This is the start of your final

4. Section II should be labeled Capital Market Efficiency. Precisely define an efficient capital market. What causes a capital market to be efficient? Why does the efficiency of the capital market matter to the managers of the firm you are studying? Be sure to number this question #4.

5. Section III should be labeled Wall Street Journal news . Carefully choose one Wall Street Journal article about your firm between January 2022 and December 2022. Follow the format of your syllabus and respond to the questions asked there. Provide a link to the article in this question and identify its date. You may want or need to do some research about your firm to put this article in the context of the news contained in your article. Be sure to number this question #5. {If you are having trouble finding one appropriate article, you may ask Ms. Nestory for assistance, or you may go back to earlier dates one year at a time.}

6. Section IV should be labeled WACC . Calculate the WACC for your firm. Use the SSRN pdf under the web campus document in the section labeled “Quick Access Link for your midterm and final” for the risk-free rate and the market risk premium. Be sure to estimate the required return on equity using three methods discussed in class and in your text. For each parameter in the WACC calculation carefully explain why you are choosing it. Use the one bond from your midterm and the FINRA quote to estimate the bond’s YTM. Explain and document your market price and your YTM estimate in your appendix. Do not include short term debt in your WACC calculation. Most firms do not fund long term assets with short term debt. Be sure to number this question #6

9. Section VII should be labeled ESG. If you were the manager or executive of your public firm, what data would you need to evaluate whether a CSR/ESG project under consideration was a worthwhile investment for the shareholders as shareholders (or from the shareholder’s point of view)? What is the difference between a publicly traded firm, a private firm, and a not-for-profit firm? How does this impact your answer to this question? Be sure to number this question #9

10. Section VIII Should be labeled ESG Project. Assume your firm is contemplating an ESG or CSR project that will last for 4 years only. Assume the project requires a 10% change in your firm’s net working capital (calculated on the Midterm) for each of 4 years below. Assume there is no cannibalization of revenues from existing projects. The cost of the new capital equipment including shipping and installation is $3,100,000. The equipment will last for 4 years. Use MACRS deprecation and show that schedule in the appendix. The salvage value of the new equipment is $400,000. For the four years, revenues from this project are expected to be $4,000,000, 4,000,000, 4,200,000, and 4,200,000; and operating expenses, $2,800,000, $2,800,000, $2,700,000, $2,750,000 . IF you need to scale these numbers (i.e., increase or decrease them by 000s) it is permissible to do so. Simply state your scaling. Clearly label and use your firm’s WACC from question 6 and effective tax rate. Show the effective tax rate information in the appendix. Show the working capital calculation from the midterm in the appendix. Show the MACRS depreciation schedule in the appendix.

Complete the Project cash flow statement below and then the question below

Determine the Net Present Value for this project. What is the decision rule for NPV decision making? Should your firm undertake this project? Is this project likely to be riskier or less risky than your firm? Why? How would you quantify that to know for sure? Be sure to number this question #10

11. Section IX Should be labeled Regression. Look at the excel data that came with your exam. Notice that this information is price data. (Its ok to use the data as is, even though there is no price data on a January 1. There is no need to include dividends in your return calculation unless you want to) Run an excel regression of your firm’s stock return against a market proxy. Which market proxy did you choose? Why? What is the intercept from this regression? What is the beta estimate from this regression? What is the R-squared? What does this mean? Look at 3 different data bases on the library resource guide and indicate what the beta estimate is for your firm in those data bases. Why are these estimates (yours and those from three data bases) different? Be sure to number this question #11. Show your regression output in the appendix. (It is permissible to contact UTAC if you have forgotten how to run a regression in excel)

12. Section X Should be labeled Stock Valuation vs SML. Calculate your firm’s DCF valuation model (stock valuation model) required return compared to your stock’s required return using the SML. Demonstrate the calculations. Are the required returns different? Why? Be sure to use Value Line to calculate the growth rate in the stock valuation model and show the Value Line pdf page in the appendix along with the growth rate calculation cash flow or dividend per share over a 5-year period. Calculate the growth rate for each sequential year over this 5-year period. Choose your stock valuation model based on this growth rate calculation. If needed or appropriate, due to an uneven growth rate, you may draw a timeline in the appendix and follow your power point or class example. Use the SSRN pdf under the web campus document in the section labeled “Quick Access Link for your midterm and final” for the risk-free rate and the market risk premium Be sure to number this question #12

13. Section XI Options. Discuss the two agency problems of the firm. Provide an example of any one day’s option transactions. Explain them thoroughly. How do options potentially help mitigate the agency problem between stockholders and managers . What parameters impact the call or put’s price? In what direction? Explain. Show a screen shot of the options transactions in your appendix. Be sure to number this question #13

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Etsy, Inc. is an American e-commerce firm specializing in selling creative materials and things that are handmade or antique. These products may be classified as belonging to a wide variety of categories, such as jewelry, handbags, apparel, home furnishings and decorations, art, toys, and even craft materials and equipment. There is a minimum age requirement of twenty years for something considered vintage. The website maintains the custom of open-air craft fairs by providing vendors with individual storefronts in which they may advertise their wares for a commission of $0.20 per item. Etsy has over 120 million products listed in its marketplace as of the 31st of December 2021. The online marketplace for handmade and antique goods united 7.5 million merchants with 96.3 million shoppers. Etsy had 2,402 people working for them at the end of the year 2021. Gross Merchandise Sales (GMS) on Etsy amounted to $13.5 billion in 2021, representing the company's overall sales on the platform.

On the heels of 2021 revenue of $2.3 billion, Etsy announced net profitability of $493.5 million. The three most important revenue streams for the platform are: Each successful sale on Etsy incurs a 6.5% charge, in addition to a listing cost of 20 cents per item. Revenue from Etsy's Seller Services, which includes expenses for things like "Promoted Listings," payment processing, and shipping label sales, is expanding at a rapid clip. Etsy also makes money from transaction fees charged by other payment processors. Etsy's Marketplace revenue includes fees received from Etsy is a significant player in the e-commerce marketplaces of the United States, the United Kingdom, Germany, France, Australia, and Canada. It is ranked in the top 10 e-commerce marketplace operators in each country. The company has a strong position in an intriguing market segment by mediating transactions between buyers and sellers of antique and handmade products via its online market. Listing fees, commissions on items sold, advertising services, payment processing, and shipping label sales contribute to the company's revenue (MOSBY, 2022). As a result, the company has established itself as one of the most prominent players in a sector experiencing rapid expansion. The consolidated gross merchandise volume for the company in 2021 is expected to be $13.5 billion.

Etsy Payments is a service for accepting payments, Etsy Ads is a platform for advertising, and Etsy Shipping Labels is a service for facilitating the purchase of cheap shipping labels for sellers in the United States, Canada, the United Kingdom, Australia, and India. Etsy also provides several seller services, such as Etsy Shipping Labels, Etsy Payments, and Etsy Ads. In addition, Etsy offers several tools for its sellers, such as the Shop Manager Dashboard, which serves as a central hub from which sellers can monitor customer communications, manage inventory, view metrics, and statistics, and track order statuses. The Sell on Etsy app also facilitates enhanced onboarding and video uploading. You'll find both of these resources on the organization's website. The company also offers bookkeeping and accounting services. Targeted offers, which is a sales and promotions tool as well as a social media tool; Etsy seller analytics pages, which provide information regarding the acquisition of traffic for the sellers' shops; Etsy seller analytics pages; and so on. In addition, the firm offers instructional tools such as blog entries, video lessons, the Etsy Seller Handbook, Etsy.com online forums, and insights; Etsy Teams, a platform that allows Etsy sellers to create personal connections with one another; and a Star Seller program. It united 96.3 million active customers with 7.5 million active vendors as of the 31st of December 2021, and it has 120 million things available for purchase. Etsy, Inc. was once known as Indieco, Inc., but in June 2006, the firm officially changed its name to Etsy, Inc. Etsy, Inc. was established in 2005 and now has its headquarters in the borough of Brooklyn in the state of New York.

Section II – Capital Market Efficiency

Efficiency in the capital market may be defined as the ability of the securities to take in the circumstances of the market, reflect how those conditions affect it, and instantly assimilate all the information pertinent to the situation. It implies that the price of shares is automatically adjusted to its optimal level in an efficient capital market (Lim et al., 2019). This adjustment is dependent on the type and environment of the market. Although it is not difficult to grasp the idea of efficient capital markets, it is necessary for the markets themselves to exhibit certain behaviors and conduct to preserve market efficiency. For instance, an efficient capital market must offer all the information on securities to all participants in a manner that is free of prejudice. Because there are hundreds upon thousands of shares trading at any one time on the market, this is easier said than done. The efficiency of the capital market comes with its own set of benefits. For instance, shareholders can make financial investments in an effective stock market without the need to cast doubt on the market's information. When the effectiveness of the market is reduced, this allows investors to put more money into the market than they would otherwise be able to.

Efficient market hypothesis

 According to the efficient market hypothesis (EMH), current stock prices fully represent all relevant information. The efficient market hypothesis (EMH) states that the value of an item should be reflected in its stock price. According to proponents of the Efficient Market Hypothesis (EMH), passive, low-cost portfolios are where investors are most likely to see returns (Kang et al., 2022). The efficient market hypothesis states that current stock prices correctly reflect all available information and are reasonably valued. With these caveats in mind, it's hard to see someone consistently beating the market via stock selection or market timing. Exceptions to this rule include getting engaged in a significant financial scandal or being born into a wealthy family.

Forms of capital market efficiency

Weak Form

According to the idea of the weak-form efficient market, all of the past values of securities have already