01 Feb FINANCIAL MANAGEMENT

Week 1 discussion

FINANCIAL MANAGEMENT

Much of the analysis done by financial managers is based on numbers that are different from what would seem to be the corresponding numbers presented in the financial statements. This difference is not due to any kind of cooking the books or other attempts to mislead anyone. One example is the use of market value rather than historical cost in the valuation of assets.

For your first post, define financial management. What are some other examples of the differences between financial management and financial accounting? Give examples.

Week 2 discussion

TVM MODEL

What are some of the assumptions behind the TVM calculations? How do these assumptions limit our application of these calculations?

Week 3 discussion

STOCKS AND BONDS

What are stocks and bonds? Describe how you could estimate their values. If you are investing in the stock market, which would you invest in and why?

Week 4 discussion

CALCULATING CAPM AND WACC FOR A REAL FIRM

Our discussion topic concerns the calculation of stock values using the capital asset pricing model (CAPM). Explain the CAPM model. The textbook provides a list of betas for a selection of stocks. Choose two firms from that list and discuss whether the betas are what you would expect. Be sure to explain why or why not. Calculate the returns based on the CAPM model. Be sure to state your assumptions.

Week 5 discussion

CAPITAL BUDGETING

Our textbook and lesson discuss some considerations that should be taken into account when doing capital budgeting: incremental earnings, interest expenses, taxes, opportunity costs, externalities, sunk costs, cannibalization or erosion, depreciation, salvage value, and others. For your first post, explain in detail what defines capital budgeting. Then explain how two of the considerations above affect capital budgeting.

Week 6 discussion

AGENCY PROBLEMS, FORECASTING, AND CORPORATE GOVERNANCE

Do some research and find some historical or current real-life examples of agency problems. Will the measures discussed in the text help to prevent problems like your examples in the future? What else would you advise? You may provide examples of agency problems from your own experience. If you do that, be careful to provide enough anonymity so that you won’t get in trouble.

Week 7 discussion

WORKING CAPITAL MANAGEMENT

Explain the cash conversion cycle (CCC). Describe the CCC for your employer or company in an industry in which you’re interested. What are some specific things that your company could do to decrease your cash conversion cycle? Let’s be sure to describe, in pretty specific terms, the CCC for our company and what could be done to shorten it.

Week 1 HOMEWORK ASSIGNMENT

Complete the following graded homework assignments from the textbook. Chapter 1 homework is to be submitted in a MS-Word document titled “FIN515_Homework1a_yourname.” The chapter 2 assignment is to be submitted in an Excel workbook titled “FIN515_Homework1b_yourname.”

The assignments are:

Chapter 1:

Mini Case on pages 55-56, questions f, g, h, j, k and p only. Your answers must be in your own words to earn credit.

Chapter 2

Problem 2-6 – Statement of Retained Earnings (p. 92)

Problem 2-7 – Corporate Tax Liability (p. 92)

Problem 2-8 – Corporate After-Tax Yield (p. 93)

Week 2 HOMEWORK ASSIGNMENT

Complete the following graded homework assignments from the textbook. This homework assignment is to be submitted in an Excel workbook titled “FIN515_Homework2_yourname.”

The assignments are:

Chapter 3 Problems (p.128-129)

3-1 Days Sales Outstanding

3-2 Debt Ratio

3-3 Market/Book Ratio

3-4 PE Ratio

3-5 ROE

3-6 Du Pont Analysis

3-7 Current and Quick Ratios

Chapter 4 Problems (pp. 165-167)

4-1 FV of Single Amount

4-2 PV of Single Amount

4-6 FV of Ordinary Annuity vs Annuity Due

4-13 PV of an Annuity

4-14 PV Uneven Cash Flow Stream

Submit your assignment on the this assignment page by the due date. Be sure to show all work and/or use Excel formulas to demonstrate how you arrived at your answer.

Week 3 HOMEWORK ASSIGNMENT

Complete the following graded homework assignments from the textbook. This homework assignment is to be submitted in an Excel workbook titled “FIN515_Homework3_yourname.”

The assignments are:

Chapter 5 Problems (pp. 232-233)

5-1 Bond Valuation with Annual Payments

5-2 YTM for Annual Payments

5-6 Maturity Risk Premium

5-7 Bond Valuation with Semi-Annual Payments

5-13 Yield to Maturity and Current Yield

Chapter 7 Problems (p. 334)

7-2 Constant Growth Valuation

7-4 Preferred Stock Valuation

7-5 Non-constant Growth Valuation

Submit your assignment on the this assignment page by the due date. Be sure to show all work and/or use Excel formulas to demonstrate how you arrived at your answer.

Week 4 HOMEWORK ASSIGNMENT

Complete the following graded homework assignments from the textbook. This homework assignment is to be submitted in an Excel workbook titled “FIN515_Homework4_yourname.”

The assignments are:

Chapter 6:

Questions (p. 285)

6-5 Beta and expected return

Problems (pp. 286-287)

6-1 Portfolio Beta

6-2 Required Rate of Return Stock

6-7 Required Rate of Return

6-10 Portfolio Required Return

Chapter 9:

Problems (p. 407)

9-2 After-Tax Cost of Debt

9-4 Cost of Preferred Stock with Flottion Costs

9-5 Cost of Equity – DCF

9-6 Cost of Equity – CAPM

9-7 WACC

Submit your assignment on the this assignment page by the due date. Be sure to show all work and/or use Excel formulas to demonstrate how you arrived at your answer.

Week 5 HOMEWORK ASSIGNMENT

Complete the following graded homework assignments from the textbook. This homework assignment is to be submitted in an Excel workbook titled “FIN515_Homework5_yourname.”

The assignments are:

Chapter 10:

Problems (p. 444)

10-8 NPV IRRs and MIRRs for Independent Projects

10-9 NPVs and IRRs for Mutually Exclusive Projects

10-10 Capital Budgeting Projects

Chapter 11:

Problems (pp. 489)

11-2 Operating Cash Flow

11-3 Net Salvage Value

Submit your assignment on the this assignment page by the due date. Be sure to show all work and/or use Excel formulas to demonstrate how you arrived at your answer.

Week 6 HOMEWORK ASSIGNMENT

Complete the following graded homework assignments from the textbook. This homework assignment is to be submitted in an Excel workbook titled “FIN515_Homework6_yourname.”

The assignments are:

Chapter 12 Problems (p. 533)

12-1 AFN Equation

12-2 AFN Equation

12-3 AFN Equation

12-7 Forecasted Statements and Ratios

Chapter 13 Questions (pp. 561)

13-2 Agency conflict

13-3 Agency Conflict – Borrowers and Lenders

Submit your assignment on the this assignment page by the due date. Be sure to show all work and/or use Excel formulas to demonstrate how you arrived at your answer.

Week 7 HOMEWORK ASSIGNMENT

Complete the following graded homework assignments from the textbook. This homework assignment is to be submitted in an Excel workbook titled “FIN515_Homework6_yourname.”

The assignments are:

Chapter 16 Problems:

16-1 Cash Management

16-2 Receivables Investment

16-3 Cost of Trade Credit

16-4 Cost of Trade Credit

16-5 Accounts Payable

16-7 Cost of Trade Credit

Submit your assignment on the this assignment page by the due date. Be sure to show all work and/or use Excel formulas to demonstrate how you arrived at your answer.

WEEK 3 SIGNATURE ASSIGNMENT FIRST GROUP PROJECT

As the new financial manager of your company, the CEO has asked your team to provide a brief analysis of the company’s performance to present at the upcoming board of directors meeting. The CEO has asked that you assess the company’s performance against your company’s industry. Thus, to do this, you will need to use ratio analysis or other techniques to determine areas in which the company is doing well, as well as areas that management should look at.

Here are the steps for the project:

1. Select your teammate. Each team should be made up of two or three members.

2. Determine which company you will analyze for the project. Your selection may be subject to your professor’s approval. The company that you select will likely be used for all four team projects. As such, be sure that the company has debt on its balance sheet, as this will be a requirement for future projects.

3. Go to the website for your company and download the 10-K report for the most recent year.

4. Perform your ratio analysis on your company:

a. A good place to start would be to perform a complete DuPont analysis of the company. The DuPont analysis might provide guidance as to what particular areas of the company should be examined next and what ratios should be calculated. Be sure to include ratios that cover the following areas:

i. Profitability

ii. Debt Management

iii. Liquidity

iv. Asset Management

v. Market Value

b. In addition to the DuPont analysis ratios, be sure to present and discuss at least six relevant ratios that your team feels may best assess the company’s performance.

c. Prepare the same ratios that your team prepared above, but this time for the prior year.

d. Provide an analysis that compares your company’s current year ratios to its prior year ratios. There is no need to explain the purpose of the ratios. Rather, be sure to provide an interpretation of the results. This may entail some research from news sources on the company’s recent performance.

e. Prepare a PowerPoint presentation that summarizes the comparison of your company’s ratios against the industry ratios, as well as your analysis. APA standards are to be followed for all portions of this presentation, including but not limited to proper references and citations.

f. Using Voicethread, Kaltura, or similar tool, prepare an oral presentation that presents your PowerPoint presentation. Each team member must participate in this presentation.

WEEK 6 SIGNATURE ASSIGNMENT SECOND GROUP PROJECT

? Once again, your team is the key financial management team for your company. The company’s CEO is now looking to expand its operations by investing in new property, plant, and equipment. Your team recently calculated the WACC for your company, which will now be useful in evaluating the project’s effectiveness. You are now asked to do some capital budgeting analysis that will determine whether the company should invest in these new plant assets.

The parameters for this project are:

Your team will be using the same company for this project that you used in the Week 3 project. The company is now looking to expand its operations and wants you to do some analysis using key capital budgeting tools to do this. The parameters for this project are as follows.

The firm is looking to expand its operations by 10% of the firm’s net property, plant, and equipment. (Calculate this amount by taking 10% of the property, plant, and equipment figure that appears on the firm’s balance sheet.)

The estimated life of this new property, plant, and equipment will be 12 years. The salvage value of the equipment will be 5% of the property, plant and equipment’s cost.

The annual EBIT for this new project will be 18% of the project’s cost.

The company will use the straight-line method to depreciate this equipment. Also assume that there will be no increases in net working capital each year. Use 35% as the tax rate in this project.

The hurdle rate for this project will be the WACC that you are able to find on a financial website, such as Gurufocus.com.

Deliverable for this Project

Prepare a narrated PowerPoint presentation using VoiceThread or similar tool that will highlight the following items.

• Your calculations for the amount of property, plant, and equipment and the annual depreciation for the project

• Your calculations that convert the project’s EBIT to free cash flow for the 12 years of the project.

• The following capital budgeting results for the project

o Net present value

o Internal rate of return

o Discounted payback period.

• Your discussion of the results that you calculated above, including a recommendation for acceptance or rejection of the project

Once again, you may embed your Excel spreadsheets into your document. Be sure to follow APA standards for this project.

week 8 Final exam

FIN 515 FINAL EXAM
1. TCO A) In the United States, which of the following types of organization has the greatest revenue in total? (Points : 5)

Sole proprietorship

C corporation

S corporation

Limited partnership

2. TCO A) A sole proprietorship is owned by (Points : 5)

one person.

one or two people, but if there are two owners, they must be married to each other.

up to 100 owners.

up to 64 owners.

3. TCO B) Which of the following would cause the present value of an annuity to increase? (Points : 5)

Reducing the number of payments.

Increasing the interest rate.

Decreasing the interest rate.

Decreasing the liquidity of the payments.

4. TCO B) Which of the following is an annuity due? (Points : 5)

A typical car loan.

A typical mortgage.

A typical apartment rental agreement.

A credit card balance.

5. TCO G) If you were a manager of a company, which of the three right side components of the DuPont Identity would you want to increase and which would you want to decrease, other things being equal? Give a specific example for how to do that for each of the three. (Points : 20)

6. TCO D) A stock has just paid a dividend and will pay a dividend of $3.00 in a year. The dividend will stay constant for the rest of time. The return on equity for similar stocks is 14%. What is P0? (Points : 20)

A stock has just paid a dividend and will pay a dividend of $3.00 in a year, so Dividend for Year 0 and coming years will be $3

7. TCO D) A stock has just paid a dividend and has declared an annual dividend of $2.00 to be paid one year from today. The dividend is expected to grow at a 5% annual rate. The return on equity for similar stocks is 12%. What is P0? (Points : 20)

8. (TCO D) A particular bond has 8 years to maturity. It has a face value of $1,000. It has a YTM of 7% and the coupons are paid semiannually at a 10% annual rate. What does the bond currently sell for? (Points : 10)

9. (TCO D) A bond currently sells for $1,000 and has a par of $1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 7% and the interest payments are made semiannually. What is its YTM? (Points : 10)

10. (TCO D) What is ? and why is it important to investors and issuers of stock? Describe the behavior of stocks with ?s of greater than one, less than one, and less than zero. (Points : 30)

11. TCO E) A company has 100 million shares outstanding trading for $8 per share. It also has $900 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 12%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital? (Points : 30)

12. TCO A) What is the difference between capital structure and capital budgeting? Explain and give an example of a capital structure decision and an example of a capital budgeting decision. (Points : 25)

13. TCO H) What is the difference between the cash cycle and the operating cycle? Under what condition would they be the same? (Points : 30)

14. (TCO F) A company has the opportunity to do any of the projects for which the

net cash flows per year are shown below. The company has a cost of capital of 12%.

Which should the company do and why? You must use at least two capital budgeting

methods. Show your work

Year A B C

0 -300 -100 -300

1 100 -50 100

2 100 100 100

3 100 100 100

4 100 100 100

5 100 100 100

6 100 100 100

7 -100 -200 0 (Points : 40)