1.Select a publicly traded company (preferably manufacturing oriented; do not use a financial services company such as a bank or a bank holding company) and obtain a copy of their most recent year-end financial statements. (Use the Yahoo finance site for your data source – www.finance.yahoo.com. You will find that larger, more mature companies are easier to use when developing forecasts. Annual Reports can supply supplemental information and can be obtained from stock brokers, through the internet and from the companies themselves.

2.Perform appropriate ratio analyses on the balance sheet and income statements of your company using techniques discussed in chapter 2 of your textbook. Compare your company to a competitor (best) or prior years. Information can be found on or http://moneycentral.msn.com. Elaborate on your findings. From the Wall Street Journal or another source, determine your company’s current stock price, current dividend, and P/E ratio. Determine the shareholder’s expected rate of return and calculate your company’s weighted average cost of capital.

3.Project your company’s income statement and assets for five years. (See chapters 3.) Identify your assumptions for major categories. Determine how you will finance your balance sheet (long-term debt, preferred stock, and equity). Explain your decisions.

4.Using ratio analysis, compare your fifth year to the current year and discuss.

5.Compute the expected stock price at the end of the fifth year. Assume your stockholders have the same expected rate of return as you computed in paragraph 2.

6.Based on your projection and the stock price determined above, how does the intrinsic value compare to the current price of the stock? Discuss.