For BP, Shell and MobileExxon1. Briefly discuss and compare the investment characteristics of each firm, e.g. are they acash cow or a growth company, or somewhere in between these two poles?2. Describe the degree to which each company pursues an organic growth strategy or anacquisition- driven growth strategy.3. Define each companys target capital structure. This may be found in the managementdiscussion and analysis sections of annual or quarterly reports, or in slides provided inconnection with quarterly earnings release conference calls, or in the accompanyingtranscript of conference calls. If those sources fail, estimate the target capital structurebased on historical trends in financial leverage.4. Evaluate whether each company has unused debt capacity relative to its target capitalstructure. Discuss why that may be the caseare they planning an acquisition, movinginto a period of high capital expenditures, or should they consider a share repurchase ordividend increase?5. Complete a valuation of the common stock of the chosen companies, using theDividend Discount Model, if applicable. If the Dividend Discount Model is not applicable,use the Growth Opportunities model (Chapter 9, section 9.3).6. Analyse how the model valuation compares with the trading value of the equity. Does itappear over or under priced in the marketplace? Discuss the implications this may havefor each companys M&A strategy (e.g. is it an acquirer or a potential target of a takeoverbid?)7. Conclude the report with a summary of the investment merits and the key corporatefinance issues facing each company.Your outline should be between 500 and 1,000 words.
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