Competency

Evaluate financial risk, cost of capital, and risk-reward tradeoffs.

Student Success Criteria

View the grading rubric for this deliverable by selecting the "This item is graded with a rubric" link, which is located in the Details & Information pane.

Deliverable Preparation

During this course, students will conduct research on companies of their choosing, guided by the scenarios outlined in the deliverables. There are no pre-assigned firms for research purposes. Instead, students are encouraged to select companies that are relevant to the deliverable content. The information gathered about these firms should reflect real-time data and demonstrate real-life applications in alignment with the course material.

Scenario

As you continue to excel in your current position, your employer has entrusted you with the opportunity to analyze a tech company, such as Google, Amazon, or Facebook, as a model. This analysis reinforces your understanding of the Capital Asset Pricing Model (CAPM) and Modern Portfolio Theory (MPT). You will write a white paper assessing the financial risk in the market for the selected tech company, determining whether it is currently undervalued or overvalued, and providing insights into the reasons behind such a market valuation.

Instructions

Write a white paper addressing the following key aspects:

• Financial Risk and Cost of Capital Analysis:
• Explain the selected tech company's financial risk, cost of capital, and risk-reward profile, utilizing historical data to provide context.
• CAPM Interpretation:
• Interpret the company's financial information using the Capital Asset Pricing Model (CAPM), offering insights into the relationship between risk and expected return.
• Return Comparison to S&P 500:
• Calculate the company's return on the market value and compare it to the S&P 500, providing a benchmark for performance evaluation.
• Stock Valuation Analysis:
• Determine whether the tech company's stock prices are overvalued or undervalued, and substantiate your conclusion with relevant justifications.
• MPT-Based Investment Strategies:
• Devise strategies for the tech company to achieve high returns and low risk by applying the principles of Modern Portfolio Theory (MPT).

A – 4 – Mastery

Thorough and accurate explanation of company financial risk, cost of capital, and risk reward from historical data.

A – 4 – Mastery

Thorough and accurate interpretation of company financial information using the Capital Asset Pricing Model.

A – 4 – Mastery

Calculated your chosen firm's return on the market value. Thorough and accurate comparison to the S&P 500.

A – 4 – Mastery

Thorough and accurate assessment of whether your chosen firm's stock prices are over or undervalued and an exemplary explanation of why.

A – 4 – Mastery

Thorough and accurate development of strategies for the firm to achieve investment high returns and low risk using Modern Portfolio Theory.

A – 4 – Mastery

The document demonstrated exemplary attribution using credible scholarly sources in APA format and had no spelling and grammar errors that interfered with clarity.