STUDENT PROJECT Purpose The financial management of a firm is a complex function. It involves making decisions that require in-depth analysis, judgment and risk taking. This project is designed to help students develop the skills needed to evaluate a company’s financial performance. Through this project, the students will become familiar with the techniques used to analyze a company’s financial strengths and weaknesses. Through the analysis of actual companies, the students will acquire a greater understanding of how to assess and respond to potential profit situations and problem areas. To assist the students in accomplishing these objectives, the following milestones should be completed by the due dates for the project tasks. The results of each task milestone will be restated in a 10 to 15 page paper and presented to the class in a 10 to 15 minute oral presentation, due in the last class meeting. PROJECT TASK NOTES Milestone: Completion of company information paper Each student will select a publicly traded company and collect information about the company through its Annual Report, SEC documents, and other data bases. The questions to be answered through the research include: What is the company primary business and who are the chief executives? What type of industry is the company in, and what is its ranking in that industry? Does the company''s have any bonds listed? If so, how many bonds does the company currently have listed on the bond market and what are their market prices? What is the average interest rate paid on the listed bonds? What is the company’s current Wall Street Journal stock quotations, How is the company''s stock listed? What is the current market price of the company''s common stock? What is the company''s projected dividend? What is the company''s stock current yield and price earnings ratio? How many shares were traded on the previous trading day? Based on the information collected on the company what dose the market price of the company''s stocks and bonds indicate about the company''s current financial? Documentation Required: Each student will prepare a 2-3 page typewritten rough draft of its answers to the questions. Resources Required: These resources can be obtained through the following: Page 2 Library information date base or other electronic data bases Company’ s Secretary—Treasurer/Public Relations Full service stock brokerage Firm PROJECT TASK NOTES Milestone: Completion of Financial Analysis Paper Based on the information collected about the company selected, each student will complete a comprehensive financial analysis of the company’s financial condition. The assignment and questions to be considered include: Compute the different groups of ratios ( liquidity, activity, solvency and debt service, profitability) . How do the company’s ratios compare with the industry averages? Construct a Du Pont analysis chart. Is the company’s ROE favorable or unfavorable and did your analysis pinpoint any areas for improvement? Compute the company’s capital structure. What is the economic impact of the company’s capital structure, and how dose it affect the company’s overall risk? Documentation Required: Each student will prepare a 2-3 page typewritten rough draft of its answers to the questions. PROJECT TASK NOTES Milestone: Completion of Capital Budgeting Based on information collected about the selected company, each student will analyze the following two capital budgeting project. What is the company''s reported retained earnings How much is 10 percent of the company''s retained earnings worth? The company is considering using 10 percent of its retained earning to invest in one of the following two mutually exclusive projects. The first project will generate cash flows of 32 percent of the invested amount each year for the next five years. What are the yearly cash flows for this project? The second project will generate a cash flow of 2 times the invested amount in year five of the project. What is the cash flows for this project in the fifth year? The company''s required rate of return is 5 points above the current prime rate. What is each project''s payback period, net present value, and internal rate of return? Which project should be accepted? Why? Documentation Required: Each student will prepare a 2-3 page typewritten rough draft of its answers to the questions. PROJECT TASK NOTES Milestone: Completion of project and preparation for oral presentation Final Product Based on the information developed in Project tasks 1,2 and 3 each student is to prepare a 10 -- 15 page typewritten paper and a 10 -- 15 minute oral presentation on the company analyzed. The Oral presentation is due in the last workshop Resources Required. Company information paper Company financial analysis paper Company capital budgeting paper