1. You are to analyze: [1] internal financial options offered to employees as a benefit, [2] the external financial options that are offered by markets to outside investors who may or may not own stock in your firm, [3] your firm's risk management, strategies and tactics that includes input risk and the use of derivatives and reduction of demand risks, [4] mergers, divestitures, and [5] international business activities.
2. First, determine if your firm has stock options for its employees.
a. If not, why do you think that the firm has not offered this benefit?
b. If so, how many options are outstanding and what dollar value do they have for the last three years?
c. How many have been exercised (dollar value) and what was the exercise price? Put this information in a table in the appendices and discuss in the memo.
3. Second, analyze the external financial options that are being traded in the markets based on the stock price of your firm.
a. Select at least two in-the-money and two out-of-the-money contracts for your firm and put copies of the contracts in the appendices.
b. You should select at least two different expiration dates for the options you choose so that you can observe a longer time period.
c. Use the options to estimate the market's view of the price of the stock for the period that the financial options cover. Discuss both the contracts and their information about future prices in the memo.
4. Given the current financial option prices for put and call options and the current price of the stock, would it make more sense to do a short sale or purchase a financial option? Provide your answer in the memo as well as the reasons for your answer.
5. Discuss the top two or three types of input risks that your firm faces.
6. For the last three years, what derivatives has your firm used? This would include future and forward contracts (dollar amount and use) and swaps (dollar amounts) to protect against changes in interest rates and exchange rates.
7. If your firm is exposed to specific commodity risks, then discuss how it protects against changes in prices for these commodities.
8. Discuss the top two or three types of risks to the demand for your firm's products or services.
9. Discuss your firm's mergers, if there are any, during the last three years.
a. Which companies did they acquire, how much did they pay for them, and how did they pay for the firms?
b. What affect did the mergers have on your firm's products or services?
c. If your firm did not have any mergers, explain why you believe they did not engage in this form of growth.
10. Discuss your firm's divestitures, if there are any, during the last three years.
a. Which part of the firm did they divest?
b. How did they accomplish the divestiture - sale, spin-off, carve-out or liquidation?
c. What affect did the divestitures have on your firm's products or services?
d. If you firm did not have any divestitures, explain why you believe they did not engage in this form of changing the firm.
11. What proportion of your firm's business is derived from international activities?
12. What are the major currencies that your firm deals with in its international business?
a. What are the current exchange rates for these countries and put a table in the appendices.
b. What are the forward rates for one month, two months, three months and six months.
13. Include all sources used for this memo at the end of the memo.
14. Include only the Value Line sheet for your firm.
15. For this memo only, you are to write four pages of text and you are to only discuss your firm and not its two top competitors.