As part of your overall cash management system, you might consider discussing a ”lockbox” system with your banking partner. What does this system entail and what are its benefits? Are such accounts relevant anymore at a time of increased usage of electronic payments? What is the benefit and the possible cost to an organization of the increased usage of electronic payments for paying vendors?”

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Discussion Question

An initial response to the following Discussion Question should be posted to the Week 13 DQ board – due Tuesday, November 29

Imagine you have just been hired as the Treasurer and CFO of a new company which has customers in 50 states and is a spin-off from an existing larger company, and as a result of this separation, you need to build a cash management infrastructure from scratch. Based on what you’ve read this week and your other research (as well as business sense), what are your most significant concerns in this overall effort?
As part of your overall cash management system, you might consider discussing a ”lockbox” system with your banking partner. What does this system entail and what are its benefits? Are such accounts relevant anymore at a time of increased usage of electronic payments?
What is the benefit and the possible cost to an organization of the increased usage of electronic payments for paying vendors?”

Recently there has been a lot of concern about rising inflation in US. Identify potential sources for this problem, its impact on businesses and remediation steps being taken by regulators/policy makers.

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Discussion

Recently there has been a lot of concern about rising inflation in US. Identify potential sources for this problem, its impact on businesses and remediation steps being taken by regulators/policy makers. In discussing these points make sure to present both sides of the arguments. For example, one could argue that inflation is not really a problem for businesses as they can pass it to customers. However, it could be argued that if businesses begin passing on these costs, customers might change there purchase behavior or abandon those companies that try to do that.

During the financial crisis and the pandemic, the Federal Reserve directly allocated credit by purchasing privately issued securities. Describe the components of the Federal Reserve’s balance sheet that are privately issued securities.

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Internet Topics

Provide the article title and author for any article you read. Remember the aim of this assignment is to acquaint you with some sources of information available on the Internet.

  1. Federal Reserve’s Balance Sheet: Go to www.federalreserve.gov/releases/h41/current/h41.pdf to see a recent balance sheet statement for the Federal Reserve System.

(a) During the financial crisis and the pandemic, the Federal Reserve directly allocated credit by purchasing privately issued securities. Describe the components of the Federal Reserve’s balance sheet that are privately issued securities.

(b) What are the repurchase agreements on the asset side?

(c) Describe what the following assets are:

  1. Net portfolio holdings of Corporate Credit Facilities
  2. Net portfolio holdings of MS Facilities

iii. Net portfolio holdings of Municipal Facilities LLC

  1. Net portfolio holdings of TALF II LLC
  2. Paycheck Protection Program Liquidity Facility

In a paragraph, discuss the moral hazard problems that may arise in these programs and discuss the problems with the quality of the collateral. What kind of risk is the Federal Reserve potentially taking on?

(a) On the liabilities side, what are reverse repurchase agreements?

(b) What fraction of total assets is currency in circulation?

(c) What fraction of total assets is reserves?

(d) Look at the H.4.1 for December 2006, December 2011 and January 2021. Discuss the differences among the three balance sheets in terms of size and composition of assets.

  1. Find the “Large Bank Capital Requirements^ on the website of the Federal Reserve System. At the end of this website is a table listing the minimum capital asset ratio (4.5%) and then two additional ratios – the stress capital buffer and a surcharge for very large institutions, such as Goldman Sachs. What are these two additional ratios?
  2. Federal Home Loan Banks (FHLB) were created during the Depression as part of Glass-Steagall. Its members are depository institutions and insurance companies. It is managed by the private sector while being a public/private government sponsored enterprise like Fannie Mae and Freddie Mac. The FHLB system has a line of credit with the U.S. Treasury, with an implicit guarantee of its debt. Discuss the basic structure of the FHLB and the moral hazard problem it creates. Your answer should be about three paragraphs.

5.Contingent convertible bonds have recently been in the news. Describe a COCO. I recommend going to the Investopedia website.

6.The Treasury issues Treasury Inflation Protected bonds (TIPS). Go to the Investopedia web site, Google Finance or else CNN  to find a primer on TIPS. Provide a summary of what TIPS are, how they are structured , and other basic information about the bond. What do these bonds imply about expected inflation?

7.The “Shadow Banking System” is defined as hedge funds, conduits, SIV, money funds, monoline insurers, and investment banks. One explanation for why the financial crisis of the past year was so dramatic is that there was a “bank run” on the shadow banking system. Provide a two paragraph description of what a bank run means for the institutions in this list of “shadow banks.”

 

Need to determine Cost of Debt and Cost of Equity. Determine Weight of Debt and Weight of Equity. Summarize your findings of WACC for both of them for the last two years.

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Financial Management: Weighted Average Cost of Capital (WACC) for both Walmart and Home Depot

Intital Instructions:

For the following two stocks:

  • Walmart (WMT) https://finance.yahoo.com/quote/WMT?p=WMT&.tsrc=fin-srch
  • Home Depot (HD) https://finance.yahoo.com/quote/HD?p=HD&.tsrc=fin-srch

You may access the following financial websites:

  • Yahoo Finance
    https://finance.yahoo.com/quote/WMT/
  • CNN Business
    https://money.cnn.com/quote/financials/financials.html?symb=WMT
  • Gurufocus
    https://www.gurufocus.com/stock/WMT/summary

Requirements: Need to calculate Weighted Average Cost of Capital (WACC) for both the above stocks

In Yahoo finance for the stock in reference, go to “Financials” in the menu options, and then “Balance Sheet” and for the last two recent years, get values of Total Debt, Total Equity (use market capitalization (# Shares issued * Share Price) from “Summary” tab.

  • Need to determine Cost of Debt and Cost of Equity.
  • Determine Weight of Debt and Weight of Equity.
  • Summarize your findings of WACC for both of them for the last two years.

Compare your computations of WACC for both of them against online estimates (Gurufocus):

  • Gurufocus WACC estimate forWalmart
    https://www.gurufocus.com/term/wacc/WMT/WACC-Percentage/Walmart
  • Gurufocus WACC estimates for Home Depot
    https://www.gurufocus.com/term/wacc/HD/WACC-Percentage/The-Home-Depot

Submit analysis, summarizing your key findings as a Word document

Choose a very specific financial institution or a financial security and do an in-depth and analysis of the Fraud. Analyze a fraud that happened in the last five years.

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Finance Research Paper – FTX Crypto Fraud

The purpose of the term-paper is to make vou an expert in some aspect of Financial Markets and Institutions. This semester we will focus on Financial Fraud as it relates to Markets or Insfitutions. More coerifcalw we will be doing work on: “The Metrics of a Fraud on one major Financial Institution /Market.”

You will choose a very specific financial institution or a financial security and do an in-depth and analysis of the Fraud. You will analyze a fraud that happened in the last five years.

How do investors deal with inflation when they determine interest rates in the financial markets? Does the interest rate on a T-bond include a default risk premium? Explain.

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Financial markets

Write out an equation for the nominal interest rate on any security.

Distinguish between the real risk-free rate of interest, r*, and the nominal, or quoted, risk-free rate of interest, r RF.

How do investors deal with inflation when they determine interest rates in the financial markets?

Does the interest rate on a T-bond include a default risk premium? Explain.

Distinguish between liquid and illiquid assets, and list some assets that are liquid and some that are illiquid.

Briefly explain the following statement: “Although long-term bonds are heavily exposed to interest rate risk, short-term T-bills are heavily exposed to reinvestment rate risk. The maturity risk premium reflects the net effects of these two opposing forces.” Assume that the real risk-free rate is r* 2% and the average expected inflation rate is 3 percent for each future year. The DRP and LP for Bond X are each 1 percent, and the applicable MRP is 2 percent. What is Bond X’s interest rate? Is Bond X (1) a Treasury bond or a corporate bond and (2) more likely to have a 3-month or a 20-year maturity?

 

Summarize your findings of WACC for both of them Walmart and Home Depot for the last two years.

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Financial Management: Weighted Average Cost of Capital (WACC)

For the following two stocks:
Walmart (WMT): https://finance.yahoo.com/quote/WMT?p=WMT&.tsrc=fin-srch
Home Depot (HD): https://finance.yahoo.com/quote/HD?p=HD&.tsrc=fin-srch

You may access the following financial websites:
Yahoo Finance
https://finance.yahoo.com/quote/WMT/

CNN Business
https://money.cnn.com/quote/financials/financials.html?symb=WMT

Gurufocus
https://www.gurufocus.com/stock/WMT/summary

 

Instructions
Group Assignment 2
Refer Text: Chapter 10 in attachment Fundamentals of Financial Management
Refer attachment Handout: Reference under “Group Assignment 2”

For the following two stocks:
Walmart (WMT) and
Home Depot (HD)

You may access the following financial websites:
Yahoo Finance
https://finance.yahoo.com/quote/WMT/
CNN Business
https://money.cnn.com/quote/financials/financials.html?symb=WMT
Gurufocus
https://www.gurufocus.com/stock/WMT/summary

Requirements: Need to calculate Weighted Average Cost of Capital (WACC) for both the above stocks***

In Yahoo finance for the stock in reference, go to “Financials” in the menu options, and then “Balance Sheet” and for the last two recent years, get values of Total Debt, Total Equity (use market capitalization (# Shares issued * Share Price) from “Summary” tab.

Need to determine Cost of Debt and Cost of Equity.

Determine Weight of Debt and Weight of Equity.

***Summarize your findings of WACC for both of them Walmart and Home Depot for the last two years.****

*****The summary findings can be 1-2 pages. This is the portion that is needed along with the one page summary.********

***The one page summary can also include the calculated weighted Average Cost of Capital (WACC) for both the above stocks (Walmart and Home Depot over the last two years).****

Gurufocus estimated WACC for Walmart: https://www.gurufocus.com/term/wacc/WMT/WACC/Walmart%2BInc

Gurufocus estimated WACC for Home Depot:https://www.gurufocus.com/term/wacc/NYSE:HD/WACC-/The-Home-Depot

 

Write part 2 as though you are the manager of the Sales dept. at the present company.

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Manager of the Sales dept

Write part 2 as though you are the manager of the Sales dept. at the present company. You are writing about what impact the new company will have on the Sales department or how the Sales dept could incorporate the new company or its inventory into your overall sales strategy. We already have averages over years. That’s done in the excel sheet. Use those numbers to talk about what the Sales dept think of the acquisition.

 

Is Mercury an appropriate target for AGI? Why or why not? Review the projections formulated by Liedtke. Are they appropriate? How would you recommend modifying them?

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Mercury Athletic Footwear

Assumptions and Questions

To guide your analyses, you may want to answer the following questions within your report:

  1. Is Mercury an appropriate target for AGI? Why or why not?
  2. Review the projections formulated by Liedtke. Are they appropriate? How would you recommend modifying them?
  3. Estimate the value of Mercury using a discounted cash flow approach and Liedtke’s base case projections. Be prepared to defend additional assumptions you make orally.
  4. Do you regard the value you obtained as conservative or aggressive? Why?
  5. How would you analyze possible synergies or other sources of value not reflected in Liedtke’s base case assumptions

Identify one sectors in US economy that you think are over-valued and are either going through market adjustment or likely to see a market adjustment soon?

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Discussion

Identify one (or more) sectors in US economy (e.g. banking/technology/materials etc.) that you think are over-valued and are either going through market adjustment or likely to see a market adjustment soon? Support your choice with arguments and evidence that can be verified.