Project #36073 - Financial Mangement

****THE COMPANY I CHOSE TO DO IS WENDYS CO

Objective:
The objective of this individual Financial Management Project is to motivate the students’
interest in Financial Management through hands-on experience researching, calculating,
analysing and interpreting financial management information. The process will cover topics such
as: a) Cash flows, b) External Financial Needs, c) Internal & Sustainable growth, d) Capital
Budgeting, e) Capital Asset pricing Model, & the Weighted Average Cost of Capital among other
financial tools.
Purpose:
The purpose of using the Financial Management Project is to give you a better understanding of
corporate financial tools and their applications. You will also learn to research and use a variety
of financial internet sources. This project will help you to apply the fundamental financial
theories and tools to a real public corporation for the benefit of your career and to enrich your
finance learning experience.
Individual Assignment: This is an individual project.

Project Requirements
• Each requirement will be a separate sheet from your project and you must include
immediately after your calculations & your supporting material
information you used from financial sources, it could be
financial sites and/or the company’s official report)
to complete the requirement.
• Complete the requirement in the order provided
• You need to show your step by step calculations for each of the requirements from above and your interpretation and implication that this result has selected company.
• Answers to requirements without calculations/ and or supporting material won’t be
accepted.
• Include a Reference Sheet (use APA)
• The information used to support your answers should be from a reliable, and well
known source.
• It should be computer based, remember you need to show your step
calculation process.
• Failure to comply with these requirements will seriously affect your grade


Report:
In addition to answer the Financial Management Question (see page 5), this project will
include:
• One page (double space, 12 font): Based on your calculations and relevant
information, discuss the Financial Management Performance from your selected
company from year-to-year (based on the annual financial report) from the point of
view of the Shareholder.
• One page (double space, 12 font): Based on your calculations and relevant
information, discuss the Financial Management Performance from your selected
company from year-to-year (based on the annual financial report) from the point of
view of the Bondholders.
• One page (double space, 12 font): Based on your calculations and relevant
information, discuss the Financial Management Performance from your selected
company from year-to-year (based on the annual financial report) from the point of
view of the Senior Management.
• One page (double space, 12 font): What are the Financial Management Strengths and
Weaknesses of the firm?
• One page (double space, 12 font): What should Senior Management set as its top
three priorities for the coming year?
• One page (double space, 12 font): clearly state your Financial Management
Recommendations to improve your selected company’s financial position.
• One page (double space, 12 font): Based on the news release you found at the
beginning of the term and the complete financial management analysis you made on
your selected company, do you think your selected company will be in the position
to achieve its goals? Why? / Why not? / How?
Sources that you may find to be particularly valuable for your research include:
Yahoo Finance: finance.yahoo.com
The morning star: www.morningstar.ca
Google Finance: www.google.ca/finance
Investopedia: www.investopedia.com
The globe and mail: www.theglobeandmail.com
Bond on line: www.bondonline.com
Use your firm official site to find the last annual financial report
Information about your company’s bond:

http://www2.morningstar.ca/homepage/h_ca.aspx?culture=en-CA
Bond rating
Dominion Bond Rating Services www.dbrs.com
Moodys: https://www.moodys.com
Standard and Poors: www.standardandpoors.com/
Additional sources
Bloomberg: http://www.bloomberg.com/
Reuters: http://ca.reuters.com/news/business
Project Requirements:
Company selection requirement:

b) Use the popular media, such as news papers, financial sites, business magazines or
any well known media to find the last news release from the firm (it could help to
Google the firm’s current project) about a current investment project, research and
development or prospectus project. It is important that this project won’t be
concluded before the end of our academic term.


In order to complete the following requirements you need to find and download the last
annual financial report from your company’s web site, which includes the financial statements
and notes to the financial statement. Only financial statements and its notes from the firm’s
official site will be accepted. Financial statements from other sources, such as, Yahoo financial,
Google financial, etc., won’t be accepted.
Financial Management Questions
1. Net working capital. Using the annual balance sheet and the Income Statement,
a) calculate the cash flow identify (OCF, NCS, changes in WC, CFFA, CFC & CFS)
b) Explain the sources and uses of cash for the firm
c) Is the Net working capital negative or positive?
d) Does this indicate any potential difficulty for the company?
e) Is the Cash Flow to Shareholders negative?
f) Explain how this might come about?
g) Is the Cash Flow to Creditors Negative?
h) Explain how this might come about?
i) Based on the information above, what is your opinion in regards to your selected
company’s liquidity?
2. Per Share Earnings, Dividends per share & Du pont Identify. Using the last annual income
statement and the Balance Sheet.
a) Calculate the Earning per shares?
b) Calculate is the Dividend per share?
c) Calculate the Du Pont Identity? (if you do not remember this financial ratios, see notes
on blackboard to refresh your memory)
d) What does this information tell you about the company?
3. Calculating EFN. Using the last income statement and balance sheet, and assuming sales
grow by 10 percent, what is the EFN for next year? Assume non-operating income and
non-operating expense and special items will be zero next year. Assets, costs, and
current liabilities are proportional to sales. Long-term debt and equity are not. Consider
the same tax rate next year as it does in the current year. (The company is working at full
capacity).
a) Prepare the Pro Forma Income Statement
b) Prepare the Pro Forma Balance Sheet
c) Calculate the current tax rate
d) Calculate the company’s payout ratio
e) Calculate the projected addition to the retain earnings
f) Calculate the EFN
g) What does this number represent for the firm?
h) Identify the Plug Variables.
i) Explain the reason of your selection.
4. Internal and Sustainable Growth Rates. Look up the financial statements for your
selected company and calculate the internal growth rate and sustainable growth rate over
the past two years.
a) Calculate ROA (ROA = return on assets)
b) Calculate ROE (ROE=return on equity)
c) Calculate R (R=retention ratio)
d) Calculate the Sustainable Growth Rate.
e) Are the growth rates the same for the two years? Why or why not? Explain
f) Calculate the Internal Growth Rate
g) Are the growth rates the same for the two years? b) Why or why not? Explain
c) What is the maximum increase in sales that can be sustained, assuming no new equity
is issued?
5. Go to the website of the Dominion Bond Rating Service and register at www.dbrs.com (for
Canadian companies) or to Moodys: https://www.moodys.com or Standard and Poors:
www.standardandpoors.com/ for a free trial (if you wish) (Use Quick Search and Ticker
Lookup to find your selected company and look up its rating. Also this site could help:
http://www.morningstar.com/credit-rating/corporate.aspx
Search in financial sources (newspapers, financial websites) for: (if your selected
company has more than one bond, select one and complete the requirement below)
a) Maturity date, coupon rate & the market value.
b) Read the notes to the financial statement (or find the Identure) to identify:
a. The basic terms of the bond
b. Security
c. Seniority
d. Call provision
e. Covenants
c) Calculate the YTM
d) Calculate the Bond Price
e) Is your bond a premium or discount bond?
f) What is the rating of your Company’s bond?
g) Is your bond retractable?
h) What type of Interest rate (fixed or floating)is your bond?
i) What does this information tell you about the firm’s debt?
j) Does this type of bond and features attract you as investor? Why? Why not?
Explain.
6. Calculating Growth Rates. Considering a dividend growth rate of 6%, find the most recent
closing monthly stock price.
a) Locate the most recent annual dividend for your selected company and calculate the
dividend yield.
b) Using your answer from a) and the 6 percent dividend growth rate, What is the
required return for shareholders?
c) Suppose instead that you know that the required return is 15 percent. What price
should your selected company stock sell for now?
d) What do you conclude from the above information?
7. Calculating the Expected Return for your selected company using CAPM. Considering a
1.3% Risk Free (which is the interest for the three-month Treasury bills).
Using the Beta for your selected company:
a) Use the average Canadian Common stock market return (10.23%) to calculate the
market risk premium.
b) What is the beta of your selected company?
c) What is the expected return using CAPM?
You wish to calculate the cost of equity for your selected company, go to
www.google.ca/finance and enter the selected company’s ticker symbol, to locate
information on the firm's stock, listed on the stock market. Locate the most recent
price for selected company, the market capitalization, the number of shares
outstanding, the beta, and the most recent annual dividend. (Market capitalization is
just a fancy name for a straightforward concept: it is the market value of a company's
outstanding shares. This figure is found by taking the stock price and multiplying it by
the total number of shares outstanding. For example, if Cory's Tequila Corporation
(CTC) was trading at $20 per share and had a million shares outstanding, then the
market capitalization would be $20 million ($20 x 1 million shares)
http://www.investopedia.com/articles/basics/03/031703.asp#ixzz2GwPLhhd9),
8. Using the Risk Free rate from above, and assuming a 4 percent market risk premium,
a) What is the cost of equity for your selected company using CAPM?
b) You now need to calculate the cost of debt (after tax YTM) for your selected
company. Using the YTM from requirement 5 c) and the tax rate from requirement 3
c).
c) What is the market value of the debt?
d) What is the market value of common shares?
e) What is the market value of preferred stocks?
f) What is the firm value?
g) What is the market value weights? (capital structure)
8
h) What is the WACC?
i) Using the book value: Calculate the Book value weights
9. Ratio Analysis
Using the financial statements of your selected company, calculate each of
following ratios listed below for the last two years include on the last annual
financial report.
a) Current ratio
b) Quick Ratio
c) Total Assets Turnover
d) Total Debt Ratio
e) Debt-Equity Ratio = TD/TA
f) De Pont Identity = NI/S x S/TA x A/E from: Financial Management Question 3c)
g) Long-Term Debt Ratio = LTD/(LTD + TE)
h) Times Interest Ratio = EBIT/Interest
i) Cash-coverage ratio = (EBIT + Dep) / Interest
j) Profit Margin = NI / S
k) Return on Assets = NI / TA
l) Price Earning Ration = Price per Share / Earning per Shares
m) Market to Book ration = Market value per Share / Book Value per Share

Subject Business
Due By (Pacific Time) 07/28/2014 12:00 am
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