Subject: Business / Finance
QuestionBriefly discuss the purpose and role that each the three principal types of financial institutions (depositary, contractual, and investment) play in the U.S. economy. How do each of these institutions intersect with the various types of markets, i.e., capital, money, spot (cash), derivatives, Forex and Interbank, primary, and/or secondary (inclusive of OTC)? Considering your analysis of institutions and markets, what strengths and weaknesses exist in our current economy that inhibit optimal performance in these areas? Propose at least one measure or solution to improve or eliminate the weaknesses you’ve identified.Topic 1 DQ 2Select a publicly-traded firm of your choice that enjoys a solid shareholder base and launched within the past 10 years. You may use the firm you have chosen to profile for the course-long assignment “Financial Analysis and Proposal” or a completely different organization altogether. What challenges has this firm encountered (or is likely to encounter) in terms of 1) incorporating ethics into financial management practices, and 2) maintaining/sustaining ethical practices in the faces of internal or external (market) pressures? Frame your response relative to the financial manager’s fiduciary duty to maximize shareholder’s wealth.Wk 2Topic 2 DQ 1Financial ratios are essential to assessing to provide an accurate valuation of a firm. Select a publicly-traded firm of your choice. You may use the firm you have elected to profile for the course-long assignment “Financial Analysis and Proposal” or a completely different organization altogether. Select one ratio each in the areas of 1) performance, 2) activity, 3) financing, and 4) liquidity warnings. Provide an evaluation of the selected firm’s strengths and weaknesses. Based on the ratios you selected, how well does your chosen firm perform? Explain.Topic 2 DQ 2Briefly explain the “DuPont Analysis” method of performance analysis. What specific strengths or features of this methodology would motivate you to use it in developing a recommendation for a firm’s return on equity (ROE)? If you do not use this method to value ROE, what other methodology would you choose, and why? Under what circumstances would you never use this methodology?Wk 3Topic 3 DQ 1You are in the process of buying a house. Your mortgage lender reviewed your credit score, employment history, debt-to-income ratio, and available funds you’ve set aside for the down payment. He quoted you a 2.75% interest rate for a 15-year loan, and a 3.50% rate for a 30-year mortgage loan. The house you want is $200,000 and you can make a 10% down payment. Using Excel, construct an amortization schedule for the amount you need to borrow from your mortgage lender for each loan option. Which of the two is a better financing decision, and why? Show all formulas required to perform these calculations and fully explain your decision making processTopic 3 DQ 2To live comfortably in retirement, you decide you will need to save $2 million by the time you are 65 (you are 30 years old today). You will start a new retirement savings account today and contribute the same amount of money on every birthday up to and including your 65th birthday. Using TVM principles, how much you must set aside each year to make sure that you hit your goal target goal if the interest rate is 5%? What flaws might exist in your calculations, and what variables could lead to different outcomes? What actions could you take ensure you reach your target goal?Wk 44 DQ 1Define the term “capital intensity.” Assuming all other elements are held constant, how would a decline in the capital intensity of a firm affect additional funds needed (AFN)? Would economies of scale combined with rapid growth affect capital intensity?4 DQ 2Consider you are a valuation analyst for Goodyear Tire and your company is planning to acquire RGC Tire. RGC’s stock price dropped by 78% YoY and they missed their dividend payment for each of the prior three quarters. Describe why the free cash flow valuation method would be useful in this case. Provide your rationale and any supporting data.Wk5opic 5 DQ 1System Admin5.0Describe the major elements of the Efficient Markets Hypothesis (EMH) theory that create dissention between the worlds of finance and academia in terms of its usefulness. Select a real-world scenario and explain how EMH is either 1) currently used, or 2) could be used by technical analysts in this scenario to gain short-term return. Explain your rationale.Topic 5 DQ 2System AdminMax Points: 5.0Describe the underlying assumptions and differences for the Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT). Provide an example in which type of situation each would be most appropriate to the task. Is there any situation in which using either method would be acceptable? Or neither, and if so, which pricing model would then be most appropriate? Explain.Wk6Topic 6 DQ 1You have been asked to perform a stock valuation prior to the annual shareholders meeting next week. The two models you’ve selected to value the firm are 1) the dividend discount model and 2) the discounted cash flow model. Explain why the estimates from the two valuation methods differ. Address the assumptions implicit in the models themselves as well as those you made during the valuation process. Also, explain why these prepared estimates may differ from the actual stick price today, or any given day.6 DQ 2In a “perfect world” capital market, how important is a firm’s decision to pay dividends versus repurchase shares? Under what conditions would you have a tax preference for share repurchase rather than dividends? Would managers acting in the interests of long-term shareholders be more likely to repurchase shares if they believed the stock to be either undervalued or overvalued? Lastly, explain how you would respond to firm’s decision to cut its dividend.Wk7Topic 7 DQ 1Summarize the pros and cons of the six capital budgeting methods. In what types of situations would capital budgeting decisions be made solely on the basis of project’s Net Present Value (NPV)? Identify potential reasons that might drive higher NPV for a given project. Substantiate your response by providing an example to explain your thought process.Topic 7 DQ 2Explain how the Federal Reserve Bank’s (Fed) decision to raise interest rates would be expected to affect each component of the Weighted Average Cost of Capital (WACC). What four mistakes are commonly made when estimating the WACC, and how do these mistakes arise? If the Fed decides to increase the interest rates significantly, how would that impact your capital budgeting decision?Wk88 DQ 1Using the data from the Intrinsic Value of a Firm assignment in this topic, provide a brief summary of your firm valuation models and outcomes. Address the assumptions implicit in the models themselves as well as those you made during the valuation process. Why might these estimates differ from the actual stick price today? Explain.8 DQ 2Reflect on your experience building the financial analysis and proposal over the span of this course. What component(s) seemed the easiest to develop? What component(s) were the hardest? What other challenges did you encounter, and how did you resolve them? Did anything surprise you as you worked through this project? What are the key takeaways you have learned in this course that you can apply tomorrow or in the near future?