HOMEWORK

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There are three (3) types of textbook based homework items located at the end of each chapter. These include Discussion Questions (DQ), Exercises (E), and Problems (P). Some homework items have been custom created.

Complete the following homework scenario:

• Required:Compare the results of the three (3) methods by quality of information for decision making. Using what you have learned about the three (3) methods, identify the best project by the criteria of long term increase in value. (You do not need to do further research.) Convey your understanding of the Time Value of Money principles used or not used in the three (3) methods. Review the video titled ?NPV, IRR, MIRR for Mac and PC Excel? (located athttps://www.youtube.com/watch?v=C7CryVgFbBcand previously listed in Week 4) to help you understand the foundational concepts:Scenario Information:Assume that two gas stations are for sale with the following cash flows; CF1 is the Cash Flow in the first year, and CF2 is the Cash Flow in the second year. This is the time line and data used in calculating the Payback Period, Net Present Value, and Internal Rate of Return. The calculations are done for you. Your task is to select the best project and explain your decision. The methods are presented and the decision each indicates is given below.

  Investment	Sales Price	CF1	CF2
  Gas Station A	$50,000	$0	$100,000
  Gas Station B	$50,000	$50,000	$25,000

  Three (3) Capital Budgeting Methods are presented:
  1. Payback Period:Gas Station A is paid back in 2 years; CF1 in year 1, and CF2 in year 2. Gas Station B is paid back in one (1) year. According to the payback period, when given the choice between two mutually exclusive projects, the investment paid back in the shortest time is selected.
  2. Net Present Value:Consider the gas station example above under the NPV method, and a discount rate of 10%:NPV_{gas station A}= $100,000/(1+.10)²- $50,000 =$32,644NPV_{gas station B}= $50,000/(1+.10) + $25,000/(1+.10)²- $50,000 =$16,115
  3. Internal Rate of Return:Assuming 10% is the cost of funds; the IRR for Station A is 41.421%.; for Station B, 36.602.
  Summary of the Three (3) Methods:
  • Gas Station B should be selected, as the investment is returned in 1 period rather than 2 periods required for Gas Station A.
  • Under the NPV criteria, however, the decision favors gas station A, as it has the higher net present value. NPV is a measure of the value of the investment.
  • TheIRRmethodfavorsGasStationA.asithasahigherreturn,exceedingthecostoffunds(10%)bythehighestreturn.

STOCK JOURNAL

1. Record the current price of the stock for each company you selected in Week 3?s Stock Journal.You may use any price during this week (e.g., day one price, the opening, the low, the high, the close, or any price you find when you check it during the day). Using a MS Excel spreadsheet or MS Word document, put your Week 8 and Week 10 stock prices side-by-side, to show the comparison.
2. Determine the total value of your investment.
3. Provide your final opinion / assessment of your investments.Did you make money or lose money? Discuss your results and, based on hindsight, describe what you would do differently.
4. Discuss what you learned from this assignment.Do you believe this assignment will help you in the future in any way?

**IN THE ATTACH FILE I WILL INCLUDE MY WEEK 3 AND WEEK 8 STOCK JOURNAL FOR HELP WITH THIS CURRENT STOCK JOURNAL

Shaquanda King FINANCE 100 WEEK 3 STOCK JOURNAL Indicate the companies you are investing in: Select three (3) US companies that are publicly traded. Please use your knowledge and experience and pick, as many stocks as you'd like. Lastly, make sure you are practicing good diversification. Jim Cramer, Money Manger, on CNBC, plays a game at the end of his show called \"Am I Diversified.\" Check out a short clip to get a sense of industry diversification at https://www.youtube.com/watch?v=f3lDxexupcE. 2. Sources of Information: There are many ways to find such companies and the stock prices, including the New York Stock Exchange at http://www.nyse.com, Google Finance at http://google.com, NASDAQ at http://www.nasdaq.com, and http://finance.yahoo.com. 3. Indicate the amount you are investing in each company: Decide how you will divide $25,000 across the three (3) companies; e.g. $10,000 in Company 1, $10,000 in Company 2, and $5,000 in Company 3. You decide the amount you are investing in each company. You do not have to provide any analysis to justify your decisions. You must only provide some reason for picking that company. For example, you might invest in Ford because that company gets a lot of your money and you hear that Ford is doing well, and will continue to do well. 4. Indicate the number of shares you are buying, and the price of the shares you are buying for each company: Once you decide the companies and the amount for each company, determine how many shares you can buy. If Company 1 is selling for $42.16, then you may buy $10,000/ $42.16, or 237.19 shares. But you cannot buy a part of a share, so you decide to buy either 237 or 238. In this example you buy 237 shares, at $42.16 per share, investing $9,991.92. You won't be able to buy exactly $10,000, or $5,000, or $25,000, but it will be relatively close. 1. We would like to purchase the following company shares, which we think will give good returns in one year span horizon 1. Dover is a diversified global manufacturer with annual revenues of $7 billion. Who deliver innovative equipment and components, specialty systems and support services through four major operating segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment. With the oil prices at rock bottom now will stabilize and gain in 6 to 12 months period will help Dover to leverage the gains. Today's price is 67.04 and will invest $10,000 and shares purchased would be 149 shares amounting to investment of $9988.96. 2. General electric the company hiked the quarterly payout from $0.22 to $0.23 per share. At this rate, GE is good for a yield of 3.4%. That's well above GE's five-year average yield of 3.1%. Shaquanda King Today's prices is 30.81 and will invest $10,000 and shares purchased would be 324 shares amounting to investment of $9982.44. 3. Industrial and Agricultural Equipment maker Caterpillar (CAT) Better-than-expected quarterly earnings released in April, along with the drop in the U.S. dollar and brokerage upgrades. Today's price is 78.50 and will invest $5,000 and shares purchased would be 63 shares amounting to investment of $4945.50. 1. Comparison between week 3 portfolio acquisition and disposable value at week 8. Current Market value. Week 3 Investments. 1. Dover, Global Manufactures. Price per share, $67.04 Shares bought. 149 shares. Value. 149*$67.04= $9,988.96 2. General Electric (GE) Price per share, $30.81 Shares bought. 324 shares Value. 324*$30.81=$9,982.44 3. Industrial and Agricultural Equipment Maker, Caterpillar Current Market value. Week 8 Investments. 1. Dover, Global Manufactures. Price per share, $73.52 Shares held. 149 shares. Value. 149*$73.52= $10,954.48 2. General Electric (GE) Price per share, $31.23 Shares held. 324 shares Value. 324*$31.23=$10,118.52 3. Industrial and Agricultural Equipment Maker, Caterpillar (CAT) Price per share, $82.66 Shares held. 63 shares Value. 63*$82.66=$5,207.58 (CAT) Price per share, $78.50 Shares bought. 63 shares Value. 63*$78.50=$4945.50 2. The value at acquisition is $9988.96+$9982.44+$4945.50=$24,916.46 This represents total acquisition cost involved. 3. Portfolio analysis. It is a well-diversified investment with positive returns. The management's decision to invest in the three firms has profits. The value of portfolio at week 8 is, $10,954.48+$10,118.52+$5,207.58=$26, 280.58 The capital gains is $26,280.58-$24,916.46=$1,364.12 Am happy of this investment gain