Risk Analysis and Interpretation for Alphabet (Google)
Part #1 – RISK EVALUATION (35 Points)
For the company you selected (Google) prepare a risk analysis.
Your risk analysis should include minimally below:
• Credit rating Use one of these three (Standard and Poor’s (S&P), Moody’s, and Fitch)
• Beta value
• Capital Asset Pricing Model (CAPM) required return on equity investment.
• CAPM rates to use:
Risk Free Interest Rate (10 Year U.S. Treasury Yield) = 4.38%
Market Risk Return = 9.75%
• Firm’s current capital structure percentages (% Debt, % Equity, most recent financial
quarter, 12/31/23)
• Using a Cost of Debt of 9.00% and a Corporate Tax Rate of 22% – Calculate your firm’s
current WACC using the capital structure percentages you determined above.
RISK PERSPECTIVES (65 Points)
1. Organizational Health – everything related to the sustainability of your firm’s future
viabilty.
2. Environmental – everything that is happening outside your organization that could affect
either your firm’s success or organizational health. This includes a scan of the social,
political, economic, and other environments in which the firm operates. Examples: Market,
Inflation, Industry, Competition, Political, Social risks.
KEY TAKEAWAYS
• Risk analysis seeks to identify, measure, and mitigate various risk exposures or hazards
facing a business, investment, or project.
• Quantitative risk analysis uses mathematical models and simulations to assign numerical
values to risk
.
• Qualitative risk analysis relies on a person’s subjective judgment to build a theoretical
model of risk for a given scenario.
• Risk analysis is often both an art and a science.
