You have just graduated from Shorter College’s MBA program and have secured a position as a fund manager for a well-known investment banking house. You have been given $300 million to manage/invest. The fund is a pension/retirement fund so its perspective is long term with low risk of loss of capital and a required return of 5% per annum. In order to reduce the investment risk you are instructed to make 12 investments of $25 million dollars each. Your challenge is to determine if the fund you are managing should invest $25 million dollars in the stock of the company you have selected for analysis. Your analysis, based on the concepts covered in this course, should address each of the following:
1. Business Strategy Analysis: Develop an understanding of the business and competitive strategies of the company. Which of the three generic competitive strategies does it utilize (low cost provider, differentiation, or focus). This should be covered in no more than three paragraphs. Do not spend time writing a history of the company. This is an analysis, not a history lesson.
2. Accounting Analysis: Do the accounting practices adopted by the company generally reflect and accurate picture of the economic performance of the company? (Did your research find any public announcements of restatement of earnings or other financial statements that would indicate the financial statements may be of dubious value? Check the SEC 8K filings).
3. Financial Analysis: Analyze and evaluate the financial ratios and cash flow measures of the company relative to its historical performance. For purposes of this project, a two- year reflection is sufficient. You should use at least 10 of the ratios including all four of the profitability ratios. Please be sure to speak to the ratios with respect to the meaning of their measurement and compare to other industry peers.
4. Prospective Analysis: Develop forecasted performance measures and list the assumptions associated with your forecast. List your assumptions and reasons for your forecast. You may also cite the works of other analysts who have published forecasted earnings for the time frame you are addressing.
5. Conclusion: Will you or will you not invest $25 million in this particular Company? Support your conclusion. Remember a negative conclusion is just as valid and valuable as a positive conclusion
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