Highly Recommended
Martin Fridson (MF), 1996, Financial Statement Analysis: A Practitioner's Guide, 2nd Edition, John Wiley
Tom Copeland, etal (TC), 1996, Valuation: Measuring and Managing the Value of Companies, 2^nd Edition, John Wiley and Sons.

Class Packets: Available at the NYU Main Bookstore located at 18 Washington Place.

n Lecture Handouts Packet
n Finance Project Packet
n Three Examples of a Student Reports:

ΠHimanshu Patel, Student Analyst, Fall 96 (JP Morgan, Equity Analyst)
� Brett Rochkind, Student Analyst, Spring 98 (Summer Intern at Morgan Stanley, Equity Analyst)
Ž Pollack Solanki, Student Analyst, Spring 98 (Summer Intern at Ernest & Young, Equity Analyst)

Grading Policy:
 

Class Participation/ Turning Assignments in On Time and of high Quality	5%
Case Project: Due December 1, 1998 (late projects are not accepted)	50%
Midterm Exam: October 22, 1998 (Tentative date)	20%
Final Exam: December 17th 4-5:50pm	25%

                
                                                                              
The Case Project is an individual effort with each student responsible for 1 stock.  The case is 150-200 pages in length.  Students use the investment report to showcase their abilities to potential employers at the most prestigious investment banking firms.

Grading is based on the class curve rather than the total number of points and adheres to the grading curve set by the Finance department. The professor has no control over this curve.
 

What is Expected of Students:

ΠStudents are expected to ask another student for lecture notes or make other arrangements if he or she is unable to attend class e.g., religious holidays.

� No makeup exams are given without a signed medical excuse from a doctor.

Ž Students are required to possess a calculator with financial functions.
 

WARNING: This is a labor intensive class. The philosophy that we use is to talk about it, read about it, and then JUST DO IT! No incompletes will be given.

Purpose: The purpose of this paper is to

Πacquaint you with various investment information
� enhance your understanding of various analytical topics covered during the semester
Ž get you a job by showing this project to an employer in a job interview

Due Date: December 1, 1998

Format: The paper must be laser printed. References to outside sources should be footnoted at the end of the paper (this includes any class handouts). In the Appendix to each section, be sure to explain the technique(s) used/description of model, the assumptions and limitations of the model, and also put all intermediate calculations here.

Individual Work: Each student is responsible for 1 stock in a given industry. Each individual in the class will not be allowed to choose a stock that another individual has selected or a stock used in the prior semester.

Outline:
I. Executive Summary: Final Stock Recommendation
II. Company Overview and Recent News about Company
III. Industry Analysis and Relationship to Company

• Industry Overview
• Analysis of Basic Competitive Forces in Industry (ala Michael Porter)
• Analysis of Management Strategies relative to the Industry
• Relative Industry Valuation

• Ratio Analysis (including DuPont Model)
• Absolute Valuation Models - Dividend Discount (DDM), FCFE, EVA/MVA,
• Relative Valuation - P/E, PBV, P/FCFE, Firm Value/Revenues, Firm Value/EBIT,etc

• Moving Averages & Relative Strength
• Earnings Surprise Models

1. Your packet at the bookstore contains 3 typical student reports from prior semesters. Each report has certain weaknesses and therefore you should treat these prior reports only as a starting point or point of departure in doing your analysis.

2. Unfortunately, due to administrative decisions to increase the size of this class, there will not be any resubmissions of the project allowed prior to the final submission. This policy may change if the class size is reduced to roughly 35 students.

Staying On Course: You are required to submit your preliminary drafts to me at the end of each time period listed below so that I know you are keeping up. The grade on your preliminary drafts are preliminary.
 

The grade on your final project is final. There will be no incompletes given in this course.

  Week                                Project Work To Be Completed Potential Data Sources/Software

Sources: RMA Annual Statement Studies (Robert Morris Associates), Industry Norms and Key Business Ratios (Dun & Bradstreet), Almanac of Business and Industrial Financial Ratios (Troy), and Trade Publications. For certain industries such as banking and insurance, the appropriate ratios will be found in tradebooks such as Shesnouff (banks) which compiles information in the call reports and the Best Reports (Insurance). Also

check the Internet (e.g. www.wsrn.com).

Sources: Bloomberg, Compustat and CRSP on srds, ValueLine, First Call on America Online, Dow Jones News Retrieval, www.wsrn.com

Perform a relative valuation analysis using firms that are "comparable" to your subject firm and using variables that are appropriate to your particular industry to adjust the industry P/E to arrive at the justified P/E for your stock and stocks of your comparables. Address questions at the end of this section in the finance project handbook.

Do some simple sensitivity analysis on the number of days to use in the short term/long term moving averages. Construct a matrix showing the profit from varying the number of days in the short/long term series. Also perform some simple sensitivity analysis on the significance level to use as the appropriate Z score in the earnings surprise model e.g. 90%, 95%, etc. Construct a matrix showing the profit from varying the Z-score (significance level).

Calculate your profit margin if you had relied on each of these alternative systems. In addition to this, calculate profits if you had used a buy and hold strategy. Address the issues in the technical analysis handout.

Sources: Historical Price Quotes and First Call on America OnLine, Bloomberg, CRSP on srds.