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Performance Management and Valuation

Due: Monday, 9:00 am (eastern), Week 7 (18% of final grade)

The risk analysis work you did in the first assignment was a great start. It helped to paint a picture of where NVIDIA (NASDAQ: NVDA) and Intel (NASDAQ: INTC) are in their corporate lifecycles, the threats and opportunities each faces, and the defensibility of their economic moats – a metaphor that Buffett loves to use.

In this assignment, you will continue your analysis by comparing key performance management metrics of our two companies, identifying areas of relative strength and weakness, and suggesting ways that each company could improve, thereby increasing its valuation. To do this, you will examine trends in order to identify variances and comparisons to: (1) establish benchmarks, (2) identify best practices, and (3) look for signs of superior performance. This analysis is critical in determining the value of each company, as well as evaluating whether potential acquisition or merger opportunities exist which could create greater value and synergies than those of operating the companies as separate entities.

Instructions

To prepare, reread the Morningstar Analyst’s Report and the most recent annual reports for both companies with a particular focus on the Income Statement and Statement of Cash Flows.

A. Complete the Assignment 2 Worksheet to compare key performance metrics and ratios for both companies in order to see how performance can be impacted by manipulating certain financial levers. The guidance for this is found in Chapters 5 & 6 of The CFO Guidebook.

B. Summarize your Analysis and Recommendations by answering the following questions:

1.  
   1. Performance Metrics:
      1.  
         1. Which company is a more efficient generator of income?
         2. Which company is growing faster?
         3. Using financial health ratios, which company is more profitable?
         4. Which company has stronger valuation ratios?
         5. Overall, which is the better run company and why?
   2. Merger Synergies:
      1.  
         1. If there was an acquisition, which company is the most likely acquirer? Why?
         2. Would you recommend a merger or acquisition to increase the moat strength of the combined companies? Why or why not?
            • If you support a merger or acquisition, identify 3 performance metrics that could be improved by a merger and explain how they would be improved. Guidance for this is found in Chapter 6 of The CFO Guidebook.
            • If you do not support a merger or acquisition, explain your rationale and why the value of each company is best preserved/increased by remaining separate. The guidance for this is found in Chapter 6 of The CFO Guidebook. 

Submission Requirements

A. Complete and submit the Assignment 2 Worksheet component of the Workbook, along with your written work for Part B, through the assignment page in Canvas.

B. Format your written responses for Analysis and Recommendation as follows:

• Typed, double-spaced, professional font (size 10-12), including headings and subheadings (to identify main topics and subtopics), with one-inch margins on all sides.
• References must be included and provide appropriate information that enables the reader to locate the original source.
  • Application and analysis of course materials and resources is expected.
  • At least one additional source beyond the course materials must be cited to support your analysis and recommendations.
• Include a cover page containing the title of the assignment, your name, the professor’s name, the course title, and the date.
• The maximum length is 4 pages, excluding your cover page, completed worksheets, and reference list.