FINC 330
Project Description
Research
Project Part 2
Due at the
end of week 7
This project is closely aligned with the Course Outcomes and Finance
Program Objectives. Completion of this project can be used as part of a
portfolio to show potential employers the student is skilled at performing
company valuations and financial statement analysis and can be included on the
student’s resume.
Bond and
Stock Performance Analysis
OBJECTIVE
In this part of the project you are to assume to have been
hired to join a team serving as an internal financial analyst to THE COMPANY. Your
client plans to invest in bonds and (or) stocks issued by THE COMPANY (SELECTED
BY INSTRUCTOR). In part 6 of the assignment you are asked to provide some
recommendations to THE COMPANY’S management.
THE COMPANY for part 2 of the project can be the company that
you were using for the Research Project Part 1 or ANOTHER COMPANY determined by
your professor. THE COMPANY for this part of the project must have bonds listed on the website http://finra-markets.morningstar.com/BondCenter/Default.jsp. To find the information on bonds, click on Search in
the middle of the screen (under Market Center Bond Guide), under Quick Search
type the Issuer Name and the Symbol, and click SHOW RESULTS.
Alternatively, you can request approval of another publicly
traded company. This request must be submitted before the end of the first week
of the course. The request must include
identification
of the company by ticker symbol and name
a
reasonable and appropriate explanation of why you want to examine the
alternative company
the
source of the analyst’s report that will be used in the analysis (which
must be submitted to me)
acknowledgement
by you that all the specific elements of the assignment (see below) will
be prepared by you and included in the final research project report
SUGGESTED WEBSITES
www.morningstar.com – To find the information for your
company you need to type the stock symbol in the Quotes window to get
into the company’s page.
http://finra-markets.morningstar.com/BondCenter/Default.jsp – To find the information on bonds, click on Search
in the middle of the screen (under Market Center Bond Guide), under Quick
Search type the Issuer Name and the Symbol, and click SHOW RESULTS.
https://markets.businessinsider.com/bonds. To find the information on bonds, scroll down the
page, type the name of the company in the window under Bond Finder, and click
SEARCH.
www.marketwatch.com -To find the information for
your company you need to type the stock symbol in the Search window to
get into the company’s page.
www.money.cnn.com -To find the information for
your company you need to type the stock symbol in the Search window to
get into the company’s page.
www.finance.yahoo.com – To find
the information for your company you need to type the stock symbol in the Search
window to get into the company’s page.
www.nyse.com – Click on Data, then click on
Stocks (under Quotes), and type the name of the company or the stock symbol in
the window “Keyword or symbol” to get into the company’s page.
www.nasdaq.com – To find the information for your
company you need to type the stock symbol in the Search window to get
into the company’s page.
Company’s websites
YOUR SPECIFIC ASSIGNMENT
Using the information from the
websites the student will develop evaluation of bond and stock performance for
THE COMPANY (SELECTED BY INSTRUCTOR). (The evaluation portion will total 85% of
the assignment grade)
-1—Introduction (3% of the project grade)- The paper should begin with a short
introduction that explains the purpose of the paper, and provides an overview
of the contents that follow (one short
paragraph).
-2- The financial leverage ratios (15% of the
project grade)
a) Find the financial
leverage ratios for THE COMPANY assigned for you of the project for the
last 3-5 years in the Internet. Present these ratios as the table(s) in your
project.
You can find these
ratios in the Internet or calculate them. If you use published ratios you must
indicate that and cite their source.
·
Debt-to-assets
ratio (Debt ratio)
·
Debt-to
Equity ratio
·
Interest
Coverage ratio (the Times Interest Earned)
b) Write (about) 1 page of the analysis of the ratio results. In your analysis you should answer
the following questions. Please explain
your answer to each question.
How is THE COMPANY financing its
assets? Discuss how much risk is associated with the financial structure the
company? How can this risk be measured? Please explain.
-3-
Collect and evaluate the data about bond performance of the assigned
company. (20% of the project grade).
The information on bonds can be found on the website http://finra-markets.morningstar.com/BondCenter/Default.jsp. To find the information on bonds, click on Search in
the middle of the screen (under Market Center Bond Guide), under Quick Search
type the Issuer Name and the Symbol, and click SHOW RESULTS.
Another useful
website on bond information is https://markets.businessinsider.com/bonds. To find the information on bonds, scroll down the
page, type the name of the company in the window under Bond Finder, and click
SEARCH.
Important: Copy the
quotations of two bonds issued by
THE COMPANY (SELECTED BY INSTRUCTOR) that contain the Price. Present these
quotations in your project.
What
were the last prices of the bonds (listed in the Last Sale column)? Assume
that par value of the bond is $1,000. How much the investor will pay for
the bond if he/she purchased the bond at the Price listed in the Last Sale
column. Show your work in your project.
Assume
that par value of the bond is $1,000. Calculate the annual coupon interest
payments. Show your work in your project.
Assume
that par value of the bond is $1,000. Calculate the current yield of the
bonds. Show your work in your project.
How much is the YTM listed in
quotations of the bonds (in the Last Sale column – Yield) (no calculations
are required for this question?
5. Write a 1-2 page of the analysis of
the bonds. In
your analysis you should answer the following questions. Please explain your answer to each
question.
a) If you
are going to buy a bond issued by THE COMPANY, which bond would you choose? Why?
b) Are these
bonds callable? If the bonds that you chose are callable (non-callable), will
it change your decision to buy them?
c) If you
are an investor who is looking for a bond to invest in, are you going to buy a
bond that you chose? Take a look at the balance sheet and
income statement of the company. What data or ratios support your decision to
buy this bond or not? You may want to incorporate the results of the Research
Project Part 1, as well as the results of the financial leverage ratios to
answer this question. You
should develop a specific recommendation, with supporting rationale for the investor to explain your
answer.
-4- Collect and evaluate the data about stock performance of
the assigned company for the last one year. (Totally 30% of the project grade).
1) Find the market ratios for the company for the last 1-3
years and its major competitor for the last year in the Internet. (15% of
the project grade)
· Price/Earnings
ratio
· Market/Book
ratio (also called (Price/Book ratio)
· Earnings
per share
· Dividends
per share
· Other
market ratios on your choice
These ratios are available on www.morningstar.com >
Company’s page – under Valuation, Financials, and under Dividends
You can find these ratios in the Internet
or calculate them. If you use published ratios you must indicate that and cite
their source.
Present
the market ratios as the table(s) in your project.
Write
about 1 page of analysis of the market ratio results that you found.
Compare the market ratio results against the industry or main competitor.
In your report please answer the question: Are the common stockholders
receiving an adequate return on their investment?
c.
Compare the P/E ratio of your company with the industry
average or 5-year average. Is the stock overvalued, undervalued, or properly
valued? Why?
d.
In accordance with your findings, is it reasonable to
buy the stock? Please explain your answers.
-2) Analysis of the historical stock prices trend for the
last year. (15% of the project grade)
Collect
and evaluate the data about stock prices of the assigned company for the
last one year for the company and its major competitor.
Create
the chart(s) using the stock price chart tools on the websites or Excel.
Present the chart(s) in your project.
Write
about 0.5 page of analysis the historic stock prices trend for the last
year.
In accordance with your findings, is it reasonable to
buy the stock? Why? Please explain your answer.
-5-
Develop a specific recommendation,
with supporting rationale for the COMPANY’S management – Think about the
financial strategy of the company, how to best balance THE COMPANY’S
financial leverage to optimize shareholder wealth going forward taking into
consideration the company’s current market position, credit
rating, dividend policy, etc. (12% of the project grade).
-6- Reflection – the students should write a paragraph in
their own words reflecting on what they learned from the assignment and how
they think they could apply what they learned in the workplace. (5% of the project grade).
PRESENTATION OF PAPER AND WRITING
(15%) of the project grade):
-Organization, Format and
Presentation of Paper including the Title page, Introduction, Body, and Summary. Each section of
the paper must begin with a sub-heading.
Please use the sub-headings included in the assignment
(4% of the project grade)
Use of Tables, Figures and Other
Graphics to Summarize and Support Analysis Presented in the Paper (3% of the
project grade)
Logical and Smooth Flowing
Transitions and Relationships among Sections of the Written Report (3% of the
project grade)
Research Sources and Significance of
Research Information and Data, Use of APA Citation Methodology (5% of the
project grade)