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FINC 330 Project Description
Research Project Part 2
Due at the end of week 7
This project is closely aligned with the Course Outcomes and Finance Program Objectives.
Completion of this project can be used as part of a portfolio to show potential employers
the student is skilled at performing company valuations and financial statement analysis
and can be included on the student’s resume.
Bond and Stock Performance Analysis
OBJECTIVE
In this part of the project you are to assume to have been hired to join a team serving as an
internal financial analyst to THE COMPANY. Your client plans to invest in bonds and (or)
stocks issued by THE COMPANY (SELECTED BY INSTRUCTOR). In part 6 of the
assignment you are asked to provide some recommendations to THE COMPANY’S
management.
THE COMPANY for part 2 of the project can be the company that you were using for the
Research Project Part 1 or ANOTHER COMPANY determined by your professor. THE
COMPANY for this part of the project must have
bonds
listed on the website
http://finra-
markets.morningstar.com/BondCenter/Default.jsp
. To find the information on bonds, click on
Search in the middle of the screen (under Market Center Bond Guide), under Quick Search type
the Issuer Name and the Symbol, and click SHOW RESULTS.
Alternatively, you can request approval of another publicly traded company. This request must
be submitted before the end of the first week of the course. The request must include

identification of the company by ticker symbol and name

a reasonable and appropriate explanation of why you want to examine the alternative
company

the source of the analyst’s report that will be used in the analysis (which must be
submitted to me)

acknowledgement by you that all the specific elements of the assignment (see below) will
be prepared by you and included in the final research project report
SUGGESTED WEBSITES
www.morningstar.com
– To find the information for your company you need to type the stock
symbol in the
Quotes
window to get into the company’s page.

http://finra-markets.morningstar.com/BondCenter/Default.jsp
– To find the information on
bonds, click on Search in the middle of the screen (under Market Center Bond Guide), under
Quick Search type the Issuer Name and the Symbol, and click SHOW RESULTS.
https://markets.businessinsider.com/bonds
. To find the information on bonds, scroll down the
page, type the name of the company in the window under Bond Finder, and click SEARCH.
www.marketwatch.com
-To find the information for your company you need to type the stock
symbol in the
Search
window to get into the company’s page.
www.money.cnn.com
-To find the information for your company you need to type the stock
symbol in the
Search
window to get into the company’s page.
www.finance.yahoo.com
– To find the information for your company you need to type the stock
symbol in the
Search
window to get into the company’s page.
www.nyse.com
– Click on Data, then click on Stocks (under Quotes), and type the name of the
company or the stock symbol in the window “Keyword or symbol” to get into the company’s
page.
www.nasdaq.com
– To find the information for your company you need to type the stock symbol
in the
Search
window to get into the company’s page.
Company’s websites
YOUR SPECIFIC ASSIGNMENT
Using the information from the websites the student will develop evaluation of bond and stock
performance for THE COMPANY (SELECTED BY INSTRUCTOR). (The evaluation portion
will total 85% of the assignment grade)
-1—Background and Industry (one
short
paragraph).
-2-
The
financial leverage
ratios (10% of the project grade)
a) Find the
financial leverage
ratios for THE COMPANY assigned for you of the project for
the last 3-5 years in the Internet. Present these ratios as the table(s) in your project.
You can find these ratios in the Internet or calculate them. If you use published ratios you
must indicate that and cite their source.

Debt-to-assets ratio (Debt ratio)

Debt-to Equity ratio

Interest Coverage ratio (the Times Interest Earned)

b) Write (about) 1 page of the analysis of the
ratio results.
In your analysis you should answer
the following questions.
Please explain your answer to each question.
How is THE COMPANY financing its assets? Discuss how much risk is associated with
the bonds issued by the company? How can this risk be measured? Please explain.
-3- Collect and evaluate the data about
bond
performance of the assigned company.
(15% of the project grade).
The information on bonds can be found on the website
http://finra-markets.morningstar.com/BondCenter/Default.jsp
. To find the information on bonds,
click on Search in the middle of the screen (under Market Center Bond Guide), under Quick
Search type the Issuer Name and the Symbol, and click SHOW RESULTS.
Another useful website on bond information is
https://markets.businessinsider.com/bonds
. To
find the information on bonds, scroll down the page, type the name of the company in the
window under Bond Finder, and click SEARCH.
Copy the quotations of
two
bonds issued by THE COMPANY (SELECTED BY
INSTRUCTOR) that contain the Price. Present these quotations in your project.
1.
Assume that par value of the bond is $1,000. What were the last prices of the bonds in $$
$ (listed in the Price column)?
Show your work in your project.
2.
Assume that par value of the bond is $1,000. Calculate the annual coupon interest
payments.
Show your work in your project.
3.
Assume that par value of the bond is $1,000. Calculate the current yield of the bonds.
Show your work in your project.
4.
Write a 1-2 page of the analysis of the
bonds.
In your analysis you should answer the
following questions.
Please explain your answer to each question.
a)
How much is the YTM listed in quotations is for the bonds? Explain the meaning
of YTM.
b)
If you are going to buy a bond issued by THE COMPANY, which bond would
you choose? Why?
c)
Are these bonds callable? If the bonds that you chose are callable (non-callable),
will it change your decision to buy them?
d)
If you are an investor who is looking for a bond to invest in, are you going to buy
a bond that you chose?
Take a look at the balance sheet and income statement of
the company. What data or ratios support your decision to buy this bond or not?
You may want to incorporate the results of the Research Project Part 1, as well as
the results of the financial leverage ratios to answer this question.
You should
develop a specific recommendation, with supporting rationale
to explain your
answer.
-4- Collect and evaluate the data about stock performance of the assigned company for the
last one year. (totally 35% of the project grade).

1) Find the market ratios for the company for the last 1-3 years and its major competitor for the
last year in the Internet.
(10% of the project grade)

Price/Earnings ratio

Market/Book ratio (also called (Price/Book ratio)

Earnings per share

Dividends per share

Other market ratios on your choice
These ratios are available on
www.morningstar.com
> Company’s page – under
Valuation, Financials, and under Dividends
You can find these ratios in the Internet or calculate them. If you use published ratios you
must indicate that and cite their source.
a.
Present the
market
ratios as the table(s) in your project.
b.
Write about 1 page of analysis of the market ratio results that you found. Compare the
market ratio results against the industry or main competitor. In your report please answer
the question: Are the common stockholders receiving an adequate return on their
investment?
c.
Compare the P/E ratio of your company with the industry average or 5-year average. Is
the stock overvalued, undervalued, or properly valued? Why?
In accordance with your
findings, is it reasonable to buy the stock?
Please explain your answers.
-2) Analysis of the historical stock prices trend for the last year.
(10% of the project grade)
a.
Collect and evaluate the data about stock prices of the assigned company for the last one
year for the company and its major competitor.
b.
Create the chart(s) using the stock price chart tools on the websites or Excel. Present the
chart(s) in your project.
c.
Write about 0.5 page of analysis the historic stock prices trend for the last year.
3) Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required
return on THE COMPANY stock. Note that you will need
the risk-free rate and the market
return. Show this information in your project.
(15% of the project grade)
1. Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the
required return on stock. Note that you will need
the risk-free rate, beta, and the market
return.
a) To get the current yield on 10-year Treasury securities go to www.finance.yahoo.com

click on
Markets – U.S. Treasury Bonds Rates.
You will use the current yield on 10-year
Treasury securities as the risk-free rate to estimate the required rate of return on stocks.
Discuss how appropriate this rate is as a measure of risk.

b) Between 1926 and 2017, the compound annual rate of return of S&P 500 is estimated
a 6.5%. We will use this number as the market return.
Discuss how appropriate this rate
is as a measure of return.
c)
Beta is listed in
www.finance.yahoo.com
and in
www.morningstar.com
on the
company’s front page. What is the beta listed for the company? What does it mean?
d)
Calculate the required return on the stock
using
the Capital Asset Pricing Model
(CAPM) Security Market Line.
Please show your work.
2.
There are several methods how to calculate the growth rate. One of the possible ways
is to calculate the sustainable growth rate as g = ROE *(1- Dividend payout ratio). You
can find ROE and the Dividend Payout Ratio
on
www.morningstar.com
> Company’s
page – under Financials and under Dividends
Calculate the company’s sustainable growth rate.
Please show your work.
3. Apply the
Gordon model (constant growth rate model) to calculate the intrinsic
(economic) value of the stock.
Please show your work.
Please note that for some companies it is not possible to use the
Gordon model. If that is
the case, please explain why it is not possible to use this model for your company. What
other models is it possible to use?
4.
Compare the result of your calculations with the current stock price. Is the stock
overvalued, undervalued, or properly valued? Why?
In accordance with your findings, is it
reasonable to buy the stock?
Why?
Please explain your answer.

5- Develop a specific recommendation, with supporting rationale for your client
, as to
whether the assigned company’s recent trend in financial and stock performance is of sufficient
financial strength to warrant entering in a long-term investment in bonds and/or stocks of the
company. Explain your answer (about 1 page)
(10% of the project grade).
-6-
Develop a specific recommendation, with supporting rationale for the COMPANY’S
management –
Think about the financial strategy of the company,
how to best balance THE
COMPANY’S financial leverage to optimize shareholder wealth going forward taking into
consideration the company’s current market position, credit rating,
dividend policy, etc.
(10% of
the project grade).
-7- Reflection –
the students should write a paragraph in their own words reflecting on what they
learned from the assignment and how they think they could apply what they learned in the
workplace.
(5% of the project grade).
PRESENTATION OF PAPER AND WRITING (15%) of the project grade):

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