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Assignment Task:

Task:

Step 1: Company selection The company that you have to evaluate depends on the last digit of your MQ student ID. If your student ID ends with ‘0’, then your company is AMC, ‘1’ is BGA, and so on. 0 1 2 3 4 5 6 7 8 9 AMC BGA CAR DHG EDV FBU GMG HVN IPL JBH To learn more about your company you need to look up what company is behind the ticker symbol. A quick web search should do the trick.

Step 2: Prepare your report You are asked to prepare a report that is no longer than 4 pages, which is easier said than done. There is way too much information out there, but you are required to keep it really concise. No client wants to read lengthy reports.

Part 1: Executive Summary and Company Background You are expected to keep your report extremely concise. It should start with an executive summary that starts with your results & recommendations. Your boss wants you to find out if the stock is currently underpriced, fairly priced or overpriced. You are asked to add a tablelike this below on page 1 in your executive summary: Company Current market value Intrinsic value Recommendation Quickly summarise the company that you are analysing and prepare a table that outlines some recent & notable highlights and lowlights that will have an impact on your model assumptions. Make sure to consider both internal and external factors. This section should not exceed one page. Part 2: Valuation The only result we are looking for is the price of the stock of the company that you are analysing. While finding the current market value is easy, coming up with the stock’s intrinsic value is harder. You are required to use the following formula for that: DDM: P0 = D1 /(r-g) Unfortunately, you need to find each of the variables on the right-hand side of the equation first. Your boss tells you that how well you justify your choices is the most important part of your report and really shows the quality of your work. You can use any appropriate way to come up with reasonable D1 and g, but are asked to use CAPM to identify a reasonable discount rate: r i =rf +bi (rm-r f ). This means that you will have to make even more appropriate assumptions now: rf , bi and rm. Try to link your assumptions to your qualitative analysis in Part 1

. You are told that you should summarise your variable assumptions in a table: Variable Assumed value Justification D1 g r f bi rm You are told that the entire valuation including table cannot exceed 2 pages. You have landed your first job as an investment analyst and are asked to produce a report that helps customers of your employer better understand if the company that you are evaluating is a good investment opportunity or not. Your boss thinks that it is particularly important that you always explain why and how you come up with your assumptions, results and recommendations. You are required to perform a valuation that consists of a qualitative part and a quantitative part. The quantitative part is the actual valuation, and the qualitative part of the analysis explains how you come up with your assumptions. Luckily you have gained some experience when you were asked to practise basic tools that you will need in the Citi Digital Internship Program. Now it’s time to show what you have learned.

Part 3: Limitations The third part of your report is discussing limitations. Limitations are short discussions around the assumptions and how they could potentially be wrong or inaccurate. Also discuss how each assumption being inaccurate affects your result and recommendations. This section is extremely important, as you can really demonstrate your in-depth understanding. This section should not exceed 1 page.

Part 4: Reflection and conclusion Reflect on your experience with the Citi Digital Internship Program. Conclude with a paragraph that summarises your report. This section should not exceed 1 page. Try to address the following points specifically:

• When performing a comparable analysis what considerations are particularly important?

• During your DCF valuation, which assumptions are particularly important? Which assumptions are most sensible?

Note: For this task you should have completed the Excel template for the DCF task. Change input variables and check which ones have the biggest impact on the result.

• Why do we do both a comparable and a DCF analysis? Don’t they give us the same result anyway?

Step 3: Submit your report Your report must be submitted via Turnitin on iLearn. Your supporting Excel file is submitted in a separate submission folder, as indicated on iLearn. Important: Make sure that your report follows the guidelines closely, that you do not submit the report late and that you never copy and paste anything from the internet without referencing. Instead of simply copying from the internet you need to reformat the text. Important Information Structure of the report: Part Must include Page limit 1 Executive summary, recommendation table, qualitative analysis 1 page 2 Valuation that uses DDM and CAPM. Each assumption must be justified 2 pages 3 Limitations discussing how assumptions could be inaccurate and potential impact on results. Brief summary of the project. 1 page 4 Reflection

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  • Posted on : October 13th, 2019

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