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Please Note: This is a 3 part assignment. Part 1 is due Sunday, Part 2 is due in 2 week, part 3 is due in 5 weeks. I will place each order separately, but will request the same writer for all parts.
PART 1 (This order. Due 2/5/23)
Ratio Analysis
Attached are the financial statements for Smith Company, Inc. Use the financial statements Download financial statementsto calculate the attached ratios. Write 2-4 sentences interpreting the ratio.
Calculate and interpret the following debt ratios: debt ratio, debt-equity ratio, and times interest earned.
Calculate and interpret the following profitability ratios: operating profit margin, net profit margin, return on assets, and return on equity.
The exercise should be 3-4 pages (not including title or reference pages), double spaced, follow the CSU Global Writing CenterLinks to an external site., and include a minimum of four (4) sources with at least 2 from scholarly or peer review journals. See the Module 3 Portfolio Milestone Rubric for full details on how you will be graded on this assignment.
PART 2
Require Return for Capital Funding
Suppose that Smith Company is considering a new project. They are trying to determine the required rate of return for their debt and equity holders. Use these financial statements Download financial statements. Also see the information below:
A 7.5% percent annual coupon bond with 20 years to maturity, selling for 104 percent of par. The bonds make semiannual payments. What is the before tax cost of debt? If the tax rate is 40%, what is the after-tax cost of debt?
The firm’s beta is 1.2. The risk-free rate is 4.0% and the expected market return is 9%. What is the cost of equity using CAPM?
The exercise should be 3-4 pages (not including title or reference pages), double spaced, follow the CSU Global Writing CenterLinks to an external site., and include a minimum of four (4) sources with at least 2 from scholarly or peer review journals. See the Module 5 Portfolio Milestone Rubric for full details on how you will be graded on this assignment.
PART 3
Part A: Ratio Analysis (Week 3 Milestone)
Attached are the financial statements for Smith Company, Inc. Use the financial statements Download financial statementsto calculate the attached ratios. Write a couple of sentences interpreting the ratio. (these will be bullets on your presentation slide).
Calculate and interpret the following debt ratios: debt ratio, debt-equity ratio, and times interest earned.
Calculate and interpret the following profitability ratios: operating profit margin, net profit margin, return on assets, and return on equity.
Part B: Require Return for Capital Funding (Week 5 Milestone)
Suppose that Smith Company is considering a new project. They are trying to determine the required rate of return for their debt and equity holders. See the information below:
A 7.5% percent annual coupon bond with 20 years to maturity, selling for 104 percent of par. The bonds make semiannual payments. What is the before-tax cost of debt? If the tax rate is 40%, what is the after-tax cost of debt?
The firm’s beta is 1.2. The risk-free rate is 4.0% and the expected market return is 9%. What is the cost of equity using CAPM?
Part C: WACC and Capital Budgeting
Calculate the firm’s WACC (using 2018 numbers). (You will need to collect information on the long-term debt and common stock equity from the Balance Sheet. The firm has no preferred stock).
Use the WACC to calculate NPV and evaluate IRR for proposed capital budgeting projects. Assume the projects are mutually exclusive and the firm has the money available to fund the project.
Part D: Analysis
You must offer suggestions to a senior financial manager and CFO on the proposed projects. Be sure to include a discussion of external funding and where it should come from if necessary and which project the firm should undertake. Prepare a presentation, a minimum of one slide for each part, summarizing your results. The calculations can be done either on a word document or using an excel spreadsheet. You will screenshot either the word document or the excel spreadsheet and include them as the images on your PowerPoint slides. Each part (parts A-D) should include the screenshot, brief bulleted information/descriiption, and the minimum 500-word descriiption/explanation in the notes section.
See rubric for specific grading criteria. Be sure to cite sources if applicable. The CSU Global Library is a good place to find your sources. Format your entire presentation according to CSU Global Writing Center Links to an external site..
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