Accounting Question

Can you help me solve Part 2, Part 3, and Part 4 questions in the following attachment? The attachment is a sample of the form. The company we choose is Hershey. Some data you can find on the website may be helpful for this work (https://www.sec.gov/edgar/searchedgar/companysearch). If there is any question feel free to ask me. Please answer questions strictly according to the attachment format, thank you!

Adolf Coors Company NYSE:TAP
Gateway
Securities Valuation Analysis
[Place the analysts’ names and emails here]
Investment Recommendation: MARKET OUTPERFORM
RKY – NYSE (2/18/00)
52 week range
Avg Daily Trade Volume
$ 46 3/16
$45 ¼-$63
138,818
Revenue (1999 Est.)
Market Capitalization
Share Outstanding
Book Val. per Share (12/99)
$ 1,983,112,000
$ 1,702,000,000
36.9M
$22.79
Ratios
Dividend Yield
Return of Equity
Return on Assets
Return on Sales
Asset Turnover
Industry
Firm
1.42%
11.46%
7.06%
4.32%
1.63x
Date of Report Here
EPS Forecast
FYE 12/30
1998A 1999A 2000E 2001E
EPS
$1.87 $2.84 $3.22 $3.65
Est. 5 Yr. EPS Grow. Rt.
13.4%
Ratios
Firm
Forward P/E 14.34
Forward PEG 1.07
M/B
2.03
Comp. Ave.
1.23%
14.82%
6.41%
4.89%
1.31x
Average of Competitors
18.66
1.50
2.97
Valuation Predictions
Actual Current Price
P/E Valuation
PEG Valuation
Residual Income Valuation
DCF Valuation
$ 46.19
$ 60.09
$ 64.76
$ 35.59
$ 57.00
BEVERAGES-ALCOHOLIC
Performance of KO
Trailing
6 mo 12 mo 24 mo
Return on Coors
-18% -18.2%
45%
Return on S&P 500
4.9% 12.2%
35%
Return on Competitors -17.7% -33.2% -30.3%
[Place a Summary of Your Analysis Here]
 Assigning a rating of market outperform on Adolph Coors Company at its current price of
$46 3/16 and a 12-month target price of $64.76 (based on PEG valuation)
 In 24 month period stock has appreciated 45% compared to direct competitors which
depreciated –30% over the same period
 Adolph Coors flagship brand Coors Light is the fourth best selling beer in the United States
 Trading prices are near its 52 week low of $45.25 (28% discount from 52 week high of $63)
 The Company’s unit volume in the premium and above-premium price categories accounts
for 88% of sales
 Despite generally slow growth in the industry, Adolph Coors’ sales are estimated to grow at
a healthy 4.4% over the next five years.
Rating System:
BUY: A purchase recommendation with above average long-term growth potential.
MARKET PERFORMER (HOLD): A recommendation to maintain current positions with returns to match that of the market.
SELL: A recommendation to sell the security (or short the security) as it is expected to decrease in price in the medium term.
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Part 1: Strategic Analysis (2 pages excluding figures and tables)
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Tell us something we do not know about the company, its competencies, demand for its
products, etc., and state the implications for future profitability. Focus on a few items
and dig deep.
Be specific
Avoid mechanical analysis, for example just listing Porter’s five forces. However, an indepth analysis of 1-2 of Porter’s five forces can be a great way to guide your team to
important issues
Analyze the company’s “addressable market.” How large is this market in dollar value
How fast is this market anticipated to grow? What is your company’s percentage share
of this market? Statista (https://www.statista.com), company earnings conference calls,
and analyst reports can be useful sources for this information.
Goal of this analysis
– Isolate source(s) of competitive advantage (Where are customers getting value?)
– Provide guidance for interpreting financial analysis and selecting key ratios to
analyze
– Make conjectures about the sustainability of the competitive advantage to aid in
cash flow and earnings prediction
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Part 2: Financial Analysis (2 pages excluding figures and tables)
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ROE decomposition (and other ratios that provide insight into the success of the current
strategy)
– Use OpROA + (Spread)NetDebt/Equity
Cash flow analysis – how does the firm generate cash? How does it finance its CAPEX
Comparisons over time and across firms
Predictions for future ratios that go into the DCF spreadsheet valuation
Use what you have learned from strategic analysis to describe what the ratios are telling
us.
Print-out the company’s income statements and that of its main competitors. Add this to
an appendix at the end of your report. These income statements are available at
https://www.sec.gov/edgar/searchedgar/companysearch. Check the spreadsheet
computation of NOPAT margin against the value computed by examining the actual
income statement. See if the computations differ. Explain which NOPAT margin
calculation is a better indication of future NOPAT margin.
Goal of this analysis
– Be sure to offer a conclusion about the current and likely future
performance of your company; Select ratios to support this conclusion. Do
not just describe all the ratios. Instead, tell a story using the ratios.
– For example, provide data that will allow us to see whether the firm’s strategy is
successful. Define success as an improvement over time relative to competitors.
– Does the data give insight into the company’s strength? For example, Intel’s
ability to respond to AMD.
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Part 3: Accounting Analysis (2 pages excluding figures and tables)
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Identify critical accounting assumptions
• Identify which of the “4 cases” apply to the firm
• Use turnover analysis (over time and across firms) to determine if potential accounting
problems exist
Look at the difference between operating cash flow and net income to see if the difference
suggests potential accounting problems
Identify nonrecurring items
Goal of this analysis
• Make a statement on whether, in your opinion, accounting statements appropriately
reflect expected performance and provide data to support the conclusion.
• (if applicable) Identify items that might confound financial analysis and PE ratio
comparisons
• (if applicable) Identify items that you would like to ask management about and list some
specific questions you would ask
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Part 4: PE, Forecasted PE, PEG valuations (1 page excluding figures and tables)
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Goal of this analysis
• Explain the PE, Forecasted PE, and PEG ratio comparisons of your company to its
competitors that appear on the cover page.
• Print-out the company’s income statements and that of its main competitors. Add this to
an appendix at the end of your report. These income statements are available at
https://www.sec.gov/edgar/searchedgar/companysearch. Do these statements show onetime items that are likely to inflate or reduce earnings and thus lead to low or high Pes?
• What do these ratios suggest about the relative valuation of the company?
• Is the relative valuation of your company consistent with your strategic analysis?
• Is the relative valuation of your company consistent with your financial analysis (i.e., its
current performance and expected future performance)?
• Are relative differences due to growth expectations, cost of equity, accounting issues, or
misvaluation?
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Part 5: DCF and Residual Income Valuations (1-2 pages excluding figures and tables)
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Valuations using the 3 models
• discounted dividends (if dividends are currently being paid)
• DCF (using Kroger spreadsheet
• Residual income (use three methods from the residual income lecture)
Relate the projections in the spreadsheets to the Strategic analysis and the Financial
Analysis parts of the report.
The analysis should have more depth than Assignment 1. Please see assignment 1 and
reconsider its questions. The hope is that the strategic analysis and the financial analysis
contained in this report will allow better answers than were provided in assignment 1.
Sensitivity analysis
Goal of this analysis: Tell us what you think the company is worth and the range of this
value
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Part 6: References, Figures, and Tables
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“References” Provide a list of sources (analyst reports, news articles, etc.) that were used
to write the report. Be sure that citations in the text of the report appear for each item
here. A parenthetical reference should appear in the text for each item listed here. For
example, if an analyst report is used for statements made in the Strategic Analysis
section, put parentheses containing the author and date of the report in the text. In this
section, put the author, date, report title, etc. so the reader can return to the actual report.
Provide income statements of your company and its main comparison companies.
Provide any spreadsheets or figures here
Please be sure that each item in this section is noted in the text of the report. For
example, “See figure 1” should appear in the text of the report if figure 1 is provided in
this section. That is, do not include figures or spreadsheets in this section that are not
explicitly mentioned in the report.
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