TMA02 - Business and Management Numeracy Skills - Business Analysis Assignment Help

Assignment Task

Question 1
In the month of Jan’21, the stock GameStop (NYSE: GME) appeared in news and in a lot of controversy. The stock runs physical video game stores which have stopped seeing customers a) because of Covid-19 which led to people generally avoiding buying things from physical stores, and b) because video game enthusiasts like to purchase video games online rather than by going to a physical store The stock came in news because of heightened amount of short selling that was involved in the stock by some of the Wall Street Hedge Funds. In front of the shorts were small retail investors from WallStreetBets, a Reddit sub-group created for the purpose of discussing buying & selling in stocks, commodities, and other financial assets. What came through was a major short squeeze and brokers halting further buying of stock to hedge their own settlement risk.

a. Briefly highlight the GME situation how it unfolded. Do you think this extreme amount of short interest was justified? What steps could the regulator have taken to prevent this from happening?

b. Compute the following valuation multiples for GME:
i. EV/EBITDA
ii. EV/Sales
iii. P/E ratio
iv. P/B ratio

c. Looking at the valuation multiples, do you think such sharp rise in the prices is justified for the stock? Alternatively, do you think the hedge funds were actually right in taking short positions and actually got unlucky by a frenzy of retail buying and got caught as a result? You may take the filing data for GME from this link. Use the data for Financial Year ending 30/01/2021 and share price for 31 Jan 2021.

Question 2

Investment appraisal in a foreign market is no small deal. There are a ton of areas that need to be addressed before even considering a step in this direction. Perhaps the first is a feasibility study conducted by hiring a consultant who is aware of the geography and the political and economic landscape of the host country. Only then if the initial assessment is positive that the company may begin making the first set of investment in the country.
a. Critique on some of the issues faced by companies in performing investment appraisal projects on an international level.
b. Highlight on some of the costs associated with such projects (monetary as well non-monetary). The recent case of Adani mining coal in Australia’s Carmichael coal mines highlights some such issues. Discuss the case while highlighting the above-mentioned costs.
c. While managers may consider a positive NPV project as a sign for making the investment, at times it also makes sense to consider projects as options and to include the cost of exercising a particular option vis-à-vis another option. Highlight the importance of considering projects as options in this context.

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