Analysis of a Publicly Traded Company's Bond and Stock

Bond Analysis

Part I.

In order to complete this part you will have to choose a publicly traded company which also have issued bonds.

You can check here if your company issued any bonds: http://finra-markets.morningstar.com/BondCenter/Default.jsp (Links to an external site.) http://www.hl.co.uk/shares/corporate-bonds-gilts/bond-prices/gbp-bonds (Links to an external site.) https://www.fixedincomeinvestor.co.uk/x/bondtable.html (Links to an external site.)

1. Find the Bond prospectus of the company and prepare a half-page report on the bond (nominal value, dates issued, redemption date, coupon dates, main bond covenants imposed on the rm, special protections clauses, etc). This information should include all details of interest for prospective bondholders. Please upload the prospectus along with your report.

2. Find the credit rating of the company, and explain what it means from the bondholder perspective. 3. Find the most recent price of the bond and show how it can be used to determine its YTM (Yield to Maturity). Show all your calculations in word document (formula and values used) and upload your excel file to support your calculations. If the bond you have chosen has not been traded recently you can assume a hypothetical price and show the YTM calculation for it.

Choose a publicly traded company, which pays dividends, go to its investor relations website, and also get the share price and trading volume information from a trading data source such as Yahoo Finance and/or Google Finance.

1. Describe the types of shares and trading of these shares in stock market. You can answer some or all of the following questions as appropriate for your stock. What type of shares and how many shares of each type has the company issued? How widely held and traded is the stock? What proportion of its shares are widely traded (?oats)? How many analysts follow the ?rm? How much trading volume is there on this stock?

2. Describe the ownership of this stock. You can answer some or all of the following questions as appropriate for your stock. Who holds stock in this company? How many stockholders does the company have? What percent of the stock is held by institutional investors? Does the company have listings in foreign markets? (If you can, estimate the percent of the stock held by nondomestic investors.) What percent of the stock is held by insiders in the company? What percent of the stock is held by employees overall? (Include the holdings by employee pension plans.)

3. Using the beta published by Yahoo Finance (or other data provider), risk-free rate equal to 3-month treasury bond yield and a 5-year return on appropriate market index, calculate the required return on the stock. (Hint: use CAPM formula).

4. Get the last 10 years of dividend information, and calculate the compound annualised growth rate of dividends. Do you think the dividends are likely to grow at this rate in the future? Explain why or why not. If not, what alternative growth rate you can suggest?

5. Using the Gordon growth model and your outputs in questions 3 and 4 calculate the intrinsic value of the stock. Is the value obtained sensible compared to the current market price? Is the stock undervalued or overvalued? You should submit all your work in one doc file, and attach the excel file containing calculations separately. I've attached a sample so you can have a better idea of the homework.