milestone 2

Business Finance

Southern New Hampshire University

Question Description

i will be giving you milestone 1 and need milestone 2 completed with exel spreadsheet done

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FIN 330 Final Project I Milestone Two Guidelines and Rubric Overview: Corporate financial managers must have a business-wide perspective to successfully navigate the corporate environment. The skills you develop in this course will support you in your future business career as well as set the conceptual foundation for the future courses in your program. Your final project for FIN 330 will allow you to showcase your mastery of the varied skills a finance professional must obtain by requiring you to analyze a real-world corporation from a quantitative perspective while also investigating the challenges and decisions a manager must face. In this milestone, you will continue to work on elements of Final Project I, the corporation valuation report. Prompt: This milestone requires you to write a draft of the Capital Structure and Valuation sections (Sections III and IV) of Final Project I, the corporate valuation report. In this assignment, you will use the same corporation you focused on in Milestone One to expand upon the capital structure of the organization and the valuation of the corporation through forecasting. Specifically, the following critical elements must be addressed in this milestone: III. Capital Structure: In the third section of your report, discuss the capital structure of the corporation. A. Outline the most recent year’s debt, equity, and total capital using the provided Excel template to show the overall capital structure of the corporation. Please note: to complete this, you will use the same template you used in support of Milestone One, but this time you will be completing the “Capital Structure” tab. B. Articulate the corporation’s dividend policy and what impact it has on the investors. C. Analyze the relationship between capital structure, cost of capital, and risk, using examples from your chosen organization. D. Explain how the relationship between capital structure, cost of capital, and risk can help inform decision making and maximize corporate value. IV. Valuation: The final section of your report will focus on calculating current value, outlining assumptions, and estimating the future value of the corporation through forecasting the cash flows. Specifically, respond to the following: A. Calculate the current market value of equity for your corporation, using the three-year history and provided Excel template, and explain what it means for the corporation. You will submit this template along with your report, and may embed pieces of the Excel template into your report to help support your work in this section. Please note: this is the same template you used in support of Milestone One, but this time you will be completing the “Valuation” tab. B. Outline any assumptions you have made in calculating the current value and estimating the future value of the corporation, explaining why you made them and why they are important. (Hint: Assumptions can include growth rates, margins, trends, etc.) C. Estimate the current value of your corporation by forecasting the cash flows over five years using the provided Excel template, and explain your findings. Calculate EVA, NPV, IRR and MIRR. Guidelines for Submission: Your submission should be 3–4 pages in length, not including the Excel template you use to address sections IV.A and IV.C, above. The written submission should use 12-point Times New Roman font, double spacing, one-inch margins, and APA formatting. Be sure to submit both your written response and the completed Excel template when submitting this assignment. Any citations should follow APA guidelines. Critical Elements Capital Structure: Overall Capital Structure: Dividend Policy Capital Structure: Relationship Proficient (100%) Accurately outlines the most recent year’s debt, equity, and total capital using the provided template to show the overall capital structure of the corporation Accurately articulates the corporation’s dividend policy and the impact it has on investors Accurately analyzes the relationship between capital structure, cost of capital, and risk, using examples to highlight claims Capital Structure: Maximize Value Accurately explains how the relationship between capital structure, cost of capital, and risk should inform corporate decision making and maximize corporate value Valuation: Current Value Accurately calculates the current market value of the chosen corporation using the three-year history and provided Excel template, explaining findings in the report Valuation: Assumptions Clearly outlines reasonable assumptions, explaining why the assumptions were made and why they matter Needs Improvement (80%) Outlines the most recent year’s debt, equity, and total capital using the provided template, but with gaps in accuracy Not Evident (0%) Does not outline the most recent year’s debt, equity, and total capital using the provided template Value Articulates the corporation’s dividend policy and its impact on investors, but does so inaccurately or with gaps in details Analyzes the relationship between capital structure, cost of capital, and risk, but lacks accuracy or does not use examples that highlight claims Explains how the relationship between capital structure, cost of capital, and risk should inform corporate decision making and maximize corporate value, but lacks accuracy or necessary detail Calculates the current market value of the chosen corporation using the three-year history and provided Excel template, explaining findings in the report, but lacks accuracy in calculations or lacks detail in explanation of findings Outlines assumptions, explaining why the assumptions were made and why they matter, but with gaps in clarity or reason Does not articulate the corporation’s dividend policy and its impact on investors 15 Does not analyze the relationship between capital structure, cost of capital, and risk 15 Does not explain how the relationship between capital structure, cost of capital, and risk should inform corporate decision making and maximize corporate value 15 Does not calculate the current market value of the corporation or does not explain findings in the report 12 Does not outline assumptions or explain why they were made and why they matter 12 15 Valuation: Estimate Logically estimates the current value of the corporation through five-year cash flow forecasting using the provided Excel template Articulation of Response Submission has no major errors related to citations, grammar, spelling, syntax, or organization Estimates the current value of the corporation through five-year cash flow forecasting using the provided Excel template, but with gaps in logic or accuracy of calculations Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Does not estimate the current value of the corporation through five-year cash-flow forecasting using the Excel template 12 Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas Total 4 100% Comments to help you fill in yellow data entry boxes are in blue or red font. Take one row at a START HERE CURRENCY: SCALING: x USD <-- This is the organization's home or functional currency. E.g., USD, INR (Indian Rupee), BRL (Brazilian Real), EU 1,000 <-- Local currency units: Usually 1000 is used. For example, if financial statement on Mergent Online says Scale = [COMPANY'S FULL NAME] <-INCOME STATEMENT HIGHLIGHTS <-Unaudited; Amounts USD x 1000 <-For Fiscal Years ending: <-% Growth vs Prior Year (1) (2) TOTAL REVENUES Cost of revenues Gross Profit or (Loss) $ - $ - $ - Other Operating Expenses OPERATING INCOME or (Loss) $ - $ - $ - Interest expense Interest & other income (expense) INCOME (LOSS) BEFORE INCOME TAXES - (1) <-- 0.0% 0.0% 0.0% 0.0% <-- 0.0% 0.0% 0.0% 0.0% <-- 0.0% 0.0% <-- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $ - $ - $ - 0.0% 0.0% Net Income or (Loss) from Continuing Operations $ - $ - $ - 0.0% 0.0% <-- Discontinued Operations Income (Loss), Net $ - $ - $ - 0.0% 0.0% <-- NET INCOME OR (LOSS) $ - $ - $ - 0.0% 0.0% <-- 0.0% 0.0% <-- $ - $ - $ - 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Provision for (or benefit from) Income Taxes Weighted average (Number of) Diluted Shares Outstanding DILUTED EARNINGS OR (LOSS) PER SHARE Net Income Margin % Common Stock Share Price at each Year-End Total Equity Value (= share price x shares) Price / Earnings Ratio (P/E) 0.0% $ - 0.0% $ Source. (Publication Year). Title Retrieved from: http://www.?????????????? 20210202164911fin_330_spreadsheet_template_1 - 0.0% $ - <-- <-<-<-<-<-- Printed 2/2/2021 Page 1 of 31 [COMPANY'S FULL NAME] CASH FLOW STATEMENT HIGHLIGHTS Unaudited; Amounts USD x 1000 For Fiscal Years ending: % Growth vs Prior Year - (1) (2) - (1) Net Income or (Loss), from Above $ - $ - $ - 0.0% 0.0% Depreciation and Amortization Expense Other Operating Sources and (Uses) $ - $ - $ - 0.0% 0.0% 0.0% 0.0% <-<-- 0.0% 0.0% <-- 0.0% 0.0% 0.0% 0.0% <-<-- Cash Flow from Investing Activities 0.0% 0.0% <-- Increase or (Decrease) in Debt Increase or (Decrease) in Common Stock Dividend Payments Other Financing Activities 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% <-<-<-- 0.0% 0.0% <-- Cash Flow from Operating Activities Purchases of property & equip., & other capital expenditures Other Investing Activities $ $ $ - - $ $ $ - - $ $ $ - - Cash Flow from Financing Activities Cumulative Translation Adjustment NET CASH FLOW $ Memo: Free Cash Flow $ Source. (Publication Year). Title Retrieved from: http://www.?????????????? 20210202164911fin_330_spreadsheet_template_1 0.0% 0.0% <-- - $ - $ - 0.0% 0.0% <-- - $ - $ - 0.0% 0.0% <-- Printed 2/2/2021 Page 2 of 31 [COMPANY'S FULL NAME] BALANCE SHEET HIGHLIGHTS Unaudited; Amounts USD x 1000 For Fiscal Years ending: % Growth vs Prior Year Current Assets Cash & cash equivalents All Other Current Assets $ - (1) $ - (2) $ - Total Current Assets Non-current Assets Property, Plant and Equipment, Net Other Non-current Assets Total Non-current Assets (1) 0.0% 0.0% 0.0% 0.0% <-- 0.0% 0.0% <-- <-<-- $ - $ - $ - 0.0% 0.0% 0.0% 0.0% $ - $ - $ - 0.0% 0.0% 0.0% 0.0% <-- 0.0% 0.0% 0.0% 0.0% <-- 0.0% 0.0% TOTAL ASSETS Current Liabilities Accounts Payable, Net Other Current Liabilities - $ - $ - $ - Total Current Liabilities Non-current Liabilities Long-term Debt Other Non-current Liabilities $ - $ - $ - 0.0% 0.0% 0.0% 0.0% Total Non-current Liabilities $ - $ - $ - 0.0% 0.0% 0.0% 0.0% TOTAL LIABILITIES <-- SHAREHOLDERS' EQUITY Common Stock, at par Additional Paid-in Capital Retained Earnings Cumulative Translation Adjustment and Other $ - $ - $ - TOTAL SHAREHOLDERS' EQUITY $ - $ - $ - <-- Total Liabilities+Total Shareholders' Equity $ - $ - $ - <-- Source. (Publication Year). Title Retrieved from: http://www.?????????????? 20210202164911fin_330_spreadsheet_template_1 Printed 2/2/2021 Page 3 of 31 [COMPANY'S FULL NAME] SELECTED FINANCIAL RATIOS Unaudited; Amounts USD x 1000 For Fiscal Years ending: % Growth vs Prior Year FINANCIAL RATIOS Price / Earnings Ratio Debt Ratio Total Debt / Equity Ratio Return on Equity (ROE) % Return on Assets (ROA) % Net Profit Margin % Free Cash Flow OTHER USEFUL RATIOS Earnings per Share or EPS Current Ratio COMMON STOCK PRICE Adjusted Close Price on or near $ - (1) (2) 0.0 0% 0.0 0.0% 0.0% 0.0% $ 0.0 0% 0.0 0.0% 0.0% 0.0% $ - (1) 0.0 0% 0.0 0.0% 0.0% 0.0% - 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% <-<-<-<-<-<-<-- $ 0.0 $ 0.0 $ 0.0 0.0% 0.0% 0.0% 0.0% <-<-- $ - $ - $ - 0.0% 0.0% <-- RATE OF RETURN CALCULATIONS (3) (2) (1) Adjusted Close Stock Price at fiscal End of Year (EOY) Annual Dividends per Share $ $ If you buy 1 share at end of fiscal -3, collect dividends, then sell at end of fiscal 0, your 3-year percent gain would be: BUT WHAT IF WE VIEW THIS AS A TIME VALUE OF MONEY QUESTION? Investor's Annual Cash Flow for 1 Share $ Solve for the annual Internal Rate of Return or IRR, with N=3 Yrs - $ - $ - $ $ - Pct Change 0.0% 0.0% - $ #NUM! <-<-<-<-- <-<-- Source. (Publication Year). Title Retrieved from: http://www.?????????????? 20210202164911fin_330_spreadsheet_template_1 Printed 2/2/2021 Page 4 of 31 Take one row at a time: read row comment and enter data in the yellow cells only. ), BRL (Brazilian Real), EUR (Euro), CNY (Chinese Yuan). Information is found on financial statements. rgent Online says Scale = Thousands, 2,822,795 listed is actually 2,822,795,000. Any financial report should show the name of the organization in the heading. Always identify the type of report. The currency and scaling needs to be defined. An organization's fiscal year might end on Dec 31, or June 30, or something else. State it here. Replace leftmost year number (Cell C9) with most recent year of data available. Cost of revenues is also referred to as cost of goods sold To enter multiple numbers, the formula would start with the equal sign like this: =1278022+1052778+863568 Confirm this matches what is listed on the financial statement you downloaded. Confirm this matches what is listed on the financial statement you downloaded. FYI, most analysts consider this better than total Net Income as an indicator of underlying business performance. Typically, from shutting down or selling part of the business. Confirm this matches what is listed on the financial statement you downloaded. Make sure this value is scaled the same way as the other numbers (thousands or millions). Net income or Loss / Total Revenue. Typical values are 2% to 20%, but it can be negative, too. Mergent Online instructions include how to find historical stock prices. Go back four years because you will need fourth year for Line 123. Better to use end-of-year shares outstanding, but this figure is close enough for this course. Market price at the end of the year divided by that year's earnings per share. Typical values are 10 to 30. Include APA citation for where you found the financial statement data. 20210202164911fin_330_spreadsheet_template_1 Printed 2/2/2021 Page 5 of 31 This is a noncash expense, so we add it back to net income here. These are working capital changes and other adjustments. By entering the total here, the row above will be automatically calculated. This is normally a negative number. This is normally a negative number. This is normally a negative number. By entering the total here, the row above will be automatically calculated. Borrowing money (debt) is a source of cash, "proceeds," repaying it is a use of cash. Issuing stock is a source of cash, "proceeds," repurchasing it is a use of cash Dividend payments should normally be a negative number, because they are a cash outflow. By entering the total here, the row above will be automatically calculated. Don't try to understand what this exchange rate-related number means at this time. It is applicable to most multicurrency organizations. Confirm this matches what is listed on the financial statement you downloaded. Usually defined as Cash Flow from Operating Actitivies less Capital Expenditures. Note: If cap exp is a negative number, you will use the absolute value of that number; this means change the negative sign to positive for the calculation. If Cap Expenditures are -$100: 20210202164911fin_330_spreadsheet_template_1 Printed 2/2/2021 Page 6 of 31 Formula is Op Cash Flow less absolute value of Cap Exp, e.g., 1,000-100 = 900. Free Cash Flow must be less than Operating Cash Flow. Cash equivalents include Accounts Receivable (invoices the organization has sent to clients, but that they have not yet paid) although some disagree AR should be considered this. Enter total current assets values, and the spreadsheet will calculate "other current assets." These are for PP&E net of accumulated depreciation. Includes intellectual property (IP), such as patents and acquired technology. Enter Total Assets, and the spreadsheet will calculate Total Noncurrent Assets and Other Noncurrent Assets. These are for bills the organization has received but not yet paid. Note: Working Capital, capital used for day-to-day operations, is Total Current Assets - Total Current Liabilities Enter Total Liabilities and spreadsheet will calculate other non-current and total liabilities. Note: Working Capital is Total Current Assets - Total Current Liabilities Confirm this matches what is listed on the financial statement you downloaded. By definition, Shareholders' equity equals total assets minus total liabilities. Confirm this matches Total Assets since Total Assets = Total Liabilities + Total Shareholders' Equity 20210202164911fin_330_spreadsheet_template_1 Printed 2/2/2021 Page 7 of 31 Price per Share / Earnings per Share. Typical values are 10 to 40 times. Total Liabilities / Total Assets. Result < 0.5, most of the assets are financed through equity. Result > 0.5, most of the assets are financed through debt. Total Liabilities / Total Shareholders' Equity. Typical values are 0.2 to 0.6. Net Income / Total Shareholders' Equity. Typical values are 2% to 40%. Net Income / Total Assets. Typical values are 2% to 40%. Almost always LOWER than ROE. Net Income / Total Revenue. Typical values are 1% to 15%. If FCF is negative, consider what that means. Is a negative FCF a bad thing? Net Income / Diluted Shares Outstanding. Typical values are $1.00 to $10.00. May also be negative. Current Assets / Current Liabilities. Typical values are 0.7 to 1.5. Usually, somewhere between a few dollars and a couple of hundred dollars per share Need fiscal end-of-year information for four years to calculate three-year percentage change. For this, ROI% = ($End - $Beg) / $Beg. More precisely, you would add dividends received to the $End value. Approximate dividends/share are calculated here, but you may want to override those with disclosed div/share figures. Not required here, but a more complete measurement. For an investor who buys 1 share at beginning, collects dividends, then sells at end of third year. This IRR is the best overall measure of this stock's performance over the time period. 20210202164911fin_330_spreadsheet_template_1 Printed 2/2/2021 Page 8 of 31 This tab is used to calculate Weighted Average Cost of Capital (WACC). Enter data in the yellow cells only. Comments to help you are indicat [COMPANY'S FULL NAME] CAPITAL STRUCTURE For End of Fiscal Year 0 Unaudited; Amounts USD x 1000 SIMPLE METHOD Debt: Bank Loans Debt: Bonds Debt: Commercial Paper Debt: Other or Unidentified Leases (a form of Debt) Preferred Stock (if any) Common Stock: At Par Common Stock: Add'l Paid-in Capital Retained Earnings [Other] TOTAL $ $ Cost of Capital: Estimated % Return Req'd by Investors 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Capital Funding Amount - TEXTBOOK METHOD Corporate Marginal Tax Rate % 20.0% 20.0% 20.0% 20.0% 20.0% 0.0% 0.0% 0.0% 0.0% 0.0% 1 - Corp Tax Rate 80.0% 80.0% 80.0% 80.0% 80.0% 100.0% 100.0% 100.0% 100.0% 100.0% % Cost of $ Cost of Capital per Capital, After Year (Column C x Tax Savings Coumn G) 0.0% $ 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $ - Wgt x Cost #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! % of Total #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! WEIGHTED AVERAGE COST OF CAPITAL: WACC = [$ Total Annual Cost of Capital] / [$ Total Capital Funding] = Amount Total Debt, incl. Leases & Preferred Stock Total Equity, incl "Other" TOTAL CAPITAL $ $0 / $0 = #DIV/0! Pct of Total - 0.0% 0.0% - 0.0% So Debt/Equity Ratio ...
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