Reference no: EM13745916

Part 1:

Initial Investment

a)  Think of something you want or need for which you currently do not have the funds. It could be a vehicle, boat, horse, jewelry, property, vacation, college fund, retirement money, etc. Select something which costs somewhere between $2,000 and $50,000.  Use the "Present Value Formula", which computes how much money you need to start with now to achieve the desired monetary goal. Assume you will find an investment that promises somewhere between 5% and 10% interest on your money (you choose the rate) and pretend you want to purchase your desired item in 12 years. (Remember that the higher the return, usually the riskier the investment, so think carefully before deciding on the interest rate.) How much do you need to invest today to reach that desired amount 12 years from now?

b)  You wish to leave an endowment for your heirs that goes into effect 50 years from today. You don't want to be forgotten after you pass so you wish to leave an endowment that will pay for a grand soirée yearly and forever. What amount would you like spent yearly to fund this grand party? How much money do you have to leave to your heirs 50 years from now assuming that will compound at 6% interest? Assuming that you have not invested anything today, how much would you have to invest yearly to fully fund the annuity in 50 years, again assuming a 6% monthly compounding rate?

Managing Earnings

Companies often try to keep accounting earnings growing at a relatively steady pace in an effort to avoid large swings in earnings from period to period. They also try to manage earnings targets.  Reflect on these practices and discuss the following in your discussion post.

• Are these practices ethical?
• What are two tactics that a financial manager can use to manage earnings?
• What are the implications for cash flow and shareholder wealth?
• Using the financial balance sheet as displayed in the text, provide an example of how purchasing an asset or issuing stocks or bonds could potentially impact earnings targets.

Your post should be 200-250 words in length.

Part 2:

Working Capital

Read the journal article, "Businesses Seeking Working Capital-Survey." Based on the information presented in the article, discuss the following:

• How should a business use working capital analysis?
• Which is more important to the short-term lender: the stock of cash or the flow of cash?
• Is it possible in today's business to operate with no current liabilities?

Capital Rationing

Compare and contrast the Internal Rate of Return (IRR), the Net Present Value (NPV) and Payback approaches to capital rationing. Which do you think is better? Why?  Provide examples and evidence from two articles from ProQuest to support your position. Your post should be 200-250 words in length.

Part 3:

Applying the Capital Asset Pricing Model (CAPM)

Analyze the Capital Asset Pricing Model (CAPM).  Using the course text and an article from ProQuest as references, address the following:

• Explain how the CAPM assists in measuring both risk and return.
• Explain how the CAPM assists in calculating the weighted average costs of capital (WACC) and its components. 
• Illustrate why some managers have difficulty applying the Capital Asset Pricing Model (CAPM) in financial decision making.
• Identify the benefits and drawbacks of using the CAPM.

Develop a 200 - 300 word answer supporting your position.

Risk Identification and Mitigation

Using the annual report from the company that you have selected for your Final Project, discuss the risks the company faces and the actions they take to mitigate those risks. Refer to the Management Discussion and Analysis section of the annual report for this information. 

As part of your response consider whether you think the risk mitigation techniques are reasonable.  Discuss what others concerns or advice you would offer if you had the opportunity.

Include in your post a calculation for the probability of one of the risks identified by your company.  This information may not be available in the annual report, therefore you will likely need to conduct research and critical thinking to complete this calculation.

Develop a 200 - 300 word explanation supporting your position

Part 4:

Factors in Capital Budgeting Decisions

Imagine you are a representative of management in the company you have selected for your Week Six assignment and you must make a capital budgeting decision.  The decision is to implement a new computer network system to decrease the time between customer order and delivery. The cost will be 10% of last year's profits. You are charged with describing the important considerations in the decision-making process to upper management.  In your response, be sure to include the following:

• A description of the important factors, in addition to quantitative factors, that were considered when making this capital budgeting decision.
• An explanation of how these factors are significant to the company.
• A summary of how you will determine the criteria to rank capital budgeting decisions and whether some criteria are more important than others.
• A calculation of the proposed return on investment based on criteria you select and justification for that ROI.

Develop a 200 - 250 word explanation supporting your recommendations.

Assessing Dividend Policy

Revisit the company you chose for your Week Six Final Project.  Using the annual report and other sources such as a 10k or 10q's, discuss the dividend policy of your company. (www.JimmyJazz.com)

Answer the following questions as part of your response:

• How would you describe your chosen company's dividend policy?
• Why do you believe this company chose the dividend policy they have in place? 
• Do you agree or disagree that they have selected the best dividend policy for the company?
• How might this dividend policy function in both perfect and imperfect capital markets?
• Calculate the dividend rate over the past 5 years.  Define why you believe that it has or has not changed over the last 5 years.

Support your position with evidence from the text or external sources.

Your post should be 200-250 words in length.

Part 5:

Comparing Financial Ratios

 

Go to MSN Money, and type in a ticker symbol for a company with the first letter of your last name.

Next, complete the following:

a. Select "Key Ratios" on the left menu panel. 
b. There are several categories listed for ratios. Select one "Financial Condition Ratio" and one "Management Efficiency Ratio". 
c. Open the Profile section on the left menu panel and you will see "Industry" is identified. Find a competitive company within that industry and compare those ratios to the ones you just found.

Examine your findings and determine whether your company outperforms its competition based on financial ratios.  Identify where your firm seems to lag. Describe how your firm compares with the industry and speculate as to why you believe your firm is performing as it is.

Potential Issues in Ratio Analysis

As your text describes, ratio analysis is a common technique in financial analysis.  One of your colleagues states that a thorough ratio analysis is all that is needed in considering the financial health of a company. Although you agree that ratio analysis is a helpful guide, there may be some potential pitfalls in ratio analysis. 

Discuss at least three potential issues in utilizing ratio analysis that you would share with your colleague. In addition, calculate a liquidity, profitability, and efficiency ratio from your Week Six company to demonstrate your observations. 

Develop a 200 - 300 word explanation supporting your findings.