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The Term Paper

FIN 408, Course Title: Corporate Finance


Answer the Following Questions from the Annual Reports of
one of the listed companies in DSE
I. Corporate Goal

1. What is the corporate goal of your firm? Do you think the goal of the firm is well
defined? If the goal of the firm is not stated anywhere in the annual report then what do
you think the goal of this firm should be? Analyze the provision of information in the
Annual Report in relation to the strategic thinking of a company in terms of corporate
objectives.
2. What is your comment regarding the corporate social responsibility (CSR) of the firm? Is
anything stated about the CSR in the annual report?

II. Valuation

3. What is the book value of the firm?


4. What is the market value of the firm?
5. Using Price-earning multiples of the industry, find out the price of the share of your
company.
6. Compute FCF to the equity-holders over the 5 years forecasted periods and discount
these free cash flows at the cost of equity (with an average growth rate) to arrive at the
price of the stock of your company.

III. Financial Statements, and Analysis

7. Analyze your firms behavior with the analysis of structure, conduct and performance of
the industry to which your firm belong?
8. Evaluate the firms financial condition of the recent five years using the ratios like (a)
liquidity (CR, QR), (b) efficiency & activity (A/R period, Inventory period, TAT, operating
and cash cycle, (c) solvency (debt equity ratio, debt to total asset, debt service coverage
ratio (d) profitability (OPM, NPM, ROA, ROE), and (e) market (BV/MV, P/E ratio. TOBIN
Q).

9. Prepare five factor Du Pont Analysis for the firm. If you want to increase the ROE what
may be your course of actions? Suggest specific actions.

Mahmood Osman Imam


IV. Cost of Capital and Capital Structure
10. What is the companys cost of equity? What is its cost of debt? What is this company's
current cost of capital (hurdle rate)?

11. Analyze the optimum debt equity ratio of the company using the checklist of capital
structure.

V. Dividend Policy

12. What is the last five years dividend pattern of the firm?

13. Prepare a Table on the computation of the following parameters over the five recent
years in order to assess the dividend policy of the firm.

DPS (Cash Div. per share and stock div. per share), EPS, DPR, OCF per share, FCF per
share, MP, P/E ratio, P/E multiple of the Industry/sector, BV per share, Reserve & RE per
share, Sustainable Growth rate (G), Inflation rate, GDP growth arte.

14. Make judgments for inculcating the stylized facts of the dividend behavior in your firm.

Mahmood Osman Imam