PART 1: USING FINANCIAL STATEMENTS FOR EQUITY VALUATION (50 MARKS) Part 1 of the assignment is intended to help you develop practical skills of Fundamental Analysis.

BA7031: Corporate Finance and Financial Statement Analysis

PART 1: USING FINANCIAL STATEMENTS FOR EQUITY VALUATION (50 MARKS) Part 1 of the assignment is intended to help you develop practical skills of Fundamental Analysis. The assignment provides you with an opportunity to apply valuation technologies that are commonly used in practice and that incorporate financial statement information into equity valuation models. The focus is on ex-post or backward validation of alternative valuation approaches.

1) You are required to provide a valuation of the common stock (equity) in ANY ONE of the firms listed below, as of the end of 2015, using the actual - real - financial results reported by the firm in 2016 and 2017

Ticker Firm Name AEO American Eagle Outfitters, Inc. BC Brunswick Corporation DE Deere & Company HSY The Hershey Company 2) Your valuation should utilise TWO valuation technologies one of which MUST be either Residual Earnings Analysis or Earnings Growth Analysis.

3) You should supply an analytical commentary on the usefulness of the two techniques that you use, substantiating your conclusions with the results from the valuation.

4) You must prepare a concisely written report for this part of the assignment and are required to include in your written report, as an appendix, entire sets of all the annual financial statements for the chosen firm for the period 2015-2017. Please note that NO other appendices are allowed.

5) Your written report must contain clear references to the relevant portions of the included in the report financial statements for the firm being analysed, and those relevant portions of the appended financial statements should be highlighted.

PART 2: USING FINANCIAL STATEMENTS FOR CREDIT RISK ANALYSIS (50 MARKS)

1) You are required to carry out an analysis of financial statement ratios that indicate the creditworthiness of a corporate borrower, that is, the corporate borrower’s ability to pay its debts on scheduled times, for ANY ONE of the firms listed below, over the period 2015-2017:

2) You should calculate the FOUR financial statement ratios that you identify as the most pertinent for credit risk assessment of your particular firm, making sure to address short-term liquidity, long-term solvency, and operating profitability. You must justify your choice of each of those four ratios.

3) You must supply a brief commentary on the dynamics of credit quality for the firm being analysed over the period 2015-2017. Your commentary must briefly outline entailing implications for pricing of the firm’s debt of the risk of debt default. You should discuss whether the credit risk of the firm - as implied by the four ratios – appeared to be improving, deteriorating, or remaining stable. You must substantiate your conclusions with evidence and offer plausible causes of any significant changes in credit risk detected through your ratio analysis.

4) You must prepare a concisely written report and are required to include in your written report, as an appendix, entire sets of all the annual financial statements for the chosen firm for the period 2015-2017. Please note that NO other appendices are allowed.

5) Your written report must contain clear references to the relevant portions of the included in the report financial statements for the firm being analysed, and those relevant portions of the appended financial statements should be highlighted.