What is your companys cost of debt

Assignment Help Financial Management

Reference no: EM133797079

Assignment: Managerial Finance

List of Companies:

1) USPH - U.S. Physical Therapy
2) BAC - Bank of America
3) WMT - Wal-Mart
4) JCP - JC Penny
5) FB - Facebook
6) GILD - Gilead
7) COP - Conoco Philipps
8) LUV - Southwest Airline

Instructions:

Provide short background information on your company. This could include the following, and should not exceed 1-2 paragraphs:

A. a description of its products, customer base, major suppliers;

B. major events (merger and acquisition, divestitures, change of directors, credit rating changes, new product releases, etc) during the past three years;

C. A description of its strategy during the past three years.

Measure your company's financial ratios during each of the past three years. (Matching content: Unit 2 & Unit 3)

A. Liquidity or Working Capital:

a. Current Ratio
b. Quick Ratio
c. Working Capital

B. Efficiency and Asset Management:

a. Total Asset Turnover
b. Fixed Asset Turnover
c. Days Sales Outstanding

C. Debt Management:

a. Total Liabilities to Total Assets
b. Long-Term Debt to Capital
c. Times Interest Earned (TIE) Ratio

D. Performance:

a. Profit Margins- Percentage of revenues remaining after deductions:
b. Return on Assets (ROA)

E. DuPont Ratio and explain. Please illustrate on each individual part of the DuPont Ratio (profit margin, turnover, and leverage).

I. Bond Valuation (Matching content: Unit 5)

A. What is the market value of the debt?

B. What is the debt structure of your company?

C. What is the average maturity of the debt?

D. What is the credit rating of the company?

E. Based on the information, what's the creditworthiness of the debt?

II. Stock Valuation (Matching content: Unit 7)

A. If the company issues dividend, conduct a valuation of your company's stock by using DDM model.

B. If the company doesn't issue dividend, please use the price multiple approach. (Will provide you more details during the semester.)

C. What are the key "value drivers" for your company? (Identify the key assumptions or variables that influence the value of your company the most. The examples would include the growth rate assumptions, the growth period assumptions, etc.)

D. Evaluate your company against a carefully selected list of its comparables and/or regression analysis. Choose a multiple that you think is the most appropriate for comparing the firms in your group/sector.

E. Based on your valuation results, what "should" the stock price of your company be? How do you explain the difference between your estimated stock price and its actual stock price?

III. Capital Budgeting (Matching content: Unit 8 & Unit 9)

A. What is your company's capital budgeting strategy? Explain.

B. Use the NPV, IRR, and Payback period model to explain the company's project performances.

C. Has your company created or destroyed value during the past three years? What explains its performance over the period?

IV. Cost of Capital and Capital Structure (Matching content: Unit 10 & Unit 11)

A. What is your company's cost of debt?

B. What is your company's cost of equity? What is your company's weighted average cost of capital?

C. What's the company's capital structure? Is it the optimal capital structure?

D. What's the company's EVA? Explain.

V. Conclusion

A. Make a final recommendation - would you buy or sell? Why?

1. (Hint: With the current volatile market condition, make decisions based on your investment holding period. Besides, you may always recommend a "sell" if you believe the trend predominates in a bear market, based on your analysis of economic indicators.)

B. Based on your calculation and analysis, is there a way in which the company could increase its value? Explain in detail.

1. (Hint: Think about the value-add from profitability, efficiency, turnover, lower cost, improved management, new product, market niche, competitor's performance, industry trend, market trend, etc).

Reference no: EM133797079

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