Investments Final Exam -
Instructions and Requirements -
You will select a firm/stock and perform a Valuation Analysis. You must select one of the companies that you personally contributed to your team portfolio so that there is no duplication. You will make a recommendation based on your financial analysis. Your analysis should include (but is not limited to):
1. Your recommendation and 1 year target price.
2. An assumptions page with key inputs and assumptions that support your financial analysis (such as industry and market share trends, end market growth rates, expected growth rates, profitability levels and trends, business drivers, risks, competition, etc.)
3. A valuation analysis of your selected firm. Use the Operating Free Cash Flow method and Relative Value ratios to arrive at the fair value of the company. This should include the use of appropriate historical ratios and forward ratios. Develop summary financial statement forecasts with key line items to support your analysis.
4. An explanation of your conclusion and how it compares to investor expectations for the company.
5. A recommended option hedging strategy based on your 1 year target price. Assume you own 1000 shares of the stock at the current market price. Select either a covered call strategy or a protective put strategy. Calculate the expected outcome in 1 year assuming the stock attains your 1 year price target.
6. A recommended Bull Call Spread or Bear Call Spread based on your 1 year price target. Calculate the expected outcome in 1 year assuming the stock attains your 1 year price target. Use 100 contracts for your option quantities.
7. The analysis will be 2-3 pages plus exhibits. Be sure to cite all sources of input.
Please use the stock Time Warner Inc. and include any Excel sheet you may use.