Southern New Hampshire University FIN 550 Milestone Two
Question # 00382464
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Updated on: 09/09/2016 02:22 AM Due on: 09/09/2016
FIN 550 Milestone Two Guidelines and RubricOverview:
For the final project, you will use this case study to prepare a financial analysis report for Home Depot Inc.
You will include in your analysis thebackground calculations and managerial analysis for each of the following topics:
time value of money, stock and bond valuation, and capital budgeting.
You willalso discuss macroeconomic variables that might impact the company’s financial decision making and strategic objectives.
These topics will be covered over fourmilestones 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 Stock Valuation and Bond Issuance sections of the final project, along with your supporting explanations.Prompt:
Calculate stock and bond valuations for Home Depot Inc. and use the results to support your explanations of shareholder value and increasing capital.
Assess the company’s dividend policies and bond issuance policies in your explanations.
Complete your calculations on the designated tab of the Final ProjectStudent Workbook.Specifically, the following critical elements must be addressed:
II. Stock ValuationA. 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 thecompany’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 support or hinder their strategies?
For example, if the company is attempting togrow, are they retaining and reinvesting their earnings rather than distributing them to investors through dividends?
Be sure to substantiate yourclaims.
III. Bond IssuanceA. 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 yourreasoning.
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 tofund operating expenses, refinance old debt, or change its capital structure, are they issuing sufficient bonds to achieve these goals?
Be sure tosubstantiate your claims.Guidelines for Submission: Your paper must be submitted as a 3- to 4-page Microsoft Word document, not including your calculations, which should becompleted in the Final Project Student Workbook. Use double spacing, 12-point Times New Roman font, and one-inch margins. Sources should be cited accordingto APA style
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Solution: Southern New Hampshire University FIN 550 Milestone Two