Project #36257 - Managing for Financial Peformance

Two questions with multiple parts. Here they are:

You have been hired as a financial analyst by a private equity firm.  Your firm along with the management of Microsoft Corporation is investigating the possibility of taking the company private, i.e. your firm and Microsoft’s management will buy all of the shares.

You have been assigned to address the issues found below.  The information that you provide will be used by the decision makers to determine a price per share for the stock.  For the computations use the information found on the Yahoo! Finance web pages for Microsoft Corporation (MSFT). The numbers used would be for the financials of June 30, 2013 and June 30, 2012.  Other computations and issues which require more current information will be found on these webpages as well.

For discussion questions, a good source of information is found in the company’s Annual Report for 2013, as well as recent articles concerning Microsoft.  The link to the company’s official web site can be found at the bottom of the Profile page on Yahoo! Finance. Your grade for the qualitative answers depends on the quality and quantity of relevant information, as well as the quality of writing.

 

(13 pts) a)Discuss Microsoft in the context of the forces considered in performing an environmental scan.

 (9 pts)  b)Discuss the risks that Microsoft needs to consider in conducting its operations.

 (5 pts)  c)Explain whether you believe that MSFT can take on more debt.  Use some computations to support your conclusion. 

 (5 pts)  d)       Discuss MSFT’s inventory position.

(12 pts) e)Construct the DuPont Identity for Microsoft, International Business Machines Corporation (IBM), and Oracle Corporation (ORCL). Explain your results.

 (6 pts)  f)Determine the MVA for MSFT, IBM, and ORCL and discuss the results.

 (5 pts)  g)Determine the EVA for MSFT and discuss the results.    Assume that MSFT’s cost of capital is nine percent. Use a tax rate of 35 percent for MSFT. Discuss the results.

(6 pts) h)         Determine MSFT’s free cash flow for 2013. Comment on the results.

(4 pts)   i)        Compare and discuss the PE ratios for MSFT, IBM, and ORCL.

(7  pts) j)         Discuss the overall financial health of Microsoft.

(5 pts) k)         After the final price is determined for Microsoft, do you believe 

                        that this is evidence of an efficient or inefficient market? Explain.

 

 

 

(12 pts)   2.You have been asked to give a presentation concerning the concept of the required rate of return. In this presentation you will explain the importance of the required rate of return, as well explain how the required rates of return for the following investments differ: 6-month Treasury bond, 10-year Treasury bond, a 10-year corporate bond (AA bond rating), the common stock of Microsoft and the common stock of 3D Systems Corporation (DDD). Prepare your presentation with a detailed explanation, including computations to show why the required rates of return differ. If necessary, use a market risk premium of 5.5 percent.

Subject Mathematics
Due By (Pacific Time) 07/25/2014 04:00 pm
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