Applied Financial Analysis
Midterm Exam 1
Due: Beginning of class on Thursday February 20, 2020
You are a new financial analyst at SoCal Management and have been given the following
task to determine on which desk you will work. You are expected to provide back-up for
all statements and calculations.
• Choose a publicly traded company whose name starts with the same letter as your
last name. Consult with classmates with the same letter starting their last name
to avoid duplications of effort. (That is, each student must analyze a different
company.) Ensure that the firm has at least one (1) issue of debt/bonds
outstanding and utilizes both capital and/or operating leases. Do NOT choose a
financial institution or a foreign company trading in the U.S.!
• Download any financial data you may need from any source to provide
management with the following information. (I recommend starting with the 10K
from sec.gov which you should include with your submission. You may also want
to go to the Marshall library to get access to Capital IQ.)
o Prepare a schedule of debt issuances and repayments for the three (3)
years following the latest 10K and calculate the amount of accrued interest
due as of January 31, 2020.
o What is your calculation of the firm’s current weighted average cost of
capital assuming the same capital structure as in the latest 10K? Make
certain that you justify your choice of one calculation method over
o Forecast the Balance Sheet and Income Statement for the year after the
latest 10K. Document any assumptions you made.
o Estimate the last three years of free cash flow (FCF) and forecast forward
one year. Explain the reasons for the method you used to forecast the
coming year’s FCF.
o Assume the FCF model with a terminal value based upon future growth is
appropriate. What terminal growth rate as of the one year in advance is
necessary to justify the firm’s share price as of the closing date of the
financial statements in the firm’s 10K? Discuss the implications of your
o Provide any additional analysis or discussion you believe is appropriate.
• Your submission will be evaluated based upon the quality and clarity of the
analysis, the documentation and the sophistication/appropriateness of the
modeling. Late submissions will not be accepted.
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