual Income Valuation Model.

• Conduct macroeconomic analysis, industry analysis, company analysis and

technical analysis in addition to the fundamental valuation analysis.

• Write a research report, make recommendation, and present to the class.

Timeline (please conduct analysis on a continuous basis and submit periodic report)

03/25 choose an industry and/or a company.

3/31- 4/1 provide an overview of the industry and the companies.

Find industry publications/webpages.

Read professional analysis sample reports (methodologies and forecast).

Industry performance, sub-sector, main product/service, key players.

Decide 1-2 companies to work on the project.

Company basics (business line, production, sales, marketing, outlook), financial

statements 3-5 years, stock market performance.

4/7- 4/08 Return analysis, earning quality/ accounting quality, profitability analysis,

Industry analysis: business cycle, life cycle, sales/revenue forecast, growth rate.

Company analysis: operating, investing and financing activities. Ratio analysis,

industry benchmark (safety, efficiency, profitability).

4/15 half-way report

4/21- 4/22 Discounted dividend valuation (adjustment and projection). Industry or

comparable,

2

Fee cash flow valuation (calculation, adjustment and projection).

4/28- 4/29 market-based valuation (peer group, comparable, ratios).

Residual income valuation.

5/5- 5/6 M&A and other considerations, private equity investment.

(sum-of-the-parts valuation, sensitivity analysis, situational adjustments)

Project presentation

5/13 project modification and revision

Final written project due

Evaluation

Analysis Report 70%

Project Progress 12%

Project Presentation 18%