Briefly discuss each alternative and include implications to the company’s capital structure and cost of capital, if any. Considering the size of the investment ($500,000 infusion), provide a conclusion on how it might impact the financial statement reviewed in Unit 1.

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Case Study:

The Exceptional Service Grading Company requires a capital infusion of $500,000. It is currently a closely held corporation with less than 25 shareholders. Although the shareholders are not all related to each other, they all know each other, and they view the business as a family business. The financial statements should be familiar to you because you performed a basic financial analysis of the company in Unit 1 of this course.

Several alternatives are available to the company, consisting of the following:

Obtain private debt financing
Seek out a private investor(s) who would be willing to share ownership (private transfer of partial ownership)
Seek out offers for a private buy-out (private transfer of entire ownership)
Issue public debt (corporate bonds)
Issue public common stock (public equity offering)

Briefly discuss each alternative and include implications to the company’s capital structure and cost of capital, if any. Considering the size of the investment ($500,000 infusion), provide a conclusion on how it might impact the financial statement reviewed in Unit 1. No calculations are required.

How much is the invested capital at t=6? How much is the gross value multiple at t=2? How much is the gross value multiple in t=9? How much is the value multiple at t=9?

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Venture Capital

1. How much is the invested capital at t=6?
a. Please round the number to one decimal, i.e., “12.4” is $12.3456 million.
2. How much is the gross value multiple at t=2?
a. Please round the number to two decimals
3. How much is the gross value multiple in t=9?
a. (Please round the number to two decimals)
4. How much is the value multiple at t=9?
a. Please round the number to two decimals
5. How much is the realized value multiple at t=7?
6. How much is the unrealized value multiple at t=4?
7. How much is the Fund’s IRR at t=3?
8. How much is the Fund’s IRR at t=6?
9. How much is the net IRR at t=7?
10. How much is the net IRR at t=9?
11. How much is the Russel 3000 10-year rolling return for 2009?
12. How much is the Russel 3000 10-year rolling return for 2022?

13.Based on the data provided: How does the performance of the KKR fund, measured by its value multiple at the end of its life compare to ones in that sample for 2014?

Top 10%
Top 11% to 25%
Middle 25% to 75%
Bottom 11% to 25%
Bottom 10%

15. Which of the options below better describes the use of the Russel 3000 as PME for PE funds?

Question 16 options:
A. The Russel 3000 Index tracks the performance of the 3,000 smallest U.S.-traded stocks. It can be considered as a more appropriate public market equivalent for private equity funds because it encompasses smaller companies compared to the S&P 500.
B. The Russel 3000 Index tracks the performance of the 3,000 largest U.S.-traded stocks. It can be considered as a more appropriate public market equivalent for private equity funds because it encompasses smaller companies compared to the S&P 500.
C. The Russel 3000 Index tracks the performance of the 3,000 smallest U.S.-traded stocks. It can be considered as a more appropriate public market equivalent for private equity funds because it encompasses larger companies compared to the S&P 500.
D. The Russel 3000 Index tracks the performance of the 3,000 largest U.S.-traded stocks. It can be considered as a more appropriate public market equivalent for private equity funds because it encompasses larger companies compared to the S&P 500.

16. PME: Case 1
Assume the fund’s first year is 2009, the PME evaluation is at the end of the 5th year, and the public market equivalent is the Russel 3000. How much would the limited partners have at the end of 2012 if, instead of investing in the private equity fund, they had invested in the Russel 3000 index? Use the NAV after contributions or distributions.

17. PME: Case 1

Assume the fund’s first year is 2009, the PME evaluation is at the end of the 5th year, and the public market equivalent is the Russel 3000. How much is the PME’s IRR at the end of the 5th year? Please round the number to two digits and do not include the percentage sign, i.e., 12.3456% must be typed 12.35

18. PME: Case 1
Assume the fund’s first year is 2009, the PME evaluation is at the end of the 5th year, and the public market equivalent is the Russel 3000. The limited partners would have been better of if they had invested in which one of the following possibilities?

  • Russel 3000 Index Fund
  • Private Equity Fund
  • Treasury Bond with a 5.7% yield

19. PME: Case 2
Assume the fund’s first year is 2012, the PME evaluation is on the fund’s whole life, and the public market equivalent is the Russel 3000 How much would the limited partners have at the end of 2016 if, instead of investing in the private equity fund, they had invested in the Russel 3000 index? Use the NAV after contributions or distributions.

20. PME: Case 2
Assume the fund’s first year is 2012, the PME evaluation is on the fund’s whole life, and the public market equivalent is the Russel 3000. The limited partners would have been better of if they had invested in which one of the following possibilities?

  • Private Equity Fund
  • Russel 3000 Index Fund
  • Treasury Bond with a 5.7% yield

21. PME: Case 3
Assume the fund’s first year is 2014, the PME evaluation is on the fund’s whole life, and the public market equivalent is the Refinitiv VC Index.
How much would the limited partners have at the end of 2018 if, instead of investing in the private equity fund, they had invested in the Refinitiv VC Index? Use the NAV after contributions or distributions.

What fraction of the company must Tribal demand to meet its expected IRR?

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What fraction of the company satisfies IRR

John has approached Tribal Ventures with a business idea. Currently, John has incorporated the business and awarded himself 2 million shares. John is looking to raise $4 million in VC funding. Tribal is interested in the deal and have made some assumptions listed below:

  • The company will achieve the $10 million in earnings in year 5
  • Tribal needs to make at least 60% IRR on this investment
  • Tribal would be able to exit at the end of year 5 and the likely P/E multiple of similar companies would be 15x in year 5
  • The company would NOT need any more funding.

What fraction of the company must Tribal demand to meet its expected IRR?

Use the servuction system model to discuss it’s relevance and use in service quality delivery for FNB in Botswana.

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Servuction system model

Use the servuction system model to discuss it’s relevance and use in service quality delivery for FNB in Botswana.

Critically evaluate financial ratios/measures which meet the objectives of the case study. Analyse the financial ratios/measures, with the support of appropriate diagrams.

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6FNCE001W Banking Theory and Practice 2022-23

The assignment is a case study. The length of the case study is 1000 words (+/- 10%) excluding cover page, table of contents, abstract, references and appendices.

Required:
In 2016, UK voted chose to leave the European Union. Conduct a case study on how Brexit and uncertainty of Brexit plan for financial services have affected a chosen UK commercial bank so far, in the context of performance and risk level. Your case study needs to include the following elements:

a. Explain the background of the mentioned topic, using appropriate references. Clearly explain the objectives of your case study. This should include the details of which types of performance and risk you choose to study.  (20 marks)

b. Collect and explain the relevant financial data of your chosen UK commercial bank and economic data from a reliable source (At least the current 5 years of data). Present the information properly.    (10 marks)

c. Critically evaluate financial ratios/measures which meet the objectives of the case study. Analyse the financial ratios/measures, with the support of appropriate diagrams.    (30 marks)

d. Critically argue how the bank’s performance and risk were affected by Brexit and uncertainty of Brexit plan for financial services.   (30 marks)

e. Your essay has to include a cover page (with the title of essay, do NOT include your student ID), a list of reference, and the appendix if needed. The referencing format should be Harvard referencing style.   (10 marks)

Draft a report in which you describe, discuss and evaluate the financial performance and financial position of the organisation as reflected by the Financial Statements and the supporting financial analysis.

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Assessment 1; Financial Analysis

Your assessment is to be written in a business report format.
1. Obtain the most recent General Purpose Financial Statements (GPFS) of a listed organisation or any other organisation for which you are able to access the audited General Purpose Financial Statements (GPFS).
2. Perform an analysis on these Financial Statements using a variety of analysis techniques, as covered in this unit and others that you may research. Ensure that you include financial ratio analysis.
3. Draft a report in which you describe, discuss and evaluate the financial performance and financial position of the organisation as reflected by the Financial Statements and the supporting financial analysis.

In order to inform your discussion and interpretation of the analysis, ensure that you:
• include a commentary on relevant context to the organisation. its industry and its operations
• ensure that your analysis clearly identifies the financial impacts of the organisation’s activities and operations.

In your discussion identify key financial issues that are of particular importance

Describe briefly the legal rights and privileges of common stockholders. What is free cash flow (FCF)? What is the weighted average cost of capital? What is the free cash flow valuation model?

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Finance Question

Mini Case

Your employer, a midsized human resources management company, is considering expansion into related fields, including the acquisition of Temp Force Company, an employment agency that supplies word processor operators and computer programmers to businesses with temporarily heavy workloads. Your employer is also considering the purchase of Biggerstaff & McDonald (B&M), a privately held company owned by two friends, each with 5 million shares of stock. B&M currently has free cash flow of $24 million, which is expected to grow at a constant rate of 5%. B&M’s financial statements report short-term investments of $100 million, debt of $200 million, and preferred stock of $50 million. B&M’s weighted average cost of capital (WACC) is 11%. Answer the following questions:

  • Describe briefly the legal rights and privileges of common stockholders.
  • What is free cash flow (FCF)? What is the weighted average cost of capital? What is the free cash flow valuation model?
  • Use a pie chart to illustrate the sources that comprise a hypothetical company’s total value. Using another pie chart, show the claims on a company’s value. How is equity a residual claim?

Suppose the free cash flow at Time 1 is expected to grow at a constant rate of gL forever. If gL<WACC , what is a formula for the present value of expected free cash flows when discounted at the WACC? If the most recent free cash flow is expected to grow at a constant rate of gL forever (and gL<WACC ), what is a formula for the present value of expected free cash flows when discounted at the WACC?

Use B&M’s data and the free cash flow valuation model to answer the following questions:

  • (1)What is its estimated value of operations?
  • (2)What is its estimated total corporate value? (This is the entity value.)
  • (3)What is its estimated intrinsic value of equity?
  • (4)What is its estimated intrinsic stock price per share?

You have just learned that B&M has undertaken a major expansion that will change its expected free cash flows to −$10 million in 1 year, $20 million in 2 years, and $35 million in 3 years. After 3 years, free cash flow will grow at a rate of 5%. No new debt or preferred stock was added; the investment was financed by equity from the owners. Assume the WACC is unchanged at 11% and that there are still 10 million shares of stock outstanding.

 

  • (1)What is the company’s horizon value (i.e., its value of operations at Year 3)? What is its current value of operations (i.e., at Time 0)?
  • (2)What is its estimated intrinsic value of equity on a price-per-share basis?
  • (3)If B&M undertakes the expansion, what percent of B&M’s value of operations at Year 0 is due to cash flows from Years 4 and beyond?

(Hint: Use the horizon value at t = 3 to help answer this question.)

 

Based on your answer to the previous question, what are two reasons why managers often emphasize short-term earnings?

Your employer also is considering the acquisition of Hatfield Medical Supplies. You have gathered the following data regarding Hatfield, with all dollars reported in millions: (1) most recent sales of $2,000; (2) most recent total net operating capital, OpCap = $1,120; (3) most recent operating profitability ratio, OP = NOPAT/Sales = 4.5%; and (4) most recent capital requirement ratio, CR = OpCap/Sales = 56%. You estimate that the growth rate in sales from Year 0 to Year 1 will be 10%, from Year 1 to Year 2 will be 8%, from Year 2 to Year 3 will be 5%, and from Year 3 to Year 4 will be 5%. You also estimate that the long-term growth rate beyond Year 4 will be 5%. Assume the operating profitability and capital requirement ratios will not change. Use this information to forecast Hatfield’s sales, net operating profit after taxes (NOPAT), OpCap, free cash flow, and return on invested capital (ROIC) for Years 1 through 4. Also estimate the annual growth in free cash flow for Years 2 through 4. The weighted average cost of capital (WACC) is 9%. How does the ROIC in Year 4 compare with the WACC?

 

What is the horizon value at Year 4? What is the total net operating capital at Year 4? Which is larger, and what can explain the difference? What is the value of operations at Year 0? How does the Year-0 value of operations compare with the Year-0 total net operating capital?

 

What are value drivers? What happens to the ROIC and current value of operations if expected growth increases by 1 percentage point relative to the original growth rates (including the long-term growth rate)? What can explain this? (Hint: Use Scenario Manager.)

 

Assume growth rates are at their original levels. What happens to the ROIC and current value of operations if the operating profitability ratio increases to 5.5%? Now assume growth rates and operating profitability ratios are at their original levels. What happens to the ROIC and current value of operations if the capital requirement ratio decreases to 51%? Assume growth rates are at their original levels. What is the impact of simultaneous improvements in operating profitability and capital requirements? What is the impact of simultaneous improvements in the growth rates, operating profitability, and capital requirements? (Hint: Use Scenario Manager.)

 

What insight does the free cash flow valuation model provide regarding possible reasons for market volatility? (Hint: Look at the value of operations for the combinations of ROIC and gL in the previous questions.)

  • (1)Write out a formula that can be used to value any dividend-paying stock, regardless of its dividend pattern.
  • (2)What is a constant growth stock? How are constant growth stocks valued?
  • (3)What happens if a company has a constant gL that exceeds its rs ? Will many stocks have expected growth greater than the required rate of return in the short run (i.e., for the next few years)? In the long run (i.e., forever)?

 

Assume that Temp Force has a beta coefficient of 1.2, that the risk-free rate (the yield on T-bonds) is 7.0%, and that the market risk premium is 5%. What is the required rate of return on the firm’s stock?

 

Assume that Temp Force is a constant growth company whose last dividend ( D0 , which was paid yesterday) was $2.00 and whose dividend is expected to grow indefinitely at a 6% rate.

  • (1)What is the firm’s current estimated intrinsic stock price?
  • (2)What is the stock’s expected value 1 year from now?
  • (3)What are the expected dividend yield, the expected capital gains yield, and the expected total return during the first year?

 

Now assume that the stock is currently selling at $30.29. What is its expected rate of return?

 

Now assume that Temp Force’s dividend is expected to experience nonconstant growth of 30% from Year 0 to Year 1, 25% from Year 1 to Year 2, and 15% from Year 2 to Year 3. After Year 3, dividends will grow at a constant rate of 6%. What is the stock’s intrinsic value under these conditions? What are the expected dividend yield and capital gains yield during the first year? What are the expected dividend yield and capital gains yield during the fourth year (from Year 3 to Year 4)?

  • What is the market multiple method of valuation? What are its strengths and weaknesses?
  • What are the advantages of the free cash flow valuation model relative to the dividend growth model?
  • What is preferred stock? Suppose a share of preferred stock pays a dividend of $2.10 and investors require a return of 7%. What is the estimated value of the preferred stock?

Choose a company and using vertical analysis review their efficiencies when compared to another company within the same industry. Using horizontal analysis, explain how the company is progressing year on year over a three year period and compare the two company’s performances.

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Analyzing a company’s performance

Assignment Overview: Individual project:

I. Choose a company and using vertical analysis review their efficiencies when compared to another company within the same industry.

II. Using horizontal analysis, explain how the company is progressing year on year over a three year period and compare the two company’s performances.

III. Explain the differences between the two companies, highlighting who you feel is doing the better job.

Give a brief synopsis of your business plan and use the budget template to project future performance, explaining why you feel the company will achieve that performance.

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Finance Question

Assignment Overview: Individual project: You will use the budgeting example given in the assessment area. Using that budget as an EXAMPLE ONLY, you will need to adjust your figures, revenue streams and costs to reflect the business you described in your entrepreneurship course. You will then explain your assumptions while highlighting our understanding of the concepts used in budgeting and variances.

Questions: I. Give a brief synopsis of your business plan and use the budget template to project future performance, explaining why you feel the company will achieve that performance.

Questions II. Create an optimistic projection and use variance analysis to explain how those changes may arise.

How many occurrences of the word Bad Debt Expense or similar wording were in the SEC Annual Report? How much bad debt expense did the company report for the most recent year? If you cannot find, did they use different terminology?

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Financial Accounting-Chapter 8

Review the Balance sheet of your company contained in the SEC 10-K report. You will be copying the Balance Sheet in part three of this assignment.

Using the data from the company SEC website, notes to financial statements, and the Income Statement answer the following questions.

Type COMPANY NAME

  1. Define Accounts Receivable
  2. Define allowance for uncollectible accounts
  3. Define allowance for doubtful accounts
  4. Define bad debt expense
  5. Based on the information in the company’s most recent annual report, determine each of the following:
  6. Accounts Receivable
  7. What amount of accounts receivable did the company report at the end of each year reported?

 

  1. Allowance for Uncollectible Accounts
  2. How many occurrences of the word Allowance for Uncollectible Accounts were in the SEC Annual Report?
  3. What is the balance in the company’s Allowance for Uncollectible Accounts or similar wording at the end of the years reported? If you cannot find, did they use different terminology? Explain how you found your answer if wording was not exact. Search notes to the financial statement or search the entire 10K for words that are similar to help you determine Allowance for Uncollectible Accounts. Your company may not use that exact terminology. Example: loss on sales.

 

  1. Bad Debt Expense
  2. How many occurrences of the word Bad Debt Expense or similar wording were in the SEC Annual Report?
  3. How much bad debt expense did the company report for the most recent year?   If you cannot find, did they use different terminology? Explain how you found your answer if wording was not exact. Search notes to the financial statement or search the entire 10K for words that are similar to help you determine Allowance for Uncollectible Accounts. You company may not use that exact terminology. Example: loss on sales

 

  1. Percentage of total current assets is accounts receivable.
  2. What is the formula to compute the percentage of total current assets is accounts receivable?
  3. What percentage of Total current assets is accounts receivable at the end of each year presented? Has this percentage increased, decreased, or remained the same during this period? SHOW YOUR WORK!
  4. Using the information presented in the company’s annual report, compute the company’s accounts receivable turnover ratio and number of days’ sales in receivables at the end of each of the years reported?
  5. Accounts Receivable turnover ratio
    1. What is the formula for Accounts Receivable turnover ratio?
    2. What does accounts receivable turnover ratio mean?
    3. What is the Accounts Receivable turnover ratio at the end of the years reported? SHOW YOUR WORK! Formula included in Chapter 8. Reading the notes to the financial statement explain why the ratio is different from year to year.
  6. Number of days’ sales in receivables
    1. What is the formula for number of days’ sales in receivable?
    2. Why would you need to know the number of days’ sales is in receivables?
    3. What is the number of days’ sales in receivables at the end of the years presented? SHOW YOUR WORK!

 

  1. Based on this information, has the company’s management of accounts receivable improved? Briefly explain your answer, make sure you read the notes to the financial statements to document your answer. Briefly explain your answer.
  1. How does accounts receivable effect this company and it’s investors?
  2. What has affected accounts receivable ?

Note: Provide evidence from notes to financial statement. A research paper is to prove your data!!!! Do not include your opinion!!!

  1. Include a copy of the company’s balance sheet and income statement from Chapter 5. Find the balance sheet, highlight the income statement, right click copy. In the word document paste Balance sheet, then in the word menu click on the layout tab and click auto fit to contents, that is so the balance sheet fits correctly on the page. This is important for me to verify your data.

 

  1. Include work cited links

All your answers should be presented in a Word document (can include tables or graphs) and submitted in the submit box for this assignment. Please remember to check your spelling and grammar.