Milestone 1 You calculated the PV of home depot correctly in the excel workbook, but you didn't make reference to that value in your analysis -- or how that value could change with interest rate movement.  Please elaborate on your recommendation with your final submission. Milestone 2 Hi Robert, your calculation in Part II #2 is incorrect.  The formula should be: =FV(0.004375,40,0,-2963).  I would like to see the formulas in your excel file and not just the results.  You were also missing the dividend yield in Part I.   Milestone 3 The operating costs (row 8) should be $25.5M for each year Running head: MILESTONE 3 1 MILESTONE 3 4 Robert Shulzinsky Southern New Hampshure University 6 January 2018 Capital Budgeting Data Net Present Value (NPV) of the Project Net Present Value for the project for the five years will be given by the NPV value for the cash flows as shown by the capital budgeting sheet for milestone 3 minus the initial outlay. NPV of the project = (CF1+CF2+CF3+CF4+CF5) – Initial outlay = ($21,453,688.38) Internal Rate of Return (IRR) of the Project Internal rate of return (IRR) represents the interest rate at which the net present value of all the cash flows of a project will break even or will be equal to just zero value. From the calculations on the capital budgeting sheet of the milestone 3, the IRR of the project is 34% meaning that the company’s investments will need to grow at a rate of 34% to equal the initial outlay, which is way much higher than the interest rate in the market. Implications of the Calculations One of the implications of the calculations of the net present value calculations of the project is that it reduces that amount of cash flows for the project. Net present value calculations discount the amount of funds that will be received in future using the interest rate of the company. In this context, the amount is discounted because of the effect of time on the money received b a company. Another aspect of the net present value is that it enables the management of the company anticipate what the company will receive in future and take into account the inflows and outflows when making decisions (Peterson & Fabozzi, 2014). On the other hand, internal rate of return provide a metric in capital budgeting for measurement of the profitability of a project with the given investments. The 34% internal rate of return mean that the company will require to grow its investments or the compound the investments by 34% in order to enable the company make the investment. A high internal rate of return is desirable when the company want to undertake the project. I would recommend the company to reject the project since it provides a negative net presen ...

1. Milestone 1
You calculated the PV of home depot correctly in the excel
workbook, but you didn't make reference to that value in your
analysis -- or how that value could change with interest rate
movement. Please elaborate on your recommendation with your
final submission.
Milestone 2
Hi Robert, your calculation in Part II #2 is incorrect. The
formula should be: =FV(0.004375,40,0,-2963). I would like to
see the formulas in your excel file and not just the results. You
were also missing the dividend yield in Part I.
Milestone 3
The operating costs (row 8) should be $25.5M for each year
Running head: MILESTONE 3
1
MILESTONE 3
4
Robert Shulzinsky
Southern New Hampshure University
6 January 2018
Capital Budgeting Data
Net Present Value (NPV) of the Project
Net Present Value for the project for the five years will be

2. given by the NPV value for the cash flows as shown by the
capital budgeting sheet for milestone 3 minus the initial outlay.
NPV of the project = (CF1+CF2+CF3+CF4+CF5) – Initial
outlay
= ($21,453,688.38)
Internal Rate of Return (IRR) of the Project
Internal rate of return (IRR) represents the interest rate at which
the net present value of all the cash flows of a project will
break even or will be equal to just zero value. From the
calculations on the capital budgeting sheet of the milestone 3,
the IRR of the project is 34% meaning that the company’s
investments will need to grow at a rate of 34% to equal the
initial outlay, which is way much higher than the interest rate in
the market.
Implications of the Calculations
One of the implications of the calculations of the net present
value calculations of the project is that it reduces that amount
of cash flows for the project. Net present value calculations
discount the amount of funds that will be received in future
using the interest rate of the company. In this context, the
amount is discounted because of the effect of time on the money
received b a company. Another aspect of the net present value is
that it enables the management of the company anticipate what
the company will receive in future and take into account the
inflows and outflows when making decisions (Peterson &
Fabozzi, 2014).
On the other hand, internal rate of return provide a metric in
capital budgeting for measurement of the profitability of a
project with the given investments. The 34% internal rate of
return mean that the company will require to grow its
investments or the compound the investments by 34% in order
to enable the company make the investment. A high internal rate
of return is desirable when the company want to undertake the
project. I would recommend the company to reject the project
since it provides a negative net present value meaning that it
will not be able to repay the initial outlay of funds in the

3. company. In this context, the company will only be able to
make cash flows, which are positive but not able to recover its
outlay. Regardless of the fact that the IRR of the company is
high, which is good for any investment, the net present value
does not do any good to the project (Peterson & Fabozzi, 2014).
Difference between NPV and IRR
Net present value uses the market interest rate to discount
the cash flows of the company showing the real money value
that will be received by the company over time. The company
uses the net present value to evaluate the project because the
amount received today may be worth more in future or the value
that is anticipated to be received in future is worth much less at
the present time. On the other hand, internal rate of return is the
rate at which the net present values of the company will be just
equal to zero. To assess the project, it is important to use the
internal rate of return of the company because it shows the real
rate of growth of the investments regardless of the amount of
future cash flows.
References
Peterson, P., & Fabozzi, F. (2014). Capital Budgeting: Theory
and Practice. Hoboken, NJ: John Wiley & Sons.
[Type text] [Type text] [Type text]
Milestone 2: Stock Valuation and Bond Issuance
Robert Shulzinsky

4. Southern New Hampshire University
16 December 18, 2017
Stock Valuation
Dividends from Financial Statement
Year
Cash Div/share ($)
Dividend Yield
Stockholder's Equity (in millions)
Stock Price
2012
1.16
0
17,700,000
165714.2857
2013
1.56
0
12,522,000
156000000
2014
1.88
0

5. 9,322,000
9400000
Home Depot Inc. is experiencing an increase in the dividend per
share from 2012 to 2014. The stock price is given by the cash
dividend per share divided by the dividend yield.
1. The new dividend yield if the company increased its dividend
per share by 1.75
The formula for the dividend yield is given by the dividends for
the period divided by the initial price for the period.
Dividend Yield=
It calculates the percentage return on a stock based on the
dividends. The total return of a stock is given by the dividends
as well as the level of increase of the stock. The dividends paid
out or declared by a company are contained in the statement of
retained earnings in the financial statements. In case of a
change in the cash dividend per share with a constant
shareholder’s equity, the dividend yield changes depending on
the level of change. Calculating the dividend yield is important
in order to evaluate the performance of a company. A lower
dividend yield could mean that the company may be having
financial issues or may be interested in further expansion of the
company while on the other hand, a higher dividend yield could
mean more profitability. However, it is important to note that a
lower dividend yield may not necessarily indicate issues with
the company, it might be because the stock price of the
company may have increased hence a lower dividend yield. It
therefore means that the company is becoming more valuable
(Jordan, 2014).
Dividend Yield= =
2. The dividend yield if the firm doubled its outstanding shares
In case of a stock split, the number of shares outstanding
increase. This may reduce the value of the stock since it may be
diluted from a stock split. A stock dividend may have a similar
effect. In the case of the firm doubling its outstanding shares,
the stock price may be halved resulting to a price of $39.47.

6. Dividend Yield= =
This results to a decrease in the dividend per share as well as a
decrease in the stock holder’s equity.
Year
Cash Div/Share ($)
Dividend Yield
Stockholder's Equity (in millions) -doubled
Stock Price
2012
0.58
0
35,400,000
165714.2857
2013
0.78
0
25,044,000
156000000
2014
0.94
0
18,644,000
9400000
The value of the firm’s equity declines to owe to a decrease in
dividend yield. The dividend yield is calculated as dividend per
share/ stock price. Thus, the dividend yield is inversely
proportional to the value of outstanding shares (the value of
equity).
Year
Cash Div/Share ($) +1.75
Stock Price
Return on Investment
2012

7. 2.91
165,714
2013
3.31
156,000,000
943.69%
2014
3.63
9,400,000
2.69%
The rate of return on equity (i.e., the cost of stock) based on the
new dividend yield calculated
The return on equity is a measure of the operating profit divided
by the amount of equity of a company. It is a measure of how
efficiently a company may use the funds provided by the
shareholders in order to generate incomes for the company.
Return on equity ratio = = .
B. What effect would you expect each of the calculations you
performed to have in terms of shareholder value? In other
words, suppose the company’s goal is to maximize shareholder
value. How will each of the situations support or inhibit that
goal?
The return on investment for the company decreases over the
years. It is clear that while the increase in the dividend per
share may affect the dividend yield, it may not affect the
shareholder’s value. In case of an increase in the increase in the
outstanding stock, there might be an effect on the shareholders
wealth. An effect on the shareholders wealth also affects the
return on investment. A decrease in the shareholders dividend
yield may negatively impact the wealth maximization objective
of the firm towards the shareholders. Also, the dividend payout
for that particular period may be lower than expected (Bieleski

8. & Rutkowski, 2013).
C. To what extent do you feel the company’s dividend policies
support or hinder their strategies? For example, if the company
is attempting to grow, are they retaining and reinvesting their
earnings rather than distributing them to investors through
dividends? Be sure to substantiate your claims.
The company should implement dividend policies that help
further its overall strategies as well as objectives to
shareholders. Otherwise, the shareholders may start pulling out
of the company which may affect the long term and the short
term market price of the company’s shares. However, it is
important that the current financial position of a company be
evaluated before a dividend is declared so as not to affect the
operational feasibility of the company. It may be necessary to
retain the earnings in case of a low business turnout while
distribute them to investors if the remaining are able to cover
their growth objectives (Brooks, 2015).
III. Bond Issuance
1. The new value of the bond if overall rates in the market
increased by 5%
· Par value=$1,000
· Maturity date is in 5 years
· Market interest rate of 8%
· Annual coupon payment of $80
The present value of a bond is equal to the Present Value of the
Coupon Payments (an annuity) + The Present Value of
the Par Value (time value of money)
= INT
= $319.42+$ 680.58
=$1000.003
2. The new value of the bond if overall rates in the market
decreased by 5%
The new value of the bond
=$366.38+$ 862.61=

9. $1228.99
3. The value of the bond if overall rates in the market stayed
exactly the same
The value of the bond will stay the same if overall rates in the
market stayed exactly the same.
The present value of a bond
= $319.42+$ 680.58
=$1000.003
B. What effect would you expect each of the calculations you
performed to have in terms of the company’s decision to raise
capital in this manner? In other words, for each situation, would
you consider bond valuation to be a viable option for increasing
capital?
When the market interest rates increase, the bond prices
decrease due to the interest rate risk. This means that overall
bond valuation should not be sufficient reason to increase
capital. The price of a bond is affected by the maturity period as
well as the coupon rate. In case of two bonds with different
coupon rates and similar maturity periods, the bond with a
lower coupon rate may experience greater volatility in case of
an increase in the market interest rates. They experience a
higher interest rate risk compared to similar bonds with higher
coupon rates. The bond option may not be viable especially
since it may negatively impact the company’s gearing level.
This is because they are susceptible to the interest risk that
might make the company incur high levels of debt over the
years and the overall borrowing cost which may reduce the
ability of the company to make dividend payments to its
shareholders (Abudy & Raviv, 2016).

10. References
Abudy, M. M., & Raviv, A. (2016). How Much Does Illiquidity
Affect Corporate Debt Yield Spread?
Bielecki, T. R., & Rutkowski, M. (2013). Credit risk: modeling,
valuation and hedging. Springer Science & Business Media.
Brooks, R. (2015). Financial management: core concepts.
Pearson.
Jordan, B. (2014). Fundamentals of investments. McGraw-Hill
Higher Education.

11. Running Head: TIME VALUE OF MONEY ANALYSIS &
CAPITAL BUDGETING CASE STUDY 1
TIME VALUE OF MONEY ANALYSIS & CAPITAL
BUDGETING CASE STUDY 4
TIME VALUE OF MONEY ANALYSIS & CAPITAL
BUDGETING CASE STUDY
Robert Shulzinsky
Southern New Hampshire University
12/1/2017

12. Q1. Time value of money refers to the notion that money in the
future is not worth than money in the present (CPF Board,
2015). This fact is supported by the idea that money to be
earned in the future will have higher risk than money earned in
the present. Furthermore, money that is earned in the present
can be invested in the present and earn more income than in the
future. This is the core principle of investment in corporate
finance where any amount of money is worth in the present than
in the future.
Using the free cash flow, the business needs to invest the cash
into projects and assets that will yield greater returns as
opposed to leaving the same idle. This leads to the need for
evaluating capital investment using capital budgeting methods.
Capital budgeting methods will use time value of money to
determine the present value and future value of investment
using discounting of money. This will be determined through
the use of the interest rate which will discount the future value
of the cash flows and asset to give the present value. As it is the
case, milestone 1 discounts the free cash flow from page 43 on
capital lease payments. The time value of money in the case is
used to calculate the value of the company which is discounted
in the present value to determine a suitable amount that the
company can be bought in the present and in the future. This
helps the company to arrive at an amount which is guided and
sound in terms of judgment used in arriving at the sell price.
Q2. The time value of money is affected by the interest rate. As
it is the case in determining the present value, the higher the

13. interest rate, the lower the present value whereas it is vice versa
for the future value which increases by increase in the interest
rate (Fabozzi, 2014). The best example is in the case of stock
and bond valuation where the market interest rate increase by
5% leads to a higher future value of the stocks which is given
by the value as 24,624 against the reduction of market interest
by 5% given by 16,428. It is also worth noting that the future
value of a bond increases by the value of the interest rate
whereas the period also affects it by increasing the risk
premium. This means that a bond that has a longer period will
have a higher bond value as compared to the bond which has a
shorter bond period.
With the introduction of risk, a higher interest is the equivalent
premium (risk premium) which is added in order to account for
increased risk. With increased premium, the future value of a
bond increases since risk is factored in to increase the value of
the bond value. With the reduction of interest, the bond value
also decreases. The implication as a company manager is the
need to reduce the time period issued to bonds as well as the
interest rate since the company will be forced to pay higher cash
flows to the bond holders.
Q3. My advice on purchasing the company will be to purchase
the company since the Net present value is positive as well as
the discounted cash flows from the companies in the future is
positive.
References
CFP Board Financial Planning Competency Handbook (US
Edition). (2015) (p. 98).
Fabozzi, F. (2014). Duration, convexity, and other bond risk

14. measures (p. 5). New Hope, Pa.: Frank J. Fabozzi Associates.
FIN 550 Final Project Guidelines and Rubric
Overview
The final project for this course is the creation of a financial
analysis report.
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 this summative assessment, you will provide a financial
analysis report for Home Depot Inc. based on the data in the
case study provided (see link in prompt).
You will be asked to take the topics that you have covered
throughout the course and display your mathematical and
conceptual mastery of them. You will
conduct background calculations and provide managerial
analysis for the following topics: time value of money, stock
valuation, bond valuation, and capital
budgeting.

15. The project is divided into four milestones, which will be
submitted at various points throughout the course to scaffold
learning and ensure quality final
submissions. These milestones will be submitted in Modules
Two, Four, Six, and Seven. The final submission will be in
Module Nine.
In this assignment, you will demonstrate your mastery of the
following course outcomes:
money on potential
investments for ensuring an effective portfolio balance between
risk and return
investment option for maximizing shareholder value
its viability as a
financing option for raising adequate capital
by utilizing capital budgeting estimates for ensuring effective
decision making
pact corporate
financial decision making for ensuring alignment with strategic
objectives
Prompt
Using this case study, prepare a financial analysis report for
Home Depot Inc. For your calculations, use the Final Project

16. Student Workbook, which includes tabs
specific to each milestone. Be sure to 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. Also
include a discussion of macroeconomic variables that might
impact the company’s financial
decision making and strategic objectives. 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.
http://www.sec.gov/Archives/edgar/data/354950/000035495015
000008/hd-212015x10xk.htm
http://snhu-
media.snhu.edu/files/course_repository/graduate/fin/fin550/fin5
50_final_project_student_workbook.xlsx
Specifically, you must address the critical elements listed
below. Most of the critical elements align with a particular
course outcome (shown in brackets).
I. Time Value of Money
A. Calculate the following time value of money figures:
1. Calculate the present value of the company based on the
given interest rate and expected revenues over time.
2. Suppose the risk of the company changes based on an internal
event. Recalculate the present value of the company.
3. Suppose that a potential buyer has offered to buy this
company in five years. Based on the present value you
calculated above, what

17. would be a reasonable amount for which the company should be
sold at that future time?
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.
C. Based on the future 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.
II. Stock Valuation
A. Based on the figures provided, calculate each of the
following:
1. The new dividend yield if the company increased its dividend
per share by 1.75
2. The dividend yield if the firm doubled its outstanding shares
3. The rate of return on equity (i.e., the cost of stock) based on
the new dividend yield you calculated above
B. What effect would you expect each of the calculations you
performed to have in terms of shareholder value? In other
words, suppose the
company’s goal is to maximize shareholder value. How will
each of the situations support or inhibit that goal? Be sure to
justify your reasoning.
C. To what extent do you feel the company’s dividend policies

18. support or hinder their strategies? For example, if the company
is attempting to
grow, are they retaining and reinvesting their earnings rather
than distributing them to investors through dividends? Be sure
to substantiate your
claims.
III. Bond Issuance
A. Assuming this company already has bonds outstanding,
calculate the following:
1. The new value of the bond if overall rates in the market
increased by 5%
2. The new value of the bond if overall rates in the market
decreased by 5%
3. The value of the bond if overall rates in the market stayed
exactly the same
B. What effect would you expect each of the calculations you
performed to have in terms of the company’s decision to raise
capital in this
manner? In other words, for each situation, would you consider
bond valuation to be a viable option for increasing capital? Be
sure to justify
your reasoning.
C. To what extent do you feel the company’s bond issuance
policies support or hinder their strategies? For example, if the
company is attempting
to fund operating expenses, refinance old debt, or change its
capital structure, are they issuing sufficient bonds to achieve
these goals? Be sure
to substantiate your claims.

19. IV. Capital Budgeting Data
A. Suppose the company is considering a potential investment
project to add to its portfolio. Calculate the following items:
1. The net present value (NPV) of the project
2. The internal rate of return (IRR) of the project
B. What are the implications of these calculations? In other
words, based on each of the calculations, and being mindful of
the need to balance
portfolio risk with return, would you recommend that the
company pursue the investment? Why or why not? Be sure to
substantiate your
claims.
C. What is the difference between NPV and IRR? Which one
would you choose for evaluating a potential investment and
why? Be sure to support
your reasoning with evidence.
V. Macroeconomic Items: The CEO of the company is
convinced that financial analysis should hinge only on what is
happening internally within the
company. Convince him otherwise based on the following:
A. Analyze the implications of interest rate changes on any of
the calculations you performed. Be sure to substantiate your
claims.
B. How might an issue (negative or positive) within the overall
stock market impact the company’s stock valuation numbers,
other financial

20. variables, or its overall portfolio management? Be sure your
response is supported by evidence.
C. Analyze the impact of any external factor (i.e., external to
the company) discussed throughout the course on the company’s
financial position.
Be sure to justify your reasoning.
Milestones
Milestone One: Time Value of Money (Section I)
In Module Two, you will submit a draft of the Time Value of
Money section of the final project, along with your supporting
explanations. Submit your calculations
on the designated tab of the Final Project Student Workbook
and your supporting explanations as a Microsoft Word
document. This milestone will be graded
with the Milestone One Rubric.
Milestone Two: Stock Valuation and Bond Issuance (Sections II
and III)
In Module Four, you will submit a draft of the Stock Valuation
and Bond Issuance sections of the final project, along with your
supporting explanations. Submit
your calculations on the designated tab of the Final Project
Student Workbook and your supporting explanations as a
Microsoft Word document. This milestone
will be graded with the Milestone Two Rubric.
Milestone Three: Capital Budgeting Data (Section IV)
In Module Six, you will submit a draft of the Capital Budgeting
Data section of the final project, along with your supporting
explanations. Submit your
calculations on the designated tab of the Final Project Student

21. Workbook and your supporting explanations as a Microsoft
Word document. This milestone will
be graded with the Milestone Three Rubric.
Milestone Four: Macroeconomic Items (Section V)
In Module Seven, you will submit a draft of the Macroeconomic
Items section of the final project, along with your supporting
explanations. Submit your
calculations on the designated tab of the Final Project Student
Workbook and your supporting explanations as a Microsoft
Word document. This milestone will
be graded with the Milestone Four Rubric.
Final Project Submission: Financial Analysis Report
In Module Nine, you will submit your financial analysis report
along with your completed Final Project Student Workbook. It
should be a complete, polished
artifact containing all of the critical elements of the final
project. It should reflect the incorporation of feedback gained
throughout the course. This submission
will be graded with the Final Project Rubric.
Deliverables
Milestone Deliverable Module Due Grading
One Time Value of Money (Section I) Two Graded separately;
Milestone One Rubric

22. Two Stock Valuation and Bond Issuance (Sections II and
III)
Four Graded separately; Milestone Two Rubric
Three Capital Budgeting Data (Section IV) Six Graded
separately; Milestone Three Rubric
Four Macroeconomic Items (Section V) Seven Graded
separately; Milestone Four Rubric
Final Project Submission: Financial Analysis Report Nine
Graded separately; Final Project Rubric
Final Project Rubric
Guidelines for Submission: Your financial analysis report
should be 7 to 12 pages, not including a title page and
references page. It should use 12-point Times
New Roman font, double spacing, and one-inch margins. All
citations and references should be formatted according to APA
style. Also submit your completed
Final Project Student Workbook.
Critical Elements Exemplary Proficient Needs Improvement Not
Evident Value
Time Value of Money:
Figures

23. [FIN-550-01]
Accurately calculates requested
figures (100%)
Calculates figures, but with gaps
in accuracy or detail (70%)
Does not calculate figures (0%) 6.33
Time Value of Money:
Implications
[FIN-550-01]
Meets “Proficient” criteria and
demonstrates keen insight into
the interrelationship between risk
and present value (100%)
Analyzes implications of change in
present value based on risk,
justifying reasoning (90%)
Analyzes implications of change in
present value based on risk, but
response or reasoning is cursory
or illogical (70%)
Does not analyze implications of
change in present value based on
risk (0%)
6.33
Time Value of Money:
Future Value

24. [FIN-550-01]
Meets “Proficient” criteria and
demonstrates keen insight into
using time value of money for
recommending investments
(100%)
Makes recommendation about
purchasing company at future
price, substantiating claims (90%)
Makes recommendation about
purchasing company at future
price, but response or
substantiation is cursory or
illogical (70%)
Does not make recommendation
about purchasing company at
future price (0%)
6.33
Stock Valuation:
Calculations
[FIN-550-02]
Accurately calculates requested
figures (100%)
Calculates figures, but with gaps
in accuracy or detail (70%)
Does not calculate figures (0%) 6.33

25. Stock Valuation:
Shareholder Value
[FIN-550-02]
Meets “Proficient” criteria and
demonstrates keen insight into
the effects of changing financial
variables on shareholder value
(100%)
Analyzes the effects of each
calculation on shareholder value,
justifying reasoning (90%)
Analyzes the effects of each
calculation on shareholder value,
but response or reasoning is
cursory or illogical (70%)
Does not analyze the effects of
each calculation on shareholder
value (0%)
6.33
Stock Valuation:
Dividend Policies
[FIN-550-02]
Meets “Proficient” criteria and
demonstrates keen insight into
the relationship between
dividend policies and strategies
for increasing shareholder value

26. (100%)
Assesses the extent to which
dividend policies support or
hinder company strategies,
justifying reasoning (90%)
Assesses the extent to which
dividend policies support or
hinder company strategies, but
response or reasoning is cursory
or illogical (70%)
Does not assess the extent to
which dividend policies support or
hinder company strategies (0%)
6.33
Bond Issuance: Bonds
[FIN-550-03]
Accurately calculates requested
figures (100%)
Calculates figures, but with gaps
in accuracy or detail (70%)
Does not calculate figures (0%) 6.33
Bond Issuance: Raising
Capital

27. [FIN-550-03]
Meets “Proficient” criteria and
demonstrates keen insight into
the effects of changing market
conditions on decisions to raise
capital (100%)
Analyzes the effects of each
calculation on the company’s
decision to raise capital, justifying
reasoning (90%)
Analyzes the effects of each
calculation on the company’s
decision to raise capital, but
response or reasoning is cursory
or illogical (70%)
Does not analyze the effects of
each calculation on the company’s
decision to raise capital (0%)
6.33
Bond Issuance: Bond
Issuance Policies
[FIN-550-03]
Meets “Proficient” criteria and
demonstrates keen insight into
the relationship between bond
issuance policies and strategies
for raising capital (100%)

28. Assesses the extent to which
bond issuance policies support or
hinder company strategies,
justifying reasoning (90%)
Assesses the extent to which
bond issuance policies support or
hinder company strategies, but
response or reasoning is cursory
or illogical (70%)
Does not assess the extent to
which bond issuance policies
support or hinder company
strategies (0%)
6.33
Capital Budgeting Data:
Potential Investment
[FIN-550-04]
Accurately calculates requested
figures (100%)
Calculates figures, but with gaps
in accuracy or detail (70%)
Does not calculate figures (0%) 6.33
Capital Budgeting Data:
Pursuing the
Investment
[FIN-550-04]

29. Meets “Proficient” criteria and
demonstrates keen insight into
using NPV and IRR to judge
potential investment
opportunities (100%)
Analyzes the implications of each
calculation on the
recommendation to pursue the
investment, substantiating claims
(90%)
Analyzes the implications of each
calculation on the
recommendation to pursue the
investment, but response or
substantiation is cursory or
illogical (70%)
Does not analyze the implications
of each calculation on the
recommendation to pursue the
investment (0%)
6.33
Capital Budgeting Data:
Difference
[FIN-550-04]
Meets “Proficient” criteria and
demonstrates keen insight into
using NPV and IRR to judge
potential investment
opportunities (100%)

30. Accurately characterizes the
difference between NPV and IRR
and explains which would be
chosen for evaluating a potential
investment and why, supporting
reasoning with evidence (90%)
Characterizes the difference
between NPV and IRR and
explains which would be chosen
for evaluating a potential
investment and why, but response
is cursory or inaccurate or
evidence is not supportive (70%)
Does not characterize the
difference between NPV and IRR
and does not explain which would
be chosen for evaluating a
potential investment and why
(0%)
6.33
Macroeconomic Items:
Implications
[FIN-550-05]
Meets “Proficient” criteria and
demonstrates keen insight into
the relationship between interest
rate changes and financial
variables in a company (100%)
Analyzes implications of interest

31. rate changes, substantiating
claims (90%)
Analyzes implications of interest
rate changes, but response or
substantiation is cursory or
illogical (70%)
Does not analyze implications of
interest rate changes (0%)
6.33
Macroeconomic Items:
Stock Market
[FIN-550-05]
Meets “Proficient” criteria and
demonstrates keen insight into
the relationship between stock
market fluctuations and financial
variables in a company (100%)
Assesses the impact of an issue
within the overall stock market on
the company’s stock valuation
numbers or any other financial
variable, supporting response
with evidence (90%)
Assesses the impact of an issue
within the overall stock market on
the company’s stock valuation
numbers or any other financial
variable, but response is cursory,
illogical, or weakly supported

32. (70%)
Does not assess the impact of an
issue within the overall stock
market on the company’s stock
valuation numbers or any other
financial variable (0%)
6.33
Macroeconomic Items:
External Factor
[FIN-550-05]
Meets “Proficient” criteria and
demonstrates keen insight into
the relationship between external
factors and a company’s financial
position (100%)
Analyzes the impact of a factor
external to the company on the
company’s financial position,
justifying reasoning (90%)
Analyzes the impact of a factor
external to the company on the
company’s financial position, but
response is cursory, illogical, or
weakly supported (70%)
Does not analyze the impact of a

33. factor external to the company on
the company’s financial position
(0%)
6.33
Articulation of
Response
Submission is free of errors
related to citations, grammar,
spelling, syntax, and organization
and is presented in a professional
and easy to read format (100%)
Submission has no major errors
related to citations, grammar,
spelling, syntax, or organization
(90%)
Submission has major errors
related to citations, grammar,
spelling, syntax, or organization
that negatively impact readability
and articulation of main ideas
(70%)
Submission has critical errors
related to citations, grammar,
spelling, syntax, or organization
that prevent understanding of
ideas (0%)
5.05
Earned Total 100%

34. 1 Time Value of MoneyMilestone One: Time Value of Money
(please fill in shaded YELLOW cells, row 6D - 6H)
Explanations:Interest Rate8%FCF (Free Cash Flow) is the net
change in cash generated by the operations of a business during
a reporting period, minus cash outlays for working capital,
capital expenditures, and dividends during the same period. FCF
is a strong indicator of the ability of an entity to remain in
business.
Note: For this part of the Milestone, please use page 43 -capital
lease payments under property.
FCF1FCF2FCF3FCF4FCF5Amounts*1006928845739658Pv*(93
1.48)($795.61)($670.79)($543.19)($447.82)Total
Pv*(3388.89)*In millionsInterest Rate (given) - in our scenario
we will use 8% interest rate. This rate is an implicit rate, the
average rate that lease consumers face on the current
market.Pv=FVN/(1+I)^NPV(I,N,0,FV)
2 Stock and Bond ValuationMilestone Two: Stock Valuation
and Bond Issuance (please fill in the shaded YELLOW cells)
Explanations:Cash Dividend - distribution of the corporate
income. They are not expenses and do not appear on Income
Statement.
Note: Part of Statement of Cash Flows. Please be aware that
corporation list 5 years worth of dividends, but only 3 years
worth of dividend yields (Hint: research F-1).
PART I: STOCK VALUATIONDividend from Financial
Statements:YearCash Div/share ($)Dividend YieldStockholder's
Equity (in millions)Stock PriceDividend Yield - annual cash
dividend per share of common stock divided by the market price
of a share of the common stock (Dividend yield = Annual
Dividend/Current Stock Price).

35. Note: Current Stock Price is not part of the Financial
Statements - calculated using the formula for Dividend
Yield20121.163.28%17,89835.3220131.566.44%17,77724.2320
141.884.79%12,52239.261. Stock Valuation - The new dividend
yield if the company increased its dividend per share by
1.75YearCash Div/Share ($) +1.75Dividend YieldStockholder's
Equity (in millions)Stock PriceStockholder's Equity = Assets -
Liabilities. Equity represents the ownership of a corporation.
Owners are called stockholders because they hold stocks or
shares of the company. The goal of every corporate manager is
to generate shareholder value.
20122.918.24%17,89835.3220133.3113.66%17,77724.2320143.
639.25%12,52239.262. The dividend yield if the firm doubled
it's outstanding sharesReturn on Equity - for this part we will
modify and use return on investment instead.
Using the formula: Dividend (+1.75)/+[(new price-old
price)/old price]
Note - for this part, you will need extra price from 2011
YearCash Div/Share ($) Dividend YieldStockholder's Equity (in
millions) -doubledStock
Price20120.581.64%35,79635.3220130.783.22%35,55424.23201
40.942.39%25,04439.26Bonds are a long-term debt for
corporations. In buying a bond, the bond-owner lends money to
the corporation. The borrower promises to pay specified interest
rate during the loan's lifetime and at the maturity, payback the
entire principle. In case of bankruptcy, bondholders have
priority over stockholders for any payment distributions.
Bonds = Debt...............Bondholders = Lenders
Stock=Equity................Stockholders = Owners
3. The rate of return on equity (i.e., the cost of stock) based on
the new dividend yield you calculated aboveYearCash
Div/Share ($) +1.75Stock PriceReturn on
Investment20122.9135.3220133.3124.233.00%20143.6339.264.2

36. 5%Calculation: Please note that for bond calculations, only one
bond is used and we assume February 1, 2015 is the origination
date. The value on financial statements will be considered PV
(Present value). Maturity date is assumed for February 2036 and
payment schedule adjusted to February 1 and August 1.
The following Senior-Note was used from page 44:
5.875% Senior Notes; due December 16, 2036; interest payable
semi-annually on June 16 and December 16
PV (Present Value) = 2,963 million
Our scenario: 5.875% Senior Notes; due February 1, 2036;
interest payable semi-annually on February 1 and August 1
PV (Present Value) = 2,963 million
PART II: BOND ISSUANCECurent Bonds from Financial
StatementsPresent ValuePV($2,963)PeriodsN40Semi-annual
payment: 2036-2016 = 20 years *2 = 40
periodsInterestI2.9375Interest paid semi-annually: 5.875%/2 =
2.9375%PaymentsPMT0This bond does not make regular PMT
except for interestFuture ValueFV$9,433.58CALCULATING
FV (please see help on the right hand side)1. The new value of
the bond if overall rates in the market increased by 5%Present
ValuePV($2,963)PeriodsN40InterestI5.4375Please adjust
interest5.875%+5% = 10.875%/2 = 5.4375%PaymentsPMT0FV
(Future Value Calculation) - using Excel FormulaFuture
ValueFV$24,634.04CALCULATING FV (please see help on the
right hand side)Step 1) Select FormulasStep 2) Click on
FinancialStep 3) Select FV - you will see the formula below2.
The new value of the bond if overall rates in the market
decreased by 5%Step 4) Enter the following:Rate - enter as
decimal, no % sign. Example: 4% as 0.04Present
ValuePV($2,963)Nper - number of period. Enter a whole
number. Example 50PeriodsN40Pmt - payment. Our example
does not assume regular payments disbursing
principalInterestI0.4375Please adjust interest5.875%-5% =
0.875%/2 = 0.4375%Pv - Present value. Enter as negative.

37. Example $1,000 should be -1000PaymentsPMT0Type - leave
blankFuture ValueFV$3,528.32CALCULATING FV (please see
help on the right hand side)3. The value of the bond if overall
rates in the market stayed exactly the same - identical to
CURRENT BOND VALUE from Financial Statements
3 Capital Budgeting DataMilestone Three: Capital Budgeting
Data (please fill in the shaded YELLOW cells)
WACC8%Capital Budgeting Example Set-upACCEPTInitial
investment $65,000,000REJECTStraight-line Depreciation of
20%Initial OutlayCF1CF2CF3CF4CF5Income Tax
@35%($65,000,000)WACC of 8% approximately. (HD WACC
was about 8.83%)Cash Flows
(Sales)$50,000,000$45,000,000$65,500,000$55,000,000$25,000
,000Cash Flow (which in this case are Sales Revenues) are as
follows: - Operating Costs (excluding
Depreciation)$25,500,000$25,500,000$25,500,000$25,500,000$
25,500,000CF1: $50,000,000 - Depreciation Rate of
20%(13,000,000)(13,000,000)(13,000,000)(13,000,000)(13,000,
000)CF2: $45,000,000Operating Income
(EBIT)37,500,00032,500,00053,000,00042,500,00012,500,000C
F3: $65,500,000 - Income Tax (Rate
35%)13,125,00011,375,00018,550,00014,875,0004,375,000CF4:
$55,000,00After-Tax
EBIT24,375,00021,125,00034,450,00027,625,0008,125,000CF5:
$25,000,000 +
Depreciation13,000,00013,000,00013,000,00013,000,00013,000
,000Operating CostsCash
Flows($65,000,000)37,375,00034,125,00047,450,00040,625,000
21,125,000CF1: $25,500,000CF2: $25,500,000Select from drop
downs below:CF3: $25,500,000NPV$9,785,570.71REJECTCF4:
$25,500,000CF5: $25,500,000IRR50%ACCEPTWACC- why do
we use WACC rate for new projects? If the project doesn’t earn
more percent than WACC, the corporation should abandon the
project and invest money elsewhere.Initial Investment - always
negative. Corporation has to invest money ("lose" it till they
recover it via sales) in order to gain future benefit.

38. 4 Interest Rate ImplicationsMilestone Four: Interest Rate
Implication (please fill in shaded YELLOW cells)
Explanation:We will use Milestone 1 and Time Value of Money
for Milesotne 4 analysis 1. Original Scenario from Milestone 1 -
Time Value of Money using 8%Two cases will be
analyzed:Interest Rate8.00%Lower Interest Rate at 5%Higher
Interest Rate at
15%FCF1FCF2FCF3FCF4FCF5Amounts*11311110810197Pv*(
104.63)(95.16)(85.73)(74.24)(66.02)Total Pv*(425.78)*In
millions2. Change in interest rate and its implications - Lower
Interest Rate (5%)Interest
Rate5.00%FCF1FCF2FCF3FCF4FCF5Amounts*1131111081019
7Pv*(107.62)(100.68)(93.29)(83.09)(76.00)Total
Pv*(460.69)*In millions3. Change in interest rate and its
implications - Higher Interest Rate (15%)Interest
Rate15.00%FCF1FCF2FCF3FCF4FCF5Amounts*113111108101
97Pv*(98.26)(83.93)(71.01)(57.75)(48.23)Total Pv*(359.18)*In
millions
SUMMARYSUMMARY TABNote: This process could take up
to 20 secondsTAB 11. Time Value of MoneyTAB 3Capital
Budgeting1006928845739658($65,000,000)$50,000,000$45,000
,000$65,500,000$55,000,000$25,000,000FALSEFALSEFALSEF
ALSEFALSE$25,500,000$25,500,000$25,500,000$25,500,000$
25,500,000TAB 2PART I - Stock
ValuationFALSE$9,785,570.71FALSE50%1.163.28%17,898TR
UETAB 4Interest Rate
Implication1.566.44%17,777TRUE1.884.79%12,522TRUEPAR
T II - Bond IssuanceCurrent Bond
ValueFALSE$9,433.28FALSE$9,433.58New Value
+5%FALSE5.4375TRUE5.4375$24,634.04FALSE$24,634.04Ne
w Value - 5%0.4375TRUE0.4375$3,528.32FALSE$3,528.32
RUN Summary
CLEAR DATA