Overview: Financial analysis involves examining historical data to gain information about the current and future financial health of a company. Financial analysis can be applied in a wide variety of situations to give business managers the information they need to make critical decisions. The ability to understand financial data is essential for any business manager. For the final project, you will use financial information from the provided 2017 United Parcel Service Annual Report to prepare a financial analysis. You will include in your analysis the background calculations and managerial analysis for each of the following topics: time value of money, stock and bond valuation, and capital budgeting. You will also discuss macroeconomic variables that might impact the companys financial decision making and strategic objectives. These topics will be covered over four milestones to be submitted throughout the course before you submit the final project. Note that while these elements may seem separate and unrelated, together they will present a well-rounded view of the companys finances with regard to the topics. For this milestone, you will submit a draft of the Time Value of Money section of the final project along with your supporting explanations as detailed below. Prompt: Calculate time value of money figures and use the results to support your explanations of the present and future value of United Parcel Service. Complete your calculations on the designated tab in the Final Project Excel Workbook. Create a separate Word document for your justifications. Specifically, the following critical elements must be addressed: I. Time Value of Money A. Using the Final Project Excel Workbook, compute the following time value of money figures: 1. Calculate the present value of the company based on the given interest rate and provided Free Cash Flows for the years 2015, 2016, and 2017. 2. Suppose the risk of the company changes based on an unanticipated decrease in the Free Cash Flows by 10% annually during the years 2015, 2016, and 2017. Recalculate the present value of the company. 3. Suppose that a potential buyer has offered to buy this company in three years. Based on the initial present value you calculated above in A1, what would be a reasonable amount for the buyer to pay for the company in three years time? Enter your answer and justify your reasoning in the Word document. B. What are the implications of the change in present value based on risk? In other words, what does the change mean to the company, and how would you, as a financial manager, interpret it? Be sure to justify your reasoning with appropriate references/sources. Enter your answer and justify your reasoning in the Word document. C. Based on the present value of the company that you calculated, and being mindful of the need to effectively balance portfolio risk with return, what recommendation would you make about purchasing the company as an investment at that price? Be sure to substantiate your reasoning with appropriate references/sources. Enter your answer and justify your reasoning in the Word document. Rubric Guidelines for Submission: Submit your Final Project Excel Worksheet with the required calculations completed. Submit your written paper as a separate Microsoft Word Document

YEAR FOUNDED 1907 2017 KEY METRICS 2016 2015 12.8% 13.54 Return on assets adj. 12.14 27,850 UPSA UPS ACCESS POINT LOCATIONS 11.4% 8.7% 13.15 52.4% 26.8% 32.5% - 10.5 MILLION Return on assets (GAAP) Return on invested capital (adj. Return on invested capital (GAAP) Dividend yield 30.3% 39.2 CUSTOMERS 2.7% 3.04 55 119,000 VEHICLES FINANCIAL HIGHLIGHTS 2017 2016 2015 Revenue $65,872 $60,906 $58,363 2.500 Operating expenses 58,343 55439 50,605 WORLDWIDE Net Income 4,910 5,451 4,844 OPERATING Adjusted net income 5.259 5,104 4,923 FACILITIES Diluted earnings per 5.87 5.35 454,000 share EMPLOYEES Adjusted diluted earnings 6.01 5.43 per share Dividends declared 3.52 3.12 2.92 IN DELIVERY FLEET per share Assets 45 405 40,377 38,311 FREE CASH FLOW Long-term debt 20 278 12,394 11,816 2017 2016 2015 Shareowners' equity 1030 2,491 Netcash from operations $1470 $6 473 $7430 Capital expenditures 5227 2.965 2,379 Capital expenditures 15.227) (2,965) 2,379) Cash and marketable 4069 4,567 4,726 Proceeds from disposals 24 88 securities 26 of PP&E In millons except for per-share amounts) Net change in finance 5 9 receivables 5.1 BILLION Other investing activities 1 (59) (50) Free cash now (3,718) 2017 DELIVERY VOLUME 3,546 5,052 Discretionary Pension 7291 2.461 1,030 Contributions 9,100 ALTERNATNE Adjusted free cash flow 56,082 53,573 $6,00 FUEL VEHICLES In millions of dollars) MORE THAN 43 MILLION 143 MILLION UPS MY CHOICE 2,242 DAILY DAILY ONLINE TRACKING MEMBERS FLIGHT SEGMENTS Sono CAPA YEAR FOUNDED 1907 2017 KEY METRICS 2016 2015 12.8% 13.54 Return on assets adj. 12.14 27,850 UPSA UPS ACCESS POINT LOCATIONS 11.4% 8.7% 13.15 52.4% 26.8% 32.5% - 10.5 MILLION Return on assets (GAAP) Return on invested capital (adj. Return on invested capital (GAAP) Dividend yield 30.3% 39.2 CUSTOMERS 2.7% 3.04 55 119,000 VEHICLES FINANCIAL HIGHLIGHTS 2017 2016 2015 Revenue $65,872 $60,906 $58,363 2.500 Operating expenses 58,343 55439 50,605 WORLDWIDE Net Income 4,910 5,451 4,844 OPERATING Adjusted net income 5.259 5,104 4,923 FACILITIES Diluted earnings per 5.87 5.35 454,000 share EMPLOYEES Adjusted diluted earnings 6.01 5.43 per share Dividends declared 3.52 3.12 2.92 IN DELIVERY FLEET per share Assets 45 405 40,377 38,311 FREE CASH FLOW Long-term debt 20 278 12,394 11,816 2017 2016 2015 Shareowners' equity 1030 2,491 Netcash from operations $1470 $6 473 $7430 Capital expenditures 5227 2.965 2,379 Capital expenditures 15.227) (2,965) 2,379) Cash and marketable 4069 4,567 4,726 Proceeds from disposals 24 88 securities 26 of PP&E In millons except for per-share amounts) Net change in finance 5 9 receivables 5.1 BILLION Other investing activities 1 (59) (50) Free cash now (3,718) 2017 DELIVERY VOLUME 3,546 5,052 Discretionary Pension 7291 2.461 1,030 Contributions 9,100 ALTERNATNE Adjusted free cash flow 56,082 53,573 $6,00 FUEL VEHICLES In millions of dollars) MORE THAN 43 MILLION 143 MILLION UPS MY CHOICE 2,242 DAILY DAILY ONLINE TRACKING MEMBERS FLIGHT SEGMENTS Sono CAPA