Which company has a better risk-return profile (i.e., compare expected returns, standard deviation of returns and beta) and why?
Write an executive summary at the beginning of the paper. A good executive summary should
summarize the paper findings after providing a background of the work and should be
substantial in size. (20 Points)
2. Write about your companies: name, size, operating region/s, products, and services etc.
3. Write an industry analysis. In the industry analysis, you need to include industry desсrіption,
industry performance, industry outlook, major companies. Your discussion should be supported
by key statistics. You also need to include COVID impact on the industry. (10 points)
After you calculate all the ratios, you need to write both historical and comparative analysis for
your companies. When writing your analysis write separate paragraphs for liquidity, efficiency,
leverage, coverage, and profitability ratios. (15 points)
6. In your profitability analysis, using DuPont breakdown analyze ROEs of your companies. Which
factors are more influential (i.e., driving the ROE up)? Which factors need improvement?
7. Based on your analysis, which company performed better and is in a better financial position? Is
there anything that any of these companies can do to improve their performance? (10 points)
8. Using the price data downloaded for your companies and SPY, estimate expected returns and
standard deviation of returns of your companies and SPY. Expected return is just a simple
average of returns. Before estimating all these, you need to first estimate returns. You will use
the close prices to calculate returns. Return in any month for a security can be calculated as
Close price of that month divided by close price of the previous month minus 1. For example,
Walmart’s return in month i can be calculated as RWMT,i ＝ (Close pricei / Close pricei-1) -1.
9. Following the market model regression, calculate beta for your companies. You need to regress
your company returns on SPY returns to get company betas. For example, for Walmart beta, you
need to regress Walmart returns on SPY returns (i.e., Walmart return is dependent variable y
and SPY return is independent variable x). Beta is the coefficient of the regression. (20 points)
10. Explain the results from the last two questions. In your return analysis, you need to include your
companies’ expected returns, standard deviation of returns and beta. Which company has a
better risk-return profile (i.e., compare expected returns, standard deviation of returns and
beta) and why? (10 points)
11. Write conclusion. ( 5 points)