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The term project consists of estimating the Weighted Average Cost of Capital (WACC) of a company as it was discussed in class. In order to improve your work, please follow these instructions:
• The work must be done in group.
• The group will decide for a publicly traded CANADIAN company. I suggest a company that has been traded on the stock market for at least 10 years.
• I suggest that students avoid Banks and all other financial institutions. The financial statements of these companies are too complicated for a term project.
• Please make sure that the company has common stock AND debt (in form of Bonds). If the company has also preferred stock and retained profit, it is totally acceptable, even better. As for other financial instruments such as commercial papers or any short term debt, you can neglect them.
• The group finds public information available about the company (divisions, activities, financial statements etc….). The information can be available on the company’s website.
• The group will estimate the cost of each financial instrument and calculate the WACC, as it was shown in class.
• For common stock, I strongly suggest that you use “Capital Asset Pricing Model” (CAPM) as shown in class.
• If you decide to use Gordon model, your decision should be well justified in your report. Also, the detail of your estimation of growth rate of dividend “g” should be in the report.
• For the beta, it is published by many companies. Otherwise, the group should estimate the beta.
• This project is not simply about calculus. Students are supposed to estimate the WACC like an analyst and make a report to the board of Directors. Therefore, you start the report with an introduction about the company, financial instruments that it usually uses to finance its projects, the total market value of each instrument. Then, you explain and present your estimations.
• The report must be prepared professionally (well-structured, NO handwriting and clean).
• If there are any biases related to your data or in your estimations, they should be mentioned in the conclusion.
• When you use some information in your report, make sure that you refer to the source of the information.
• The sources of the information should be presented in the appendix or in footnotes.
• The report takes approximately 5-7 pages (Not including the appendix), but I’m rather flexible on the number of pages.