Determine assumptions for use in forecasting a 10-year pro forma income statement and balance sheet for the target.

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Determine assumptions for use in forecasting a 10-year pro forma income statement and balance sheet for the target. Submission files: Report in Word file and spreadsheet in Excel file.

The first thing to do will be to determine a growth rate in sales. It should not be the same rate for each year. The whole purpose of having a planning period is that you can change assumptions each year to get a more realistic view of how the firm evolves through time in the near-term.
Synergies should be accounted for. If you think a synergy will be increased sales, then adjust the sales growth rate you decided upon. If you think a synergy will be decreased costs, then perhaps you will adjust your profit margins. These synergies should be consistent with those you discussed in Part 1 (paper below). Make sure that where synergies are accounted for is clearly labeled.
You will be turning in your Excel sheets (attached), so make sure everything is clearly labeled and the formulas are accessible by the instructor. Your process should be clear and your worksheets should be well organized. You can make use of cell comments and/or text boxes, or put very short explanations into nearby cells. Any comments in the spreadsheet are not considered part of your report.
You must assume there is long-term debt in your target’s pro forma balance sheet (it cannot be zero for all years).
In a report, discuss all assumptions you are making and why you are making them. This report should be in paragraph format. It should look neat and professional, with clear and detailed explanations of your reasoning process for determining assumptions and for how you applied those assumptions to the numbers.

Write a report outlining your recommendation as to which assets your clients should invest in.

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1.            Assessment Guideline

This assessment comprises an individual report that should be no longer than 1,000 words (±10%), excluding the title page, executive summary, table of contents, tables and figures, appendices and references.

3.            Case Study

3.1     JP Morgan Asset Management

You are a Hedge Fund Manager for JP Morgan Asset Management. You are in charge of a $3M fund pool. Your clients have instructed you to invest the fund in US assets predominantly in equities and foreign currencies with USD as the home currency. You decide to create a hedge fund portfolio of 8 assets consisting of 4 US equities and 4 foreign currencies with USD as the home currency. The following conditions apply:

  1. Your clients indicated that you are to invest the $3M in these assets. You do not have to use all 8 assets in the pool; however, your pool should consist of a combination of equity and f/x assets (and demonstrate your analysis in these 8 assets even if you do not use all of them at the end). You should aim to use most, if not, all of the $3M in the investment pool.
  2. You should describe the risk attitude of your clients (loving, neutral or averse). In any case, your clients intend to maximise returns for any level of a given risk.
  3. As a hedge fund manager, you are allowed to have a long and a short positions in these assets. For example, if you employ both a long and a short positions, then it is possible for your long position to go over $3M for as long as the total long and short positions is $3M.
  4. Your clients also require you to provide rationale for the assets chosen in the investment. For instance, if you decide to invest in ‘TSLA’ stock, the rationale behind this decision (e.g. transparency, liquidity, growth, returns, etc.). You can also add Key Performance Indicators (KPIs) such as income statement, balance sheet, financial ratios, segment data, credit rating, earnings estimate, relative performance, share price performance, etc.) to your analysis.
  5. In terms of historical trade data, you should use and/or analyse minimum of 5 years’ worth of data at a monthly frequency. Please include COVID-19 periods in your data selection and analysis.

3.2     Required

JP Morgan Asset Management department has asked you to write a report outlining your recommendation as to which assets your clients should invest in. When compiling this report, your clients expect to see tables outlining the respective relevant information for each of these assets as well as appendices demonstrating all relevant calculations.

When preparing the report, you have been asked to address the following points:

  1. Calculate the average return on the asset, the standard deviation of the asset’s returns as well as a risk-adjusted return measure for the
  2. When conducting your fundamentals analysis, that you use the top-down approach to justify your choice of markets and
  3. That you find and highlight the key findings of relevant research or literature (including newspapers articles, investor reports, etc.) on each of the asset classes and specific

3.3     Structure of the Report

The report should be structured as follows:

  1. COVER PAGE, which should contain:
    • A relevant title for the
    • The word count for the report (excluding the title page, executive summary, table of contents, tables and figures, appendices, and references).
  2. TABLE OF CONTENTS, which should contain:
    • A full list of sections (including executive summary, references, bibliographic materials, and any appendices).
    • The page number of which each section
  3. EXECUTIVE SUMMARY, which should:
    • Highlight the key points and findings of the
    • Be in the third person and use the present tense, e.g. “This report compares…”.
  4. INTRODUCTION, which should:
    • Give a succinct explanation of the aims, scope and context of the
    • Include brief details and definitions for any information necessary for the reader to understand the
  1. MAIN BODY, which should:
    • Provide the main critical analysis of the different markets and securities as well as any relevant research on the
    • Provide relevant figures and compare this with the respective base
  2. CONCLUSION, which should
    • Briefly summarise the aims and key findings of the
    • Make a recommendation to JP Morgan Asset Management Team as to how the team should invest providing justifications for this
  3. REFERENCES & BIBLIOGRAPHY, which should:
    • The list of references lists the details of any material that have actually been cited in the report (full details of the source should be given using the Westminster Harvard referencing system).
    • The bibliography lists the details of any other sources that you may have referred to when preparing the report but not actually cited in the report itself
  4. APPENDIX, which should:
    • Provide calculations for the figures used in the report and highlight the respective formulae
    • Include any other material that you feel may be relevant but does not warrant being included in the

 

What are 2 or 3 ways that an individual or organization could mitigate the risks and potential pitfalls of investing?

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Based on past experiences and personal values, people have different beliefs about gambling. Some view it as a moral issue and consider luxurious casinos to be deceptive and eager to take money out of the hands of the naïve. Some people enjoy the excitement of watching the dice roll and view a night in the casino or an occasional scratch-off ticket as nothing more than a recreational experience. Also, while some people are simply disinterested in any form of gambling, there are others who become addicted to the prospect of being able to “win it all back next time” and allow gambling to destroy their lives. Just as there are diverse perspectives on gambling, there are also many different perspectives on how people connect the concept of investing to the concept of gambling. Some people make no connection between the two, defining a clear distinction between a random act of chance to a calculated investment decision. Others, however, cannot distinguish the difference, considering the stock market to be nothing more than a casino in disguise.

In this Discussion, you will consider the connection (or lack of connection) between investing and gambling, specifically in terms of investing in the stock market.

To prepare for this Discussion:

Review this week’s Learning Resources and consider the relationship between investments and risk.
Consider the following statement: “Playing the stock market is like gambling. Such speculative investing has no social value, other than the pleasure people get from this form of gambling.”
Review the Academic Writing Expectations for 2000/3000-Level Courses, provided in this week’s Learning Resources.

By Day 3

Post a 150- to 225-word (2- to 3-paragraph) explanation of the differences between gambling and investing. In your explanation, answer the following:

How would you describe the difference between gambling and investing?

What are the risks and potential pitfalls of investing that might cause someone to make the statement that “playing the stock market is like gambling”?

What are 2 or 3 ways that an individual or organization could mitigate the risks and potential pitfalls of investing?

To support your response, be sure to reference at least one properly cited scholarly source.

Explain whether it is possible to earn excess returns without taking on additional risk.

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How do you feel about the following statement: “Avoiding risks is the biggest risk of all”? That statement may seem contradictory at first, but it makes more sense if you apply the concept to various situations in life and business. For example, many people pursue a college degree because they feel it will increase their job prospects and earning potential. This can turn out to be true but is not a guarantee. Others may find this path too risky and prefer to enter the job market right away. Although the first group of people take the risk of their college degree paying off in the long run, the second group are also taking the risk of limiting their potential for the future. Similarly, the nature of entrepreneurship is built upon the risk of investing time and money into something that could potentially fail. Even established businesses could become outdated or be outperformed if they stop taking certain risks. Just as the concept of risk can apply in a general sense, it also applies to investments that individuals and businesses make. Calculated investment risks are not always guaranteed to pay off, but a zero-risk approach may not be as safe as it sounds either.

In this Assignment, you will address questions related to returns and risk premiums.

To prepare for this Assignment:

Review this week’s Learning Resources.

Refer to the Academic Writing Expectations for 2000/3000-Level Courses as you compose your Assignment.

By Day 7
Submit your responses to the following prompts.

Explain the differences between the arithmetic return and the geometric return. Include in your explanation what factor determines the difference between arithmetic returns and geometric (compounded) returns. (75–150 words, or 1–2 paragraphs)

If you own a stock with volatile returns over a 2-year period, will the average return be higher or lower than the geometric return? Explain why. (75–150 words, or 1–2 paragraphs)

Why is it more convenient to display your investment returns in percentage terms rather than dollar terms? (75–150 words, or 1–2 paragraphs)

Would a common stock or a corporate bond demand a higher risk premium? Explain why. (75–150 words, or 1–2 paragraphs)

What are the differences between a bond risk premium and an equity risk premium? (75–150 words, or 1–2 paragraphs)

Explain whether it is possible to earn excess returns without taking on additional risk. (75–150 words, or 1–2 paragraphs)

Explain why you think the ratios are crucial.

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When discussing financial statements, you should be able to define the relationship between the balance sheet, income statement, and the statement of cash flows. Demonstrate your understanding of these financial statements and their limitations by selecting four ratios that you think are important in evaluating the strength of an organization’s financial position. Explain why you think the ratios are crucial.
Activity Ratio, Profitability ratio, Market RAtio and Liquidity ratio

What are the four options to purchase this equipment?

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1NEWEQUIPMENT-TOPAYCASH,RENT,GETALOAN,ORLEASE?ESF needs new, state of the art equipment. The management team has already identified a vendor for this equipment and a package that costs $50,000. Your manager would like you to present how you would like to purchase this equipment. Answer the questions below and present your recommendation to your manager based on the information provided.ESF has $60,000 in cash reserves and other assets available to make this purchase. You currently average $4,000 in monthly operating expenses and are setting aside $500 per month in your reserve account.If you rent the equipment there is no up-front cash expenditure, except for a $1,000 security deposit. You will face lower upkeep and repair costs. You can also return the equipment if you are not satisfied. The monthly rental fee is $1,200 and it is 100% tax deductible.A local bank is willing to extend you a simple interest business loan (multiply principle by interest rate to calculate finance charges) of $40,000 over 5 years at 4% with no money down. They will not offer the full amount because equipment will depreciate and they want to minimize their exposure (i.e., financial risk).Since you have excellent credit and good cash flow the vendor offers to a”lease toown plan” toyou for the equipment. They are offering 100% financing over 5 years. Their terms are a 3% down payment that would cover any taxes, installation, and delivery expenses. You would pay $980 per month. Similar to renting, lease payments are tax deductible.Your manager tells you that EAGLE SOAR averages a quarterly profit before taxes of $15,000 and your tax rate is 30% (Federal and State combined). Also, she prefers to always have at least 3 months (or one quarters) worth of operating expenses in reserves. However, this is not required but there must be a plan to replenish the reserve account within 6 months if it falls below 3 months’ worth of operating expenses.QUESTIONS

1. What are the four options to purchase this equipment?

2. What is your upfront cost for all options to purchase this equipment?

3. What is your monthly cost for all options over the next 5 years? (Note: disregard maintenance)

4. What is your total cost for all options over the next 5 years? (Note: disregard maintenance and depreciation)

5. What is your recommendation to the manager about how to pay for the equipment? Use the information above to justify your rationale and response

Compare the financial performance of two companies in the same sector for the last three years (you need to use three years of data).

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The aim of the assignment is to compare the financial performance of two companies in the same sector for the last three years (you need to use three years of data). The organisations are Easyjet plc and Ryanair Holding plc. As a consultant, use this analysis to suggest a prospective long term investor of the most attractive organisation to invest in.

Identify and evaluate alternative sources of business finance such as cost of capital and capital structure theories.

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WIZZ (WIZZ AIR HOLDINGS PLC. ORD)
Identify and evaluate alternative sources of business finance such as cost of capital and capital structure theories.
Discuss and apply principles of business and asset valuations.

Do you think all marketing staff members should be equipped to speak with the public about the firm’s financial matters?

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Discuss the following scenario: Staff members from the marketing department of your firm are doing a splendid job selling products to customers. Many of the customers are so pleased that they are also buying shares in the company’s stock, which means that they receive a copy of the firm’s annual report. Unfortunately, questions sometimes arise that the marketing staff members are woefully inadequate at answering. Technical questions about the firm’s financial condition and performance are referred to the chief financial officer, but the director of marketing has asked you to write a memo in which you explain the key elements in an annual report so that marketing representatives are better prepared to respond to questions of a more general nature.

For your initial post, write a clear, concise memo that describes the contents of an annual report so marketing personnel can understand the basic requirements of an annual report. Reference this week’s readings and lecture to help organize and explain your thoughts. In addition, answer the following questions:

Do you think all marketing staff members should be equipped to speak with the public about the firm’s financial matters?
What are some of the benefits of improving employee financial literacy?

Interpret financial ratios, compare and make your recommendation as a financial manager.

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You have the following financial statements of your company for the year ended 2016 and 2017:
Prepare a report for Board of Directors that includes the following:
Calculate following ratios: current ratio, quick ratio, asset turnover, profitability ratios (profit margin, gross profit margin) receivable turnover ratio, payable turnover, return on assets, return on equity, earning per share, debt equity ratio, price earning ratio and dividend yield ratio.
Interpret financial ratios, compare and make your recommendation as a financial manager.
Please use attachment when writing report