Content what you say (13/15) Professionalism how you say it (1/15) Visual appeal how it looks. (1/15) You should have received an email from me with your assigned company name. You cannot select your own company. If you did not receive from me the company name or you joined this class late, email me as soon as possible. OBJECTIVE: This individual Financial Management Project aims to motivate the students interest in Financial Management through hands-on experience researching, calculating, analyzing, and interpreting financial management information. The process will cover topics such as a) Cash flows, b) Ratio Analysis, c) Bond valuation, d) Stock valuation, e) Making Capital Investment Decisions, f) Capital Asset pricing model, and g) the Cost of Capital. PURPOSE: The purpose of using the Financial Management Project is to understand corporate finance tools and their applications. This project will help you apply the fundamental corporate financial management theories to benefit your career and enrich your finance learning experience. You will also learn to research and use a variety of financial internet sources. PROJECT REQUIREMENTS - CHECKLIST You must include your calculations and the supporting material. Highlight the information used for your calculations. Complete the questions in the order provided. Identify each question. Answers to questions without calculations/ and or supporting material wont be accepted. Include a reference sheet (use APA) The information used to support your answers should be from a reliable and well know source. It should be computer-based; remember you need to show your step-by-step calculation process. Additional information regarding the submission format will be posted on Bb. A sample report will be shown during an online session. When given an explanation, you need to support your arguments using the theory from our textbook. Failure to comply with these requirements will seriously affect your grade. 2 1. Uploading files Before you start your project, you need to be sure you have the information about your company. You need to upload it, and I need to approve it. Please do not start your project without approval. Use your firms official site to download the last annual financial reports a) You need to upload on Blackboard your companys last annual financial reports (PDF). b) And your companys bond information (PDF) and divided information (PDF) If your company does not have bond information and/or dividends information available, please email me. c) Daily I will approve the submissions. The Dropbox will be open on Thursday (Sept 14th at 8 pm), and you can submit it as soon as you have the information. But you cannot start working with the company if the company has not been approved on Bb. On this page your Document source, Highlighting the information You used to answer the requirements On this page your Calculations, Answers, Observations Analysis 3 2. FINANCIAL MANAGEMENT REQUIREMENTS: In order to complete the following requirements, you need to use the last annual financial report from your companys website, which includes the financial statements and notes to the financial statement. Only financial statements and notes from the firms official site will be accepted. Financial statements from other sources, such as Yahoo financial, Google financial, etc., wont be accepted. Requirement # 1: Ch 2: Cash Flow Identify: Using the annual balance sheet and the Income Statement, calculate the cash flow identify. To complete this requirement, you need to use your companys income statement information and generate a simplified income statement, as I presented below. Please ignore the 35% rate in the screenshot. The tax dollars in your income statement should be the same as the tax from your companys income statement. a) OCF b) NCS c) changes in NWC d) Is the Net working capital negative or positive? e) Does this indicate any potential difficulty for the company? Why? f) CFA g) CFC h) Is the Cash Flow to Creditors Negative? i) Explain how this might come about? j) What is the last total dividend paid? refer to the Statement of Changes in Equity k) Did the company issue new shares? Yes or no. What is the total dollar value? refer to the Statement of Changes in Equity l) Did the company repurchase shares? Yes or no. What is the total dollar value? refer to the Statement of Changes in Equity m) Based on the information above (from point a to l), what is your opinion regarding the cash flow of your company? 4 Requirement # 2: Ch 3: Ratio Analysis Requirement # 2: Ch 3: Ratio Analysis: a) Using excel and the financial statements of your assigned company, calculate each of the following ratios listed below for the last five years and prepare a table showing these ratios. Calculate: Liquidity Ratios a) Current Ratio b) Quick Ratio c) Cash Ration Long-Term Solvency Ratios d) Total debt ratio e) Debt/equity ratio f) Equity Multiplier g) Long-term Debt Equity ration h) Times Interest Earned Assets Turnover Ratio i) Inventory Turnover j) Days sales in inventory k) Receivables turnover l) Days sales in receivables m) Total Assets turnover Profitability Ratios n) Profit Margin o) Return on Assets p) Du Pont Identity: Net income/Sales x Sales/assets x Assets/Equity. (you already calculated the profit margin, total assets turnover, and the equity multiplier). Explain q) What does the Du Pont identity (from point p) tell you about your company? 5 Formulas to use 6 See the example of this section. Because each company has different accounts in the statement of financial position, I suggest to re-arrange the accounts and create your simplified and unique statement of financial position. You will need to decide the accounts to include in your simplified statement of financial position, but you can't change the total. The total in your simplified statements and the companys should be the same. 7 b) You will need to graph the ratios. You decide the visuals, but they need to be clear and easy to understand (including labels) For example: Ratios 2016 2017 2018 2019 2020 Current Ration 1.25 1.23 1.85 1.9 1.95 Quick Ration 0.52 0.45 0.32 0.25 0.15 Ch 3 Using excel, Prepare a 5-year Common Size Income Statement and 5-year Common Size Statement of Financial Position. See the example below. Actual financial reports are complex. You can simplify the financial statements as I did it. You will select the categories. 8 Requirement # 3: Ch 7: If your selected company has more than one Bond, select one Bond and complete the requirement below). If your company does not have bonds, please contact me. Find the following information: a) Maturity date b) coupon rate Calculate: c) Using the nominal value, Maturity and coupon rate (from Markets Insider), calculate the Yield to Maturity (using the rate function from excel). Include your excel screenshot. Identify: d) Is your Bond a premium or discount bond? e) What is the rating of your companys Bond? If available f) What type of Interest rate (fixed or floating) is your Bond? Explain: g) Does this type of Bond and features attract you as an investor? Why? Why not? Explain. Requirement # 4: Ch 8: Stock Valuation. Find your companys last year stock value (e.g. at Dec. 31, 2020) (. See your statement of financial position date. Use the link below to find information about your companys dividend: https://ca.finance.yahoo.com/ a) Locate your companys annual dividend per share (If our company pays dividends quarterly you will need to add the four paymenst) and calculate the dividend yield. b) Using your answer from this requirement a) and the 25 percent dividend growth rate. What is the required return for shareholders? c) Suppose instead that you know that the required return is 20 percent. What price should your selected company stock sell for now? 9 Requirement # 4: Ch 14: Calculating the cost of equity for your selected company using CAPM. Considering a 3% Risk-Free Rate (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 (9 %) to calculate the market risk premium. b) What is current beta of your selected company? Requirement # 5: Ch. 13 Portfolio Beta Assuming that your company has $10,000,000 Canadian dollars to invest in an equally weighted portfolio consisting of Nike, Kellogg, Royal Bank of Canada, and Canadian Tire. What is the portfolio beta of your portfolio? You need to submit your screenshots (4), one for each company, and your calculations. Requirement # 6: Ch 14: Using the Risk-Free rate (2 % Risk-Free Rate) and assuming a 10 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. Use the info from Requirement 3, c). Requirement # 8 In addition, to answer the Financial Management Question (above), 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 Shareholder's point of view. 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 firm's Financial Management Strengths and Weaknesses? One page (double space, 12 font): clearly state your Financial Management Recommendations to improve your selected companys financial position. Reference (APA style)