Assignment 3: Risk Analysis - REQUIREMENTS: Your report should be single-spaced in Times New Roman 12-point font with 1 margins on each side. All individuals in the group must be stated on the first page. Your report should consist of: (1) text, (2) a neatly formatted appendix that clearly shows your ratio calculations so that they can be re-performed by the grader. Note: if you do not show your work, you will not receive partial credit for incorrect answers. Please present your calculations to four decimal places so that you can clearly see small changes (i.e., 0.0487 or 4.87%). Notes Please read!! (1) Use Income from Continuing Operations rather than Net Income. (2) Use Cash flow from Continuing Operations. (3) The debt numbers on the balance sheet already include capital lease liabilities. (4) Depreciation & Amortization on the Income Statement is incomplete because some of these charges are included in Cost of Goods Sold. The MD&A provides a more precise number for Depreciation & Amortization use the number given in the MD&A in your calculations below. (5) Target does not include interest income in their net interest expense. 1. Credit Risk. Calculate the following ratios for Target for fiscal years 2021 and 2021: Times Interest Earned, EBITDA coverage, CFO to total debt, Liabilities to Equity. A. Use Targets 2021 10-K to find the credit rating assigned by Moodys as of the balance sheet date. Use Exhibit 4.8 (4.7 in the 5th and 4th edition, 4.6 in the 3rd edition) of the textbook to determine what credit rating class (or credit rating range) the ratios you calculated fall into. Specifically, use your calculation of Times Interest Earned and compare it to the column labeled EBITA/Interest Expense. Use your calculation of CFO to total debt and compare it to the column labeled FFO/Debt. For each ratio, answer the following question: does Moodys actual rating correspond to the rating you would expect based on the ratio? If not, does Moodys view Target as higher or lower risk than you would expect based on the ratio? Why might this be? B. Did any of the credit rating agencies change Targets credit rating during the year? Based on the trends discussed above, does a change seem warranted? Why or why not?