Compute the present value of the company based on the given interest rate
FIN 550 Milestone One Guidelines and Rubric Overview: Financial analysis involves examining historical data to gain information about the current and future financial health of a company. Financial analysis can be applied in a wide variety of situations to give business managers the information they need to make critical decisions. The ability to understand financial data is essential for any business manager. For the final project, you will use financial information from the provided 2017 United Parcel Service Annual Report to prepare a financial analysis. You will include in your analysis the background calculations and managerial analysis for each of the following topics: time value of money, stock and bond valuation, and capital budgeting. You will also discuss macroeconomic variables that might impact the company’s financial decision making and strategic objectives. These topics will be covered over four milestones to be submitted throughout the course before you submit the final project. Note that while these elements may seem separate and unrelated, together they will present a well-rounded view of the company’s finances with regard to the topics. For this milestone, you will submit a draft of the Time Value of Money section of the final project along with your supporting explanations as detailed below. Prompt: Calculate time value of money figures and use the results to support your explanations of the present and future value of United Parcel Service. Complete your calculations on the designated tab in the Final Project Excel Workbook. Create a separate Word document for your justifications. Specifically, the following critical elements must be addressed: I. Time Value of Money
A. Using the Final Project Excel Workbook, compute the following time value of money figures: 1. Calculate the present value of the company based on the given interest rate and provided Free Cash Flows for the years 2015, 2016, and 2017. 2. Suppose the risk of the company changes based on an unanticipated decrease in the Free Cash Flows by 10% annually during the years 2015, 2016,
and 2017. Recalculate the present value of the company. 3. Suppose that a potential buyer has offered to buy this company in three years. Based on the initial present value you calculated above in A1, what
would be a reasonable amount for the buyer to pay for the company in three years’ time? Enter your answer and justify your reasoning in the Word document.
B. What are the implications of the change in present value based on risk? In other words, what does the change mean to the company, and how would you, as a financial manager, interpret it? Be sure to justify your reasoning with appropriate references/sources. Enter your answer and justify your reasoning in the Word document.
C. Based on the present value of the company that you calculated, and being mindful of the need to effectively balance portfolio risk with return, what recommendation would you make about purchasing the company as an investment at that price? Be sure to substantiate your reasoning with appropriate references/sources. Enter your answer and justify your reasoning in the Word document.
Rubric
Guidelines for Submission: Submit your Final Project Excel Worksheet with the required calculations completed. Submit your written paper as a separate Microsoft Word Document (no PDF documents, please). Your paper must be submitted as a 2–3 page document, not including your calculations, (which should be completed in the Final Project Excel Workbook). Use double spacing, 12-point Times New Roman font, and one-inch margins. References/Sources and citations should be formatted according to the latest APA style.
Critical Elements Proficient (100%) Needs Improvement (70%) Not Evident (0%) Value Time Value of Money:
Figures
Accurately calculates requested figures Calculates figures, but with gaps in accuracy or detail
Does not calculate figures 30
Time Value of Money: Implications
Correctly analyzes implications of change in present value based on risk, justifying reasoning
Analyzes implications of change in present value based on risk, but response or reasoning is cursory or illogical
Does not analyze implications of change in present value based on risk
30
Time Value of Money: Future Value
Makes accurate recommendation about purchasing company at future price, substantiating claims
Makes recommendation about purchasing company at future price, but response or substantiation is cursory or illogical
Does not make recommendation about purchasing company at future price
30
Articulation of Response Submission has no major errors related to citations, grammar, spelling, syntax, or organization
Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas
Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas
10
Total 100%
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