Using the GAAP balance sheet, for each item, determine where it should be classified in the economic balance sheet (i.e., core operations, nonoperating net assets, debt claims, other capital claims, or equity claims). Create a two-column table in Word to show the corresponding accounts.
Determine whether any other items should appear on the economic balance sheet that is not on the GAAP balance sheet.
Determine if information exists in the annual report or elsewhere that can assist in valuing the nonoperating net assets, debt, and other capital claims.
Part 2
Estimate the cost of equity, WACC, and unlevered cost of equity.
Use the same company (Dell).
Find the beta for your company use: https://finance.yahoo.com/q/ks?s=AIG
Estimate your company's cost of equity.
Estimate your company's weighted-average cost of capital.
Estimate your company's unlevered cost of equity.
Show your calculations in an Excel document. Be sure to label each calculation clearly.
Part 3
Combined income and cash flow statement
Download the company's annual report from its website, or the company's Form 10-K from the U.S. Securities and Exchange Commission (SEC) website [www.sec.gov].
Confirm that the firm's income, dividends, and other capital transactions explain the change in equity for the most recent year. (You may need to consult the statement of shareholders' equity.)
Confirm that the firm's cash flow statement begins with the same net income amounts found in the income statement.
Confirm that the firm's cash flow statement shows a change in cash that is equal to the difference between cash shown on the balance sheet at the beginning and end of the year. In Excel, construct a combined income statement and cash flow statement.
Write 1-2 paragraphs that answers the following: what would you do if you found there was a huge difference in the net income amounts and the reported cash flow amounts? How could technology limit the likelihood of this happening again?
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