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. • 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) 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.