Estimate the value of corporations based on quantitative and qualitative analysis of financial history, industry trends, and projections of future performance. Analyze the relationships between capital structure, risk, and cost of capital for informing financial decisions that can optimize the value of corporations. Analyze challenges financial managers face regarding short-term and long-term planning for informing decision making.

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Final Project I

This paper will be done on Tesla. I have also uploaded a copy of the rubric. There is also the Excell spreadsheet that is mentioned in the rubric. I did upload a copy of the two previous assignments to this final paper if you would like to use them.

In this assignment, you will demonstrate your mastery of the following course outcomes:
 Estimate the value of corporations based on quantitative and qualitative analysis of financial history, industry trends, and projections of future performance.
 Analyze the relationships between capital structure, risk, and cost of capital for informing financial decisions that can optimize the value of corporations.
 Analyze challenges financial managers face regarding short-term and long-term planning for informing decision making.

Develop a position paper applying public finance and public choice to a contemporary topic in the field utilizing the existing academic literature. Write a paper on higher education costs, student debt and how private companies could pay directly to students to attend school instead of broad loans.

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Existing academic literature

Develop a position paper applying public finance and public choice to a contemporary topic in the field utilizing the existing academic literature. Write a paper on higher education costs, student debt and how private companies could pay directly to students to attend school instead of broad loans.

Papers are expected to be at least 10 pages in length.

Select a company within the healthcare industry that you will use for your proposal research. Submit your selected company to your instructor for approval to ensure that the company will provide information that will allow you to make a capital budget proposal.

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Final Project Milestone Two: Healthcare Organization Selection

USE ONLY U.S Sources Follow Attachment Rulesnstructions

Select a company within the healthcare industry that you will use for your proposal research. Submit your selected company to your instructor for approval to ensure that the company will provide information that will allow you to make a capital budget proposal.

For additional details, refer to the Milestone Two Guidelines and Rubric PDF document and Final Project Guidelines and Rubric PDF document.

develop a sense of how the financial statements for a venture should be created and managed. Watch the Cengage video – B2B CFO -to discuss the pros and cons of using an outside source for financial preparation. Read The Entrepreneurial Process feature in Chapter 11 “Watching Your Accounts Receivables” and discuss the importance of managing accounts receivables for more effective cash flow.

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Intro to Entrepreneurship

It is time to decide on how financial statements should be set up for a proposed venture. Even though they may be pro forma statements at this point, there needs to be a clear understanding of who will be creating and managing the documents.

The purpose is to develop a sense of how the financial statements for a venture should be created and managed. Is it better to outsource or develop the knowledge on your own? This question must be answered.

Everyone, watch the Cengage video – B2B CFO -to discuss the pros and cons of using an outside source for financial preparation. You will have to decide if it is better to outsource or develop the knowledge on your own. This is part of step 1.

You should read The Entrepreneurial Process feature in Chapter 11 “Watching Your Accounts Receivables” and discuss the importance of managing accounts receivables for more effective cash flow. This is part of step 1.

Activities to do: Create a document and attach it.

Step 1: Each of you provides input on the best way to handle the financial statements for the venture. Watch the 32B CFC – to discuss the pros and cons of using an outside source for financial preparation. This discussion should include the topic of the creation of a Pro-forma and the eventual management of the actual statements as well.

Step 2: Then, weigh the pros and cons of each suggested method and compare it back to the text material in Chapter 11 as to why certain financial decisions are critical for the entrepreneur.

Step 3: Based on that analysis and discussion, come to an opinion on the creation and management of the financial statements.

Step 4: Finally, you need to go back to Appendix 6-A and complete the financial analysis section in detail. This section should be turned in as part of the assignment. Use this canvas module to submit the Appendix 6-A section noted. Just focus on 6a-1f Financial Analysis. This is located at the end of ch 6 (see below) and just recreate the items no need to use the actual form. Include budgets with numbers samples

6a-1fFinancial Analysis Explanation: Summarize the critical assumptions upon which the financial information is based; in other words, show how the numbers have been derived. A pro forma income statement and a statement of cash flows are the two most critical financial documents to add here—even though they may include preliminary outside sources needed to get some idea of the generation of revenue and the cash position of the venture during the first three  years. If possible, provide a break-even analysis to demonstrate where the venture moves from survival to growth.

Show a time series record including, price, value, cash, return, cumulative wealth, and profit and loss table with discussion. Which portfolio made the most profit or had the greatest losses?

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FINC PAPER

This report must be a minimum of 12 to 15 double-spaced MS Word formatted file plus exhibits, related documentation (e.g., tables, charts, reports, etc.), and at least four appropriate supporting references. It should include a cover sheet, abstract or executive summary of around two hundred (200) words, content, and reference page. The written 3-Portfolio Case Project Written Report will be evaluated based on the following criteria:

-3-PORTFOLIO CASE WRITTEN PAPER OUTLINE
-Cover sheet
-Table of Contents
-Abstract or Executive Summary

Part I: Portfolio Construction and Management– Data Collection State the objectives for the construction and management of each of the three (3) portfolios.
1. This includes your policy statement (why were certain stocks purchased), strategy, asset allocation, and industry analysis.
2. Implementation and application of specific and well-articulated portfolio management strategies; portfolio design, security selection criterion, initial and final Portfolio value.
3. Show a time series record including, price, value, cash, return, cumulative wealth, and profit and loss table with discussion.

Part II: 3-Portfolio Case Evaluation and Assessment

Data analysis and Critical Thinking for each of the three (3) portfolios

1. Compare P1 to P2 to P3. Which portfolio made the most profit or had the greatest losses?

2. Complete the following analyses of P1, P2, and P3.

  • A. Return of investment
  • B. Expected rate of return
  • C. Variance
  • D. Standard deviation
  • E. Risk return analysis

3. Compare the returns (or losses) of P1, P2, and P3 to:

  • A. The S & P 500
  • B. Dow Jones Industrial Averages
  • C. Russell 2000.

4. Use the Sharpe and Traynor formulas to evaluate P1, P2, and P3

Part III: Quantitative Analysis and Critical Thinking – Summarization
1. Accurate computation of statistics, use of quantitative methods, utilizing professional analyses and critical thinking; when comparing and contrasting the 3-portfolios.
A. Active versus passive portfolio management
B. Strategic versus tactical asset allocation
C. Observations of the 3-Portfolio Case Study

Reference Page: Include your research sources and significance of research information and data, use of APA citations and URL links

Can you give the reasons, and critically assess why relevant governments do not use available derivative instruments to manage oil price risk? Discuss the benefits of using market-based derivatives for hedging oil price risk for the governments and through that, for society. Explain your views on the current development and state of the derivatives markets (both exchanges and OTC) for appropriate management of oil price risk by governments?

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Hedging oil price risk by governments

In this part we would like you to read the following research papers:

1. “Hedging government oil price risk” by James A. Daniel, The Journal of Energy and Development 27(2), pp 167-178, published in 2002.

2. “Managing oil price risk in developing countries” by Julia Devlin and Sheridan Titman, The World Bank Research Observer 19(1), pp 119-140, published in 2004.

After reading the papers, please critically address the following discussion topic:It is now a common practice among the oil and gas companies to use derivatives in order to hedge oil price risk. This is, however, not the case for governments of the countries in which the oil industry is one of a major GDP contributor.

• Can you give the reasons, and critically assess why relevant governments do not use available derivative instruments to manage oil price risk?
• Discuss the benefits of using market-based derivatives for hedging oil price risk for the governments and through that, for society.
• Explain your views on the current development and state of the derivatives markets (both exchanges and OTC) for appropriate management of oil price risk by governments? Substantiate your opinion in the light of the reasons aforementioned in the first point.

Prepare the binomial model for both options and conduct the relevant quantitative analysis in an Excel spreadsheet. Describe also the process for obtaining the value of the option at a particular node for each of the two options. Clearly explain the replication strategy, the assets involved in the strategy and which positions are taken in the relevant assets. Demonstrate your practical ability to apply the binomial model in futures option valuation.

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Pricing crude oil futures options

In this part we would like you to build the three-step binomial tree for American futures options for crude oil and price those options using the equivalent binomial model. Use the hedge portfolio approach to price the American call futures option and risk neutral valuation to price the equivalent American put futures option.

For the purpose of the above task consider a hypothetical option that expires in one year and has a strike price 10% greater then the current futures price. Consider also the case when the futures contract expires two days after the option expiration date and this interval can be perceived as negligible for the purpose of a quantitative analysis in this exercise. Assume that the annualised volatility of one-year crude oil futures price is 45%.

You also need to source online the other inputs for the binomial model, that is:

• The current futures crude oil price of the underlying contract

• The one year risk free interest rate

For the selected values of the above parameters, you need to report the source of the data, the date of collection and provide a screenshot of the online source.

Prepare the binomial model for both options and conduct the relevant quantitative analysis in an Excel spreadsheet.

Describe also the process for obtaining the value of the option at a particular node for each of the two options. For the call option, clearly explain the replication strategy, the assets involved in the strategy and which positions are taken in the relevant assets. You should demonstrate here your practical ability to apply the binomial model in futures option valuation.

Once you obtain the prices for American call and put futures options from the binomial model, we would like you to use Black’s model to compute the prices of European call and put futures options. Can you use Black’s model to price American futures options? Explain how are the prices of the European and American futures options are related to each other.

Using the information provided in the case above, write a report for the board of directors of BST Bank Plc providing an analysis of the proposed project and recommendations for the company. 

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Faculty of Business and Law

 

Assignment Brief Mode C and Q Regulations

Module Title: Principles of Finance  

 

 

 Assignment Number Resit CW1
Module Code:   Assignment Title BST Bank
Module Leader:   Assignment Weighting 25%

               

Release Date:  
Submission

Date/Time:

 
Submission

Time and Place:

  
Assessment Information

This assignment is an individual assignment.

 This assignment requires you to answer all questions

Criteria for Assessment

 This assignment is designed to assess learning outcomes:

  1. Introduction to capital markets and investment process
  2. Capital appraisal techniques
  3. Diversification and optimal portfolio allocation of risky assets
  4. Capital asset pricing model and the security market line
Word Count

The word count is 1,500 words

There will be a penalty of a deduction of 10% of the mark (after internal moderation) for work exceeding the word limit by 10% or more.

The word limit includes quotations and citations, but excludes the references list.

Setting:

 It is June 1st 2022.  BST Plc has established itself as one of the leading retail banks in the UK.  The firm’s debt is currently rated at B+, however the company has been performing very well and expect a significant upgrade to AA status shortly. In light of its recent success, the firm is considering increasing the number of branches it has.

 BST Plc Capital Structure:

BST Plc has 400m shares in issue which currently trade at £2.65 each.  Its only debt is in the form of 15m bonds that have exactly 6 years left to expiry, these have a coupon rate of 8% and face value per bond of £100.

The Branch Expansion Project:

The company hopes to open small bank branches in small towns and village around the UK.  The aim is to open 50 new banks across the UK, although this number is very dependent on the availability of suitable premises.

The company has carried out a feasibility study, the cost of which was £24 million which is due for payment in one year.  Based on this, BST estimates the cash flows – per new bank branch – will be:

 

  Year 3 cash flows per outlet
Revenues £61m
Banking Costs £30m
Staff Costs                                    £15m
Insurance Costs £5m
Tax £6.1m

 

The viability study also concluded the following:

  1. The project will require the following cash injections (these exclude fees due to Dalglish Inc.) o An immediate investment of £800m o A further investment of £100m at the end of Year 1 o A further £900m at the end of Year 2
  2. Other than the cash injections above there will be no other cash flows in Years 1 or 2
  3. From Year 3 until Year 6:

o Revenues will grow at 12% per year o Banking Costs will increase by 15% per year o Staff Costs will increase by 10% per year o Insurance costs will increase by £1.5m per year (per outlet) o Tax costs are expected to remain at 10% of total revenues

 

  1. Cash flows in Year 7 and every year thereafter will be identical to those in Year 6.

 

Funding:

 

With regard to the £900m payable at the end of Year 2, the firm intends to invest £800m in a portfolio consisting of 25% of Stock A and 75% of Stock B at the end of Year 1.  Details of the expected returns for each stock in Year 2 are shown below:

 

UK Economic Growth Probability Returns Stock A Returns Stock B
High 0.2 12% 36%
Average 0.7 14% 12%
Low 0.1 30% -20%

 

Required:

 

Using the information provided in the case above, write a report for the board of directors of BST Bank Plc providing an analysis of the proposed project and recommendations for the company.

 

Specifically the final report should include:

 

  1. An estimate of the current Weighted Average Cost of Capital (WACC) of the company.
  2. A detailed cash flow forecast for the whole project (50 banks).
  3. An appraisal of the project using any techniques you think are appropriate.
  4. An estimate of how much the portfolio is expected to be worth at the end of Year 2 and whether the firm will need any additional capital to fund the project.
  5. A final recommendation of whether the project should be accepted.

 

 Further Information:

 

In addition to the lecture slides, textbooks, journals and the information above the following sources of information may be useful:

 

  1. i) Bloomberg, Reuters, FAME ii) http://www2.standardandpoors.com/ iii) The FT.com

 

Note:

  • BST Bank is NOT a real company (it has no website!). However, in writing the report you should assume that it would be competing against real firms that do exist in the UK.

Marking Guidance:

Marks for the coursework will be awarded based on the following criteria:

 

100

Create a Power Point presentation of 7-8 slides plus the title slide that contains the main results of all questions to the Term Paper of the Three Portfolio project. Respond to other students Power Point presentations. In your responses to other students please do not repeat the information presented on the student’s slides.

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FINC Dis

As an initial response to the discussion topic, create a Power Point presentation of 7-8 slides plus the title slide that contains the main results of all questions to the Term Paper of the Three Portfolio project.
You need to respond to other students Power Point presentations. In your responses to other students please do not repeat the information presented on the student’s slides. Present your opinion, with supporting rationale, about the other student’s results of the “Three Portfolio” project.

Reflection – the students also should include a paragraph in the initial response in their own words, using finance terminology, reflecting on specifically what they learned from the assignment and how they think they could apply what they learned in the workplace or in everyday life.

Show a time series record including, price, value, cash, return, cumulative wealth, and profit and loss table with discussion. Which portfolio made the most profit or had the greatest losses?

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FINC PAPER

This report must be a minimum of 12 to 15 double-spaced MS Word formatted file plus exhibits, related documentation (e.g., tables, charts, reports, etc.), and at least four appropriate supporting references. It should include a cover sheet, abstract or executive summary of around two hundred (200) words, content, and reference page. The written 3-Portfolio Case Project Written Report will be evaluated based on the following criteria:

-3-PORTFOLIO CASE WRITTEN PAPER OUTLINE
-Cover sheet
-Table of Contents
-Abstract or Executive Summary

Part I: Portfolio Construction and Management– Data Collection State the objectives for the construction and management of each of the three (3) portfolios.
1. This includes your policy statement (why were certain stocks purchased), strategy, asset allocation, and industry analysis.
2. Implementation and application of specific and well-articulated portfolio management strategies; portfolio design, security selection criterion, initial and final Portfolio value.
3. Show a time series record including, price, value, cash, return, cumulative wealth, and profit and loss table with discussion.

Part II: 3-Portfolio Case Evaluation and Assessment

Data analysis and Critical Thinking for each of the three (3) portfolios

1. Compare P1 to P2 to P3. Which portfolio made the most profit or had the greatest losses?

2. Complete the following analyses of P1, P2, and P3.

  • A. Return of investment
  • B. Expected rate of return
  • C. Variance
  • D. Standard deviation
  • E. Risk return analysis

3. Compare the returns (or losses) of P1, P2, and P3 to:

  • A. The S & P 500
  • B. Dow Jones Industrial Averages
  • C. Russell 2000.

4. Use the Sharpe and Traynor formulas to evaluate P1, P2, and P3

Part III: Quantitative Analysis and Critical Thinking – Summarization
1. Accurate computation of statistics, use of quantitative methods, utilizing professional analyses and critical thinking; when comparing and contrasting the 3-portfolios.
A. Active versus passive portfolio management
B. Strategic versus tactical asset allocation
C. Observations of the 3-Portfolio Case Study

Reference Page: Include your research sources and significance of research information and data, use of APA citations and URL links