Finance homework
Select a major industrial or commercial company based in the United States and listed on one of the major stock exchanges in the United States. Each student should select a different company. Avoid selecting an insurance company
or a bank, because the financial ratios for these financial businesses are different. Write a 4-pages NO double-spaced paper answering and demonstrating with calculations and financial data the following questions.
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What is the name of the company? What is the industry sector?
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What are the operating risks of the company?
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What is the financial risk of the company (the debt to total capitalization ratio
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Does the company have any preferred stock?
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What is the capital structure of the company: short-term portion of long-term debt, long-term debt, preferred stock (if any), and market value of common stock issued and outstanding?
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What is the company’s current actual beta?
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What would the beta of this company be if it had no long-term debt in its capital structure?
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What is the company’s current marginal tax
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What is the cost of debt before and after taxes
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What is the cost of preferred stock (if any)?
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What is the cost of equity?
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What is the cash dividend yield on the common stock?
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What is the weighted average cost of capital of the company?
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What is the price earnings multiple of the company?
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How has the company’s stock been performing in the last 5 years?
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How would you assess the overall risk structure of the company in terms of its operating risks and financial risk (debt to capitalization ratio)?
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Would you invest in this company? Why or why not?
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The last page of your paper should be a Bibliography of the sources you used to prepare this paper.
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