Project 1.

As instructed by your professor, obtain the annual report of a well-known company.

Requirements

1. Suppose you are a member of a loan committee at Bank of America. Assume a company has requested a loan from the bank. Analyze the company’s financial statements and any other information you need to decide how much money you would be willing to lend the firm. Specify the following:

a. The length of the loan period—that is, over what period will you allow the company to pay you back?

b. The interest rate you will charge on the loan. Will you charge the prevailing interest rate, a lower rate, or a higher rate? Why?

c. Any restrictions you will impose on the borrower as a condition for making the loan. Note: The long-term debt note to the financial statements gives details of the company’s existing liabilities.

2. Write your group decision in a report addressed to the bank’s board of directors. Limit your report to two double-spaced typed pages (400 to 600 words).

3. If your professor directs, present your decision and your analysis to the class. Limit your presentation to 10 to 15 minutes.

Project 2.

You are the owner of a company that is about to “go public,” that is, issue its stock to outside investors. You want to make your company look as attractive as possible to raise $1 million to expand the business. At the same time, you want to give potential investors a realistic picture of your company.

Requirements

1. Design a prospectus (a report) to portray your company in a way that will enable outsiders to reach an informed decision as to whether to buy some of your stock. The prospectus should include the following:

a. Name and location of your company.

b. Nature of the company’s business (be as detailed as possible).

c. How you plan to spend the money you raise.

d. The company’s comparative income statement, statement of retained earnings, balance sheet, and statement of cash flows for two years: the current year and the preceding year. Make the data as realistic as possible with the intent of receiving $1 million.

2. Create your prospectus using Word, Pages, or other similar tool. Do not exceed five pages.

3. If directed by your professor, make a copy for each member of your class. Distribute copies to the class and present your case with the intent of interesting your classmates in investing in the company. Limit your presentation to 10 to 15 minutes.