FIN 640 Milestone Two Guidelines and Rubric Overview: For your final project, the CEO has asked you, the new investment manager of XYZ Tech Company, to produce an investment analysis report. You will prepare an investment analysis report for the company, which will include portfolio analysis that you have compiled, a complete portfolio, and a justification of your investment strategies in an executive summary. For this second milestone, due in Module Five, you will first complete the Company and Market Analysis portion of your final project. Using historic and quantitative data, you will provide a brief discussion of the absolute and relative performance of the chosen companies in terms of industry trends. Next, with your completed company and market analysis in mind, you will begin to construct an investment portfolio that includes a consideration of assets, securities, and rates of return for each of the companies that you will be including in the portfolio. Prompt: Referring to the microeconomic and quantitative data that you have gathered and analyzed, in a 2- to 3-page paper, first briefly discuss each company’s stocks and bonds (both corporate and government) for absolute and relative investment performance with regard to industry trends. Next, with your company and market analysis in mind, begin to construct an investment portfolio that includes a consideration of assets, securities, and rates of return for each of the companies that you will be including in the portfolio. Specifically, the following critical elements must be addressed: I. Company and Market Analysis: In this section, you will analyze the company and its position in the financial markets. C. Industry Trends i. Compile historic industry microeconomic data from database research for relative comparisons and inputs into asset valuation models. ii. Analyze quantitative data across sectors and industries to measure absolute and relative performance. II. Portfolio: With your company and market analysis in mind, construct a complete portfolio that includes the following: A. Assets i. Explain the inclusion of specific asset classes for the portfolio, considering the portfolio’s risk/return trade-offs and the company’s investment objectives. ii. Apply the asset allocation weightings across asset classes, sectors, and industries. B. Securities i. Analyze the company’s historical revenue and earnings growth in order to demonstrate a comparison to that of peers in the industry. ii. Determine the intrinsic value of assets utilizing the asset valuation models. C. Rates of Return i. Analyze the assets’ historical risk and rates of return, utilizing a comparison of the assets’ rates of return to similar securities or benchmarks for support. ii. Calculate required rates of return, utilizing various asset valuation models (e.g., stock valuation models, bond valuation models, real estate valuation models, etc.). For your milestones and the final project, you will need to use the portfolio analysis template that you prepared in Milestone One as a reference. Be sure to refer back to this (and update and revise it as necessary) as you continue your work throughout the course. You should also be monitoring the portfolio’s performance on a daily basis and reading the financial periodicals provided among the course resources to stay current with your investments. Be sure to apply instructor feedback on this milestone to your final project. Rubric Guidelines for Submission: The written component of the milestone should be submitted as a Word document, 2–3 pages in length, double-spaced, using 12-point Times New Roman font, one-inch margins, and the latest edition of the APA manual for formatting and citations. Please note that the grading rubric for this milestone submission is not identical to that of the final project. The Final Project Rubric will include an additional “Exemplary” category that provides guidance as to how you can go above and beyond “Proficient” in your final submission. Critical Elements Company and Market Analysis: Industry Trends: Microeconomic Data Proficient (100%) Compiles historic industry microeconomic data from database research for relative comparisons and inputs into asset valuation models Company and Market Analysis: Industry Trends: Absolute and Relative Performance Analyzes quantitative data across sectors and industries to measure absolute and relative performance Portfolio: Assets: Asset Classes Explains the inclusion of specific asset classes for the portfolio, considering the portfolio’s risk/return trade-offs and the company’s investment objectives Needs Improvement (75%) Compiles historic industry microeconomic data from database research for relative comparisons and inputs into asset valuation models, but compilation is incomplete or contains inaccuracies Analyzes quantitative data across sectors and industries to measure absolute and relative performance, but analysis is cursory, contains inaccuracies, or is not used to measure absolute and relative performance Explains the inclusion of specific asset classes for the portfolio, but does not consider risk/return trade-offs or investment objectives, or explanation is cursory or contains inaccuracies Not Evident (0%) Does not compile historic industry microeconomic data Value 11.5 Does not analyze quantitative data across sectors and industries 11.5 Does not explain the inclusion of specific asset classes for the portfolio 11.5 Portfolio: Assets: Allocation Weightings Applies the asset allocation weightings across asset classes, sectors, and industries Portfolio: Securities: Historical Analyzes the company’s historical revenue and earnings growth in order to demonstrate a comparison to that of peers in the industry Portfolio: Securities: Intrinsic Value Determines the intrinsic value of assets utilizing the asset valuation models Portfolio: Rates of Return: Historical Analyzes the assets’ historical risk and rates of return utilizing a comparison of the assets’ rates of return to similar securities or benchmarks for support Portfolio: Rates of Return: Calculate Calculates required rates of return utilizing various asset valuation models Submission has no major errors related to citations, grammar, spelling, syntax, or organization Articulation of Response Applies the asset allocation weightings across asset classes, sectors, and industries, but application is incomplete or contains inaccuracies Analyzes the company’s historical revenue and earnings growth, but analysis is incomplete, does not demonstrate a comparison to peers, or contains inaccuracies Determines the intrinsic value of assets, but determination does not utilize asset valuation models, is incomplete, or contains inaccuracies Analyzes the assets’ historical risk and rates of return utilizing a comparison of the assets’ rates of return to similar securities or benchmarks, but analysis is cursory, is insufficiently supported, or contains inaccuracies Calculates rates of return, but calculations are incomplete or contain inaccuracies Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Does not apply the asset allocation weightings across asset classes, sectors, or industries 11.5 Does not analyze the company’s historical revenue or earnings growth 11.5 Does not determine the intrinsic value of assets 11.5 Does not analyze the assets’ historical risk and rates of return utilizing a comparison of the assets’ rates of return to similar securities or benchmarks 11.5 Does not calculate rates of return 11.5 Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas Total 8 100% 1 FIN 610 Final Project Milestone Two Student's Name Institutional Affiliation Course Name Professor's Name Date 2 FIN 610 Final Project Milestone Two Ford Motor Company (hereafter referred to Ford) and General Motors Company (GM) are among the most prominent automotive manufActurers worldwide. These companies operate across the six continents, offering a variety of products to their customers. Therefore, Ford and GM yield billions in revenues and profits annually. However, these automotive manufActurers' performance depends on several economic factors such as prevailing interest rates and inflation rates and legal aspects such as the Sarbanes-Oxley Act of 2002. Economic factors affect multiple elements in the companies' external environment, such as industry performance, consumption rates, credit access, and stock market performance. In contrast, legal factors affect these firms' ethical considerations in their industry. This paper will evaluate the impActs of current interest rates, rate of inflation, Federal Reserve's monetary policy plans, and the Sarbanes-Oxley Act of 2002 on the financial markets and instruments and Ford and GM. Prevailing interest rates FOMC (2021) notes that The federal Open Market Committee (FOMC) has retained an interest rate near zero. A low-interest rate is beneficial to short-term financial markets and instruments since it prompts investors to shift their capital to equities. Moreover, a lowinterest rate enables individuals to access cheap credit for investment, including financial markets and instruments. As demand for equity increases, stock prices rise, increasing corporations' equity capital value. This factor is beneficial for Ford and GM's capital base. These companies are planning to invest in other ventures such as electric vehicles. Such investments are capital intensive, and it is critical for them to main a solid capital base as they seek more investors and partnerships. The FOMC's plan to hold the interest rate at its current position is beneficial to investors in the short-term financial market and these corporations. 3 The current rate of inflation The rate of inflation has been increasing in the USA since the end of last year. According to S&P Global (2021), the annual inflation rate increased from 1.2 percent in November to 1.4 percent in December and is expected to reach over 2.2 percent in 2021. The consumer price index rose by .4 percent monthly in 2020 (S&P Global, 2021). Rising inflation erodes the purchasing power of financial instruments' future income. It also erodes consumers' purchasing power, limiting their investment capacity in the financial market (Qamruzzaman & Wei, 2018). These results will substantially affect Ford and GM. As inflation rises, consumers postpone their spending on cars, affecting the industry's revenues and cash flows from operating and investment activities. Furthermore, the current inflation rate will affect these organizations' equity capital base. The Federal Reserve's plans FOMC revised its monetary policy in February 2021 based on the economic impacts of the COVID-19 pandemic. This pandemic has continued to ravage the USA's labor markets and economic Activities (FOMC, 2021). This revision also followed weak aggregate demand in the commodity market. Consequently, the FOMC retained its monetary policy near zero and has undertaken other measures to purchase treasury securities and agency mortgagebacked securities, improving money supply. The Federal Reserve is unlikely to change this monetary policy in the short-term since it projects similar economic conditions in the coming months (FOMC, 2021). Therefore, the FOMC's policy will lead to lower interest rates, prompting investors to move money to the equities market. This factor will improve these companies' equity capital base. Ethical considerations resulting from the Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 regulates the financial practice and corporate governance in all American companies to stem corporate fraud (Soxlaw.com, 2020). This Act 4 also protects shareholders and the public from accounting errors, misinformation, fraud, and malpractice by guaranteeing corporate disclosures' accuracy (Soxlaw.com, 2020). Therefore, the Sarbanes-Oxley Act of 2002 affects ethical and legal prActices in all corporations. Ford and GM must adhere to all legal and ethical guidelines, including tax and regulatory procedures. For instance, they must disclose all tax obligations to their shareholders. These companies must also disclose all regulatory guidelines that impact their finances or operating Activities. Furthermore, the Sarbanes-Oxley Act of 2002 will prevent the manipulative smoothening of cash flows to reduce volatility. Soxlaw.com (2020) notes that companies must strengthen their audit committees and internal controls to strengthen disclosure. Conclusion This study has evaluated how various economic factors, comprising current interest rates, inflation rates, and the federal monetary policy, will affect the short-term financial markets and instruments. The study has also analyzed how the Sarbanes-Oxley Act will affect ethical considerations in Ford Motor Company and General Motors. The FOMC policy has retained near-zero interest rates. These rates will likely remain low in the coming months as the Federal Reserve works towards economic recovery during the COVID-19 pandemic. Low-interest rates will increase investment in the equities security market. However, inflation has continued to rise, stifling consumption of capital goods and investments in financial markets and instruments. 5 References FOMC. (2021). Monetary Policy Report – February 2021 (pp. 1-20). Washington, D.C.: Board of Governors of the Federal Reserve System. Retrieved from https://www.federalreserve.gov/monetarypolicy/files/20210219_mprfullreport.pdf Qamruzzaman, M., & Wei, J. (2018). Financial Innovation, Stock Market Development, and Economic Growth: An Application of ARDL Model. International Journal Of Financial Studies, 6(3), 69-72. https://doi.org/10.3390/ijfs6030069 S&P Global. (2021). S&P Dow Jones Indices. S&P Global. Retrieved 24 March 2021, from https://www.spglobal.com/spdji/en/. Soxlaw.com. (2020). A Guide To The Sarbanes-Oxley Act. The Sarbanes-Oxley Act 2002. Retrieved 24 March 2021, from http://www.soxlaw.com/. FIN 640 Milestone One Guidelines and Rubric Overview: For your final project, the CEO has asked you, the new investment manager of XYZ Tech Company, to produce an investment analysis report describing how to invest the firm’s cash and cash equivalents in the financial markets. You will prepare an investment analysis report for the company, which will include a portfolio analysis template that you will use to outline how you will invest the cash in selected public corporations. Finally, your reasons behind your investment strategies should be noted in an executive summary. For this first milestone, due in Module Three, you will submit your company profile. Using the investment parameters for XYZ Tech Company along with your own financial database research, you will fill in the portfolio analysis template and write a 2- to 3-page paper outlining the securities that your company will invest in to create a well-diversified investment portfolio. You will analyze each company and its performance in the financial markets over the past five years, include a company valuation for each firm, and identify stakeholders in the company. Prompt: First, visit Morningstar and other bond resources from the Module Three Reading and Resources area of your course to retrieve stock and bond information for each of the following companies:      Apple, Inc. (AAPL) Caterpillar (CAT) Consolidated Edison (ED) Northern Trust (NTRS) Macy’s (M) Using the portfolio analysis template, provide the specified data to explain the company’s growth period (revenues, earnings market share, etc.). Finally, in a 2- to 3-page paper, discuss the five-year history of each company by visiting the respective websites and databases covering the firm and industry. The paper should briefly discuss the products and services produced by each company that were major contributors to the company’s success. It should also discuss each company’s strengths given the competitive nature of the industry. Based on the financial items and key ratios of the company that you have researched, include a brief discussion of the company’s valuation. (Hint: The Key Ratios on the Morningstar website list competition and industry ratios and could be downloaded directly into Excel for easier comparison.) You should also identify the key stakeholders, particularly common stakeholders, in the company. Specifically, you must address the following critical elements: I. Company and Market Analysis: In this section, you will analyze the company and its position in the financial markets. A. Financial Markets i. Analyze the five-year performance of the domestic economy relative to the financial markets (using the portfolio analysis template). ii. Explain specific market performance data based on compiled asset valuation model inputs supported by database research of five-year sector and industry performance and current trends. iii. Evaluate the impact of the five-year and current macroeconomic data on asset prices. B. Company Valuation i. Analyze the company’s financial items and key ratios for a comparison to peers and industry (using the portfolio analysis template). ii. Determine the intrinsic value of assets by inputting data into the various asset valuation models. D. Stakeholders i. Identify five key stakeholders and their needs in relation to the company’s portfolio. ii. Identify the common stockholders’ primary objective and their required return on equity. Refer to your text readings and other course resources to support your responses. In Milestones Two and Three, and for the final project submission, you will be using the portfolio analysis template that you have prepared in this milestone. Be sure to refer back to this (and update and revise it as necessary) as you continue your work throughout the course. You should also be monitoring the portfolio’s performance on a daily basis and reading the financial periodicals provided among the course resources to stay current with your investments. Be sure to apply instructor feedback on this milestone to your final project. Rubric Guidelines for Submission: Submit both your completed portfolio analysis template and company profile. The written component of this milestone should be submitted as a Word document, 2–3 pages in length, double-spaced, using 12-point Times New Roman font, one-inch margins, and the latest edition of the APA manual for formatting and citations. Please note that the grading rubric for this milestone submission is not identical to that of the final project. The Final Project Rubric will include an additional “Exemplary” category that provides guidance as to how you can go above and beyond “Proficient” in your final submission. Critical Elements Financial Markets: Domestic Economy Proficient (100%) Analyzes the five-year performance of the domestic economy relative to the financial markets Financial Markets: Asset Valuation Model Inputs Explains specific market performance data based on compiled asset valuation model inputs supported by database research of five-year sector and industry performance and current trends Financial Markets: Macroeconomic Data Evaluates the impact of the fiveyear and current macroeconomic data on asset prices Company Valuation: Financial Items and Key Ratios Analyzes the company’s financial items and key ratios in order to demonstrate a comparison to peers and industry Needs Improvement (75%) Analyzes the five-year performance of the domestic economy relative to the financial markets, but analysis is cursory or contains inaccuracies Explains specific market performance data based on compiled asset valuation model inputs, but explanation is cursory, is not supported by database research of five-year sector and industry performance and current trends, or contains inaccuracies Evaluates the impact of the fiveyear and current macroeconomic data on asset prices, but evaluation is cursory or contains inaccuracies Analyzes the company’s financial items and key ratios in order to demonstrate a comparison to peers and industry, but analysis is cursory, comparison is incomplete, or response contains inaccuracies Not Evident (0%) Does not analyze the performance of the domestic economy Value 13 Does not explain specific market performance data based on compiled asset valuation model inputs 13 Does not evaluate the impact of the macroeconomic data on asset prices 13 Does not analyze the company’s financial items and key ratios in order to demonstrate a comparison to peers and industry 13 Company Valuation: Intrinsic Value Stakeholders: Key Stakeholders Determines the intrinsic value of assets by inputting data into the various asset valuation models and explains how each model was applied Identifies five key stakeholders and their needs in relation to the company’s portfolio Stakeholders: Common Stockholders Identifies the common stockholders’ primary objective and their required return on equity Articulation of Response Submission has no major errors related to citations, grammar, spelling, syntax, or organization Determines the intrinsic value of assets by inputting data into the various asset valuation models, but determination contains inaccuracies, or asset valuation models are not used correctly, or lacks explanation Identifies key stakeholders and their needs in relation to the company’s portfolio, but does not identify five stakeholders, needs are inappropriately identified in relation to the portfolio, or response contains inaccuracies Identifies the common stockholders’ primary objective and their required return on equity, but identification is inaccurate or does not take into account either the objective or return on equity Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Does not determine the intrinsic value of assets 13 Does not identify key stakeholders and their needs in relation to the company’s portfolio 13 Does not identify the common stockholders’ primary objective or their required return on equity 13 Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas Total 9 100%
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