15.535  Business Analysis Using Financial Statements

Monday December 10 is the due date for team projects. Please bring a hard copy of your team’s write-up to class next Monday. Also, please email Ari and me an electronic copy of your slideshow presentation by NOON next Monday so we can have all presentations loaded on a single computer.

Presentation order will be determined randomly by Ari and will not be disclosed in advance so all teams need to be prepared to present first thing next Monday. Presentations are only 6-8 minutes (time limit strictly enforced) with 3-5 minutes left for questions. The purpose of the presentation is to provide a buy, sell, hold recommendation on your company and present 2-3 main reasons supporting your recommendation. Essentially, your presentation is an abridged investment pitch. Because time constraints make it unlikely that all groups will get to present, presentations themselves will not be graded, but I will review presentation slides as a component of your write-up grade. Also, comments/questions during the presentations will continue to count towards class participation.

Ari and I will be available to answer last minute questions this week and over the weekend. Do not hesitate to contact us.

This Wednesday we will be joined by Andrew Janower, a Managing Director at Charlesbank Capital Partners, a Boston-based private equity firm that specializes in middle-market investments primarily in US companies. Andrew will be speaking to us about how he uses accounting information in his work.

Questions for New Century Case:

1.) What was New Century’s business model? What were the primary risks faced by New Century?

2.) Describe in words how New Century accounts for the different ways it treats a mortgage? How were the primary risks faced by New Century reflected in its financial statements?

3.) Why did New Century fail?

Questions are in the case. Please prepare questions 1, 2, 3, and 5. When valuing Square D, use both free cash flow and abnormal earnings approaches. Assume a WACC of 12% and cost of equity capital of 15%.

Questions for Krispy Kreme Case:

1.) How is Krispy Kreme performing? What are the key success factors for Krispy Kreme to continue its growth? What are the key risks?

2.) Analyze the process used by CIBC to forecast Krispy Kreme’s revenue. Do you agree with CIBC’s assumptions, methodology, and conclusions?

 

Krispy Kreme financial statements have been posted to Stellar. Case write-ups should be no more than 1-2 typed pages, along with any supporting exhibits. Case write-ups are due at the beginning of class on the due date. Project teams can turn in a single write-up but all team members should be prepared to discuss the write-up in class.