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Unformatted text preview: FIN 310, Sections A & C Spring 2011 Research Project 1. Description of tbe Project Using the data sources destribed below, Excel, and Word: • Locate and use financial information for!l!!!. companies, each from a different industry; Using the data, calculate the companies' current cost of equity, cost of debt, and weighted average cost of capital ~ ACe), as well as the optimal capital structure of the companies; Write a report presenting and interpreting your results; Recommend whether the companies should keep their current capital structure or not. • • · • Assignment due: April 22 • • 2. Objectives of tbe Project This assignment requires the use of Excel. Data on the weighted average cost of capital (W ACe) of individual companies are generally not available, but the inputs required to compute W ACC can be found. You should interpret the current vs. optimal capital structure results from a financial point of view and' utilize different theories to support your conclusions (e.g. the theory of agency costs, asymmetric information, pecking order theory; etc.) These are covered in chapters 12 and 1~ on capital structure, so you may wish to read ahead prior to beginning your analyses. . 3. Data collection procedures A. Teams and Data Requirements This is a group assigrunent. Teams can have 3. 4. or 5 membe1'll. Reports by 1,2, or 6 people will receive zero points. Additionally, each student is entitled to asking questions by sending up to 5 e-mail messages. Any further e-mails will not receive a response. You need to calculate the current and optimal capital structure for two companies using the procedure described herein. You are required to use the fmancial information about your companies from the Bloomberg system, as described below. If you are unsure or unable to locate some of those in Bloomberg, alternatively you can use the companies' annual fmancial reports (I O-K or zo-F), usually available on the companies' websites under the "Investors" section. If the financial report is not available, you may go to the Securities and Exchange Commission (SEC)'s website: http://sec.gov and search for the firm you would like to analyze using the following links: Filings and Forms / Search for Company Filings / Company or fund name, ticker symbol ...... The inputs required to perform the calculations are specified in the aCcompanying example file (FIN310]roject_mar251I.xls). You can find most required inputs in the following financial statements: balance sheet, income statement, and statement of cash flows. Make sure. to keep track of the units you work with, since incorrectly using values denominated in thousands ($000) rather than millions ($000,000) can cause interpretation problems....
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- Spring '11
- Weighted average cost of capital, optimal capital structure