Company Business Model and Risk Categorization 15
WACC before COVID-19 21
WACC with COVID-19 13
The report should be double-spaced, with 11-font, and 1” margins. Use appendices as specified. Be sure to include a list of your references at the end of the report.
Assignment purpose:
• understand the systematic risk vs. unsystematic risks of a Canadian publicly-traded firm.
• estimate the WACC of a publicly-traded firm
• explore how WACC of the firm has changed with COVID-19
• use the WACC to estimate the appropriate discount rate for an above-average capital budgeting project for your company.
Question:
Part I: Company Business and Categorization of Risks (not to exceed 3 pages) 15 marks
a) Describe the operating strategy of the firm. In this description do not mention anything about debt or equity. Stick to main revenue streams, type of customers etc. You will get much information in the annual report. 5 marks
b) For many firms, there are many, many risks described in the risks section of the annual report. Place the main risks into two categories. i) Systematic/market/undiversifiable risk and ii) unique/business/unsystematic/diversifiable risk. Select what you believe to be the main risks, paraphrase the description from the annual report into normal everyday language to show me understand these risks. In an appendix, include the pages of the annual report with the list of risks and reference the pages where the list of risks is found. 10 marks