University of Lethbridge
MGT. 3040Y– Corporate Finance
Project – Spring Semester 2005
 Contribution to final mark – 30%
 Team project - 3or 4 member teams
 Due date – March 21, 2005 – presentations same evening
 Select either Agrium Inc (AGU.to) or Enbridge Inc. (ENB.to)
Task:
Part 1 – Operating Context - 10%
 Analyze the company’s position in its industry – e.g. SWOT
analysis/Porter’s Five Forces Model
Part 2 - Financial Analysis - 50%
 Financial analysis – what condition is the company in financially?
o Earnings/cash flow/debt levels & capital structure, etc.
 Analyze the company and understand its business model – how does
the company make money? Where is its cash flow coming from ?
Cash Flow Analysis
 Cash flow from assets = cash flow to creditors and shareholders –
trend over 3-5 years
o Operating cash flow
-Net capital spending
-Changes to net working capital
=’s Cash flow from assets
=’s
Cash flow to (from) creditors
Cash flow to (from) shareholders
Mgt 3040 Y – Spring 05 Semester
Team Project
 Consolidated Statement of Cash Flows
o Cash from operations
o Investing activities
o Cash from Financing Activities
 What does this analysis tell you about the financial condition/health
of the company? Has it been able to generate sufficient cash to fund
its capital expenditures or has it been constantly doing external
financing or raising new equity? Is it generating cash from operations
– if not what might be the reasons?
Ratio Analysis
 5 categories
 trends
 peer group analysis/benchmark
Shareholder Value
 share price performance plus dividends
 5 year horizon – if you had invested $ 1000 in shares of your
company what is your return?
o Starting share price vs today’s share price
o Add up dividends
o Total market value today vs starting position of $1000
o Calculate annualized return – time value of money (PV &
FV)
 Discuss this change in shareholder value – how does the rate of
return compare to the return on the TSE index/S&P 500 Index. Has
the company done a good job at generating shareholder value?
Financial Planning
 Calculate internal growth rate and sustainable growth rates and
discuss implications for the company. What do these calculations
imply about future growth of the company?
Part 3 - 25% Theoretical Share Value
 Using the dividend model from Chapter 8 – calculate the theoretical
value of its common stock?
 Is it fairly valued – over or under valued relative to its current trading
position
Mgt 3040 Y – Spring 05 Semester
Team Project
 If you were advising a friend on this particular stock - what would
your recommendation be? – buy/sell/hold? Justify your position
Part 4 – 10% Group Presentation
Part 5 – 5% Paper Presentation (overall layout of paper, grammar,
sentence structure etc)
Mgt 3040 Y – Spring 05 Semester
Team Project