Corporate Finance

Corporate Finance

ASSIGNMENT TASK – AT&T Inc. Assignment tasks Select a company (AT&T) listed on an internationally recognised and well established Stock Exchange .

Discuss how successful the company has been at delivering value to its shareholders over the past 5 years.

 Complete an EVA analysis of your company for the last 5 years. Clearly show your work rather than using final EVA numbers from another source.

Analyse the Total Shareholder Return (TSR) of the company for the past 5 years, including any key events and compare with a similar company or appropriate benchmark. Undertake a current valuation of the equity in this company, using the following methods:

 Net Asset Value.

 Comparable Ratios (e.g. P/E, P/B, EV/EBITDA). You will need to look at both past results and comparable firms to analyse and justify an appropriate valuation. Note that simply multiplying the current ratio by the recent earnings (or book value or EBITDA) is not sufficient.

 Discounted Free Cash Flow. You will need to forecast each component of free cash flow (e.g. Sales, costs, capex, etc.) for at least 5 years of forecast cash flows and estimate a terminal value, and then discount . Make sure to justify all of your assumptions. You can find information to support your forecasts from sources including the MD&A section of the company’s annual report (or its competitors), news stories, industry trade publications and government or think tank studies on the industry. Videos on how to estimate cost of capital and how to forecast free cash flow can be found in Blackboard under the appropriate Unit. Attempt to reconcile any differences in value that you obtain by using these different methods and state (with reasons) what value you think is correct for the company. You must clearly explain all of your assumptions used in the valuations.

Choice of company; Choose a listed company on a major stock exchange (e.g. London, New York, Tokyo, Mumbai) for which you can access the share price data over the past 5 years. Large companies will provide financial data on the websites, often under a section titled ‘investors’. More information on choosing an appropriate company can be found in the formative assessments.

Guidelines The report should include:

 a key point summary of your conclusions

 graphical illustration, where appropriate

 a bibliography of sources of information used and references to texts or other material drawn upon. You should follow Harvard referencing guidelines

 detailed tables, extracts or copies of financial information should be placed in the appendices if they are necessary to understand your report. You should only include appendices if you refer to them in the body of the report. You do not need to include the entire financial statements.

 You should not embed spreadsheets in the Word document as they will not be seen by the marker. You should only copy those tables which are important for the reader to understand your work. Introduction to the Modul Financial data available includes the Financial Analysis Made Easy database maintained in the School of Management library. Other special reports, for example, Company Focus, are available from the Financial Times Share Service, or brokers’ circulars issued from time to time by the broking arm of numerous finance houses. Data can also be found online from the company websites,, and other internet sources.

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