Regular final exam scheduled for next Monday from 11:15 AM to 1:15 PM.
Early final exam on Wednesday in room 170 from 11:00 AM to 1:00 PM.
Around 55-60 students signed up for the early final.
If unprepared, students may opt-out and take the regular final instead.
Project Submission
Project is due by 5:00 PM on the same day.
Late submissions will not be penalized harshly; however, it's advised to submit early.
Submit in PDF format for easier grading.
Project Importance
Purpose of the project is to expose students to real-world company analysis and financial metrics.
Students should focus on understanding where their data fits within the market context, encouraging perspective and critical thinking.
Key Learning Objectives
Appreciate the complexity of real-world companies, including how subjective judgments affect financial analysis.
Recognize the need to critically evaluate models and computations rather than taking them at face value.
Corporate Governance & Shareholder Power
Discussed how different stakeholders have varying interests in a company:
Managers prioritize personal ambitions.
Shareholders seek profit maximization.
Power dynamics often lean more towards managers, especially in companies with dual-class share structures.
Task: Rate your company’s governance and the power dynamics on a scale of 0 to 2 (0: shareholders have no power, 2: shareholders have complete power).
Risk Assessment
Discussed marginal investors: investors who represent a diversified portfolio that influences market prices.
Beta: A measure of risk based on historical stocks data; encourages understanding of the concept of risk, emphasizing the critical thinking needed to assess it thoroughly.
Importance of using bottom-up beta for a more comprehensive analysis versus regression-based methods.
Cost of Capital
Cost of Equity: Derived from the risk-free rate adjusted by the equity risk premium.
The equity risk premium is volatile and varies across time and geography.
Cost of Debt: Reflects the company's creditworthiness, using the marginal tax rate for after-tax calculations.
Project Evaluation Metrics
Accounting Returns: Various pitfalls encountered during calculations including:
Negative book equities and their implications for company evaluation.
How accounting trends and projections may mislead regarding the underlying company value.
Final Takeaways
Need to critically analyze potential value changes in companies, understanding that they should reflect real efficiency and profit generation potential.
Focus should be on long-term project evaluations corresponding with real operational strategy, rather than purely financial metrics that can obscure actual performance.
Future Prospects
Recommended to take a nuanced view of company potential and performance beyond simple metrics, considering growth, competitive advantages, and strategic management decisions.