Description
you will use financial information from your selected company to prepare a financial analysis report You will include in your analysis the background calculations and managerial analysis for each of the following topics: time value of money, stock and bond valuation, and capital budgeting. You will also discuss macroeconomic variables that might impact your selected company’s financial decision making and strategic objectives. These topics will be covered over four milestones to be submitted throughout the course before you submit the final project. Note that while these elements may seem separate and unrelated, together they will present a well-rounded view of your selected company’s finances with regard to the topics.
For this milestone, you will submit a draft of the Stock Valuation and Bond Issuance sections of the final project, along with your supporting explanations.
Prompt
Calculate stock and bond valuations for the company you selected from the first tab of the Final Project Excel Workbook and use the results to support your explanations of shareholder value and increasing capital. Assess the company’s dividend policies and bond issuance policies in your explanations. Complete your calculations on the designated tab of the Final Project Excel Workbook (linked to in your course).
Specifically, the following critical elements must be addressed:
Stock Valuation
Based on the figures provided in the financial information you prepared for your selected company, calculate each of the following:
Fill in the yellow highlighted cells with the matching data prepared for your selected company.
The new dividend yields if the company increased its dividend per share by $1.75.
The dividend yield if the firm doubled its outstanding shares using a stock split. Note that other numbers will be affected by a stock split such as new stock price, actual dividends paid, and number of outstanding shares. Stockholders’ equity will not change.
Return on investment—calculate the rate of return on investment based on the data you calculated in Question 1.
What effect would you expect each of the calculations you performed to have in terms of shareholder value? In other words, suppose the company’s goal is to maximize shareholder value. How will each of the situations support or inhibit that goal? Be sure to justify your reasoning through research, references, and citations using proper APA style.
To what extent do you feel the company’s dividend policies support or hinder their strategies? For example, if the company is attempting to grow, are they retaining and reinvesting their earnings rather than distributing them to investors through dividends? Be sure to substantiate your claims through research, references, and citations using proper APA style.
Bond Issuance
Assuming your selected company issues a new bond.
For the purpose of this exercise, assumptions are being made. Assume that your selected company issues a new 10-year bond for $300,000 on October 1, 2021, that will mature on October 1, 2031. The future value of this bond is therefore $300,000. The bond was issued at the current market rate of 5.0% fixed for 10 years, with interest payments paid semi-annually. What is the present value of this bond using the three scenarios in Part II: Bond Issuance?
The present value of the bond at issuance
The new present value of the bond if overall rates in the market increased by 2%
The new present value of the bond if overall rates in the market decreased by 2%
The present value of the bond if overall rates in the market remained the same as at issuance
What effect would you expect each of the calculations you performed to have in terms of the company’s decision to raise capital in this manner? In other words, for each situation, would you consider bond valuation to be a viable option for increasing capital? Be sure to justify your reasoning through research, references, and citations using proper APA style.
To what extent do you feel the company’s bond issuance policies support or hinder their strategies? For example, if the company is attempting to fund operating expenses, refinance old debt, or change its capital structure, are they issuing sufficient bonds to achieve these goals? Be sure to substantiate your claims through research, references, and citations using APA style.
What to Submit
Your paper must be submitted as a 3- to 4-page Microsoft Word document, not including your calculations, which should be completed in the Final Project Student Workbook. Use double spacing, 12-point Times New Roman font, and one-inch margins. Sources should be cited according to APA style.
