Capital budgeting
Discussion – Collecting Real Data
Many assignments of this course require dealing with real data, so you will have to know how to collect financial data. Many useful sources are listed in Course Resources under Webliography.
For this exercise, please choose a company that went public in 2012-2019 and then find the following information: 1) the date company went public;
2) how many shares it issued;
3) at what price it issued shares (IPO price);
4) what was the opening price on the first day of trading;
5) what was the closing price on the first day of trading.
What was the dynamics of the share price? Share your thoughts.
The best source of some of this information is in company’s prospectus, so called form 424b4, which is filed with the SEC and available through its Electronic Data Gathering, Analysis, and Retrieval system (EDGAR https://www.sec.gov/edgar/search-and-access#.VL3aEleN2cc ). Opening and closing prices are available from numerous sources, including, e.g., Yahoo Finance.
Discussion – Lyft and Uber Risks
In 2019 two ride-sharing companies – Lyft and Uber – went public.
Whats are the risks that these companies are facing? Are these risks similar or different for both companies?
In 2020, with the pandemic we have an entirely new risk for these firms. Do you think these risks were “priced in” when the firms went public in 2020?
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Discussion – Forecasting Your Company’s FUTURE Cash Flow (we are working with Pfizer)
In order to value a company that you have chosen (PFIZER) in the first topic this week, you would need to forecast its future free cash flows. How would you approach this task? Using downloaded real data, try to make the forecast and see, what issues you might have.
Discussion – Risk Management Analysis and Project Valuation
Financial manager has to consider many different risk factors in risk management analysis of the project.
Brexit can have a dramatic impact on businesses in the EU and rest of the world.
Choose a company with business activities related to the UK – it can be an importer/exporter, or a
company that uses UK for logistics or other business purposes. Introduce the company to the class and
discuss, what risks Brexit imposes on its business activity and how the company manages this risk.
Discussion – Forecasting Top-Down or Bottom-Up?
To forecast future cash flows sometimes companies use top -down and sometimes bottom-up approach
(and sometimes both)? What are the advantages and disadvantage of each of them?
In forecasting your company cash flow in earlier discussion topic, what approach did you and your
classmates use, how would you compare the two approaches in this case?
Attention:N Please notice that this question is about forecasting future cash flows the mselves. “top-down” and “bottom-up approach, can be applied to other areas, which are beyond the scope of this
question.
