University of Lethbridge
MGT. 3040Y– Corporate Finance
Project – Spring Semester 2007
 Contribution to final mark – 30%
 Team project - 3or 4 member teams
 Due date – March 15, 2007 – presentations same evening
 Select either Transalta Utilities (TA) or Agrium INC (AGU )
Task:
Part 1 – Operating Context - 10%
 Analyze the company’s position in its industry – e.g. SWOT/’’TOWS’
analysis/Porter’s Five Forces Model
Part 2 - Financial Analysis - 50%
Overall Objectives of Part 2 A&B
Financial analysis – what condition is the company in financially?
Analyze the company and understand its business model – how does the
company make money? Where is its cash flow coming from? Which part of
the company’s operations contributes the most to cash flow?
Part 2 A
Cash Flow Analysis
Consolidated Statement of Cash Flows (from the company financial
statements)
o Cash from operations
o Investing activities
o Cash from Financing Activities
Mgt 3040 Y – Spring 07 Semester
Team Project
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Use the above model in analyzing the company’s cash flow
Cash flow from assets = cash flow to creditors and shareholders
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
 Explain how this model differs from the Consolidated Statement of
Cash Flows – conceptually
 What does your 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?
Part 2B
Ratio Analysis
 Apply all 5 categories
 Trends – 3 year minimum
 Interpretation of results – what do the ratios/trends tell us about the
financial condition of the company
Part 2 C
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?
Mgt 3040 Y – Spring 07 Semester
Team Project
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Part 2 D
Financial Planning
 Calculate internal growth rate trend and sustainable growth rate
trend 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
o What might be the reasons for major differences between the
theoretical value and its current trading position?
 If you were advising your firm 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 07 Semester
Team Project
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Mgt 3040 Y – Spring 07 Semester
Team Project
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