Conclusion. Accounting, Finance and SPSS Assignment.

Guidelines for Case Study:
I. Case Objective:
The objective of this case is to understand key knowledge we learnt in class, including corporate governancestructure and capital structure, stock valuation methods, and the Capital Asset Pricing Model (CAPM). Youshould be aware that the reality is much more complicated than the theory, so please be prepared to deal withany new knowledge through self-learning. Please select ONE publicly listed NON-FINANCIAL firm in anystock market, and then download its annual report in ONE year.
You can freely choose which firm to analyze, but I suggest you selecting firms with relatively simplebusiness structure, such as retail firms. Also, there is no requirement for the year of annual reports, and theycould be the most recent annual reports, or annual reports in 2000 or any other year. Just select one year asyour main reference, and use other years as supporting resources if needed. Also, if necessary, please specifyall your assumptions to simply the analyses.
II. Data sources:
Annual reports and other disclosure filings can be found in the stock exchanges websites, corporate officialwebsites or major financial websites. Here are some links for major stock markets, and you could find otherrelevant links on Google.
US market--U.S. Securities Regulatory Commission (SEC): Annual reports are 10-K filings (or 20F filingsfor some foreign companies), https://www.sec.gov/edgar/searchedgar/companysearch.html.HK SAR--Hong Kong Stock Exchange: https://www.hkexnews.hk/. See “Listed Company
PublicationsView Publications by Company”.
Mainland China--China Securities Regulatory Commission:
Shanghaihttp://www.csrc.gov.cn/pub/newsite/xxpl/sjspl/;
Shenzhenhttp://www.csrc.gov.cn/pub/newsite/xxpl/shjspl/.
The quotes of individual stocks and stock indexes can be found in major financial websites, such as Bloomberg,Yahoo Finance, Wall Street Journal, etc. The data about macro-economic indicators such as GDP or fixedincome interest rates can also be found through the above websites, as well as the World Bank, U.S. Fed, etc.
III. What you need to submit:
All class will be divided into eight groups (6 people in each group) either by random assignment or voluntarygrouping. After group members are settled, please email me your group members, selected company, andpreferred presentation date. The presentation will be held in week 11 and week 12, with maximum 4 groupsin each session. The choice of timeslot follows the first-come-first-served policy, so please email me as longas you make a decision. If you want to change to another target company any time before the presentationweeks, just feel free to email me to make sure that the same company has not been selected by other groups.To facilitate your analysis and resolve your questions, every group is required to schedule a Zoom meetingwith me or come to my office hours before presentation.
1. A written report. This written report should be a well-structured analysis addressing the problems inSection IV. The maximum is 15 pages, excluding the reference list. The reference list should include link(s)of major annual report(s), links for stocks and indexes information, any new articles or academic papers citedin your written report. This written report accounts for 10 points in total.
2. Presentation slides. Each group is required to conduct a 40 minutes presentation showing how you addressall the problems in Section IV. All group members are expected to contribute some time during thepresentations, and will be graded separately based on individual performance. For ease of grading, pleaseemail me your presentation slides and a name sheet listed by the order of presenting before class.Presentation accounts for 10 points in total.
3. Peer evaluation. Each member in a group should submit a grading sheet of all other members in the samegroup. Please fill out the grading form in Section V, and email it to me by the presentation session. Thewithin-group average will be your points for this part, which accounts for 10 points in total. IV. Problems to Address in the Case Study:
Part One: Business Overview.
Please describe the business background of the firm you selected, such as firm information (e.g., firm history,firm industry, main business/products/services, annual revenue, total assets, common equity, etc.) and stockinformation (e.g., number of shares outstanding, stock price performance in past year, the most recent closeprice or market capitalization, etc.).
Part Two: Corporate Governance.
Please describe the firm’s ownership structure, such as major institutional and/or individual shareholders,shareholders with different voting rights, recent major changes in ownership structure. The objective is tounderstand how cashflow and voting rights are distributed among shareholders, whether the ownership isdiversified or concentrated, whether the founder or top managers have superior control of the firm.Please list all the directors on the board and their roles. The objective is to evaluate the board independence,and whether you think the board structure would be effective in terms of monitoring and offering advices.Please describe the major compensation plans for top executives (CEO, CFO), such as stock options, fixedsalary or performance-based cash bonus. The objective is to evaluate whether you think the compensationstructure can mitigate the agency problem.
Part Three: Capital Structure.
Please describe the equity financing methods of the firm. For example, what is the amount of common equity?What is the amount of retained earnings? Are there any external equity issuance activities in the stock marketsrecently? Are there any stock repurchase activities recently? Are there any cash dividends distributionsrecently? The objective is to have a glance of how firms raise equity and how firms make distributions toshareholders.
Please describe the debt financing methods of the firm. For example, what is the amount of long-term debt orshort-term debt? Does the firm use revolving credit lines? Is the debt collateralized or secured? What is theamount of debt borrowed from the banks? What is the amount of publicly listed bonds issued by the firm?Does the firm repay any debt recently? Does the firm have any plan to issue new debt recently? The objectiveis to have a glance of different types of debt a firm can use. Also, please evaluate whether you think the debtlevel is high or low given the firm’s performance.
Part Four: Stock Valuation.
The objective of this part is to estimate stock price per share based on the models we learnt in class. To makethe process easier, here are the suggested steps:
First, assume the firm will exist forever, and hence use an infinite timeline. Meanwhile, choose at least threedifferent discount rates for estimation, such as 5%, 10%, 15%, or other numbers you prefer.Second, when predicting future cash flows to shareholders, you have two options. One is to use free cash flowsfrom the Cash Flow Statements, and the other is to use dividend payments. The choice between these twodepends on your own justification.
Third, for each discount rate, choose a stock valuation model we learnt to estimate the present value of futurecash flows or dividends. You can assume a constant growth rate of future cash flows based on a historical average growth rate, or you can also use the two-stage model. Again, the choice depends on your ownjustification.
Fourth, divide the present value in step four by the number of shares outstanding, and this gives you anestimate of stock price per share. You can receive a group of estimates based on different discount rates.Fifth, compare your estimates with the actual stock price in the market. Evaluate whether it is worthwhile tobuy the stock.
Part Five: CAPM.
The objective is to practice the application of the CAPM. You can refer to the excel file inserted in the “Returnand Risk” slides to see the procedure in detail. Here, I list the steps briefly.
First, determine an estimation window and the return frequency, such as daily returns for one year, monthlyreturns for five years, or annual returns for 30 years. The bottom line is to have enough observations (>=30).Second, based on your estimation setting, download the corresponding close prices (adjusted for stock splits)for the stock you choose. Meanwhile, download the corresponding market index history (the index shouldrepresent for the general market of the stock you choose). Then calculate the annualized returns for the stockand the index.
Third, determine the proxy for risk-free rate. If the firm is listed in the U.S., you should use U.S. Treasuriesrates. If the firm is a HK listed firm, you have more flexibility because the capital markets in HK have lowrestrictions, and the currency is linked to US dollar. So, you can either choose HK government bonds yield orU.S. Treasuries rates. Moreover, the maturity of chosen fixed-income bonds should be consistent with yourestimation window. For example, you should use short-term fixed income rate if you estimate monthly returnfor three years. In addition, make sure that the rate is translated into annualized rate.
Fourth, calculate stock risk premium and market risk premium. Regress stock risk premium on market riskpremium, and the coefficient on market risk premium is the coefficient beta based on the CAPM.Fifth, compare your estimate of beta with Yahoo Finance. Also estimate what the stock return will be basedon the CAPM if future market return is 20% and risk-free rate is 4%.
Part Sixth: Conclusions.
Summarize your findings: Evaluate whether you think the governance structure is good or not; evaluatewhether the stock price is high or not; estimate the coefficient beta, and evaluate whether you think the firmis riskier or less risky than the market; calculate the debt-equity ratio or debt-assets ratio of the firm, andevaluate whether you think the firm uses too much debt.Also, point out any interesting knowledge beyond the textbook you learnt through the case, or anything elseyou want to share with classmates. 
Presenting Order
The Company you study:
Presentation Date:
Number Name Student ID
1234567891011 V. Peer Evaluation Form:
Please truly evaluate the performance of all group members (including yourself) based on the contributions inconducting the case study. The maximum of each person is 10 points, and your grade for this part will be thewithin-group average of all peer evaluations. Please DO NOT FORGET to sign your name and student number,and a form without signature will be considered as invalid. In addition, this form will be strictlyconfidential after submission, and I will never release the signed form to anyone else without yourpermission.
The company we need to analyze is Lacoste.
Part Sixth: Conclusions.
Summarize your findings: Evaluate whether you think the governance structure is good or not; evaluate
whether the stock price is high or not; estimate the coefficient beta, and evaluate whether you think the firm
is riskier or less risky than the market; calculate the debt-equity ratio or debt-assets ratio of the firm, and
evaluate whether you think the firm uses too much debt.
Also, point out any interesting knowledge beyond the textbook you learnt through the case, or anything else
you want to share with classmates.