cO層PO傭A帽FIMNcE
圏悶胃酸㊥囲弼㊨鞘⑱醐
The purpose of this graded project is to
ing togethe「 in a practica看way some important
COnCePtS yOu’ve lea「ned in the course.
Once you,ve completed this prqiect, yOu Can Perfe「m simiIar analyses on other o「ganlZa-
tions. Some of the wo「k for this p「Qject w川be compIeted in ExceI・ Once you’ve compieted
these prob-ems in Excel, and ifyou,ve linked a= your cells properIy, yOu Can 「euSe yOu「
sp「eadsheets, On-y changing the inputs" Go to you「 Student portai and downIoad the
500306_PrpjecしFiles. This sp「eadsheet contains information needed to complete the
prQject, Ybu冊e submi軸g this Excel sp「eadsheet along with you「 P「Oject.
酔翁曙思配闘㊨徳田㊨粥輔弼鴫の㊨輔弼陶常
EI Cap Ciimbing Company (ECCC) is a sma= sta血P that manufactu「es and se=s
high-quaIity c看imbing gea「 in F「esno’Ca=fo「nia. The founde「 Of the company- Leah・
has been incredibly successful, but hasn,t kept the company,s financiaI 「ecords as
We= as she might have.
The initia=nvestment fo「 EI Cap was p「ovided by her f「iends and fam時and was sma=・
Howeve「, Cu「rent OPerations can,t meet the demand fo「 the p「Oduct) and Leah has plans
to increase both production and the numbe「 Of storefronts.
These p-ans 「equire a la「ge investment f「om both equity and debt financing・ The new
investors and creditors require detaiied financiai statements・ Leah has hired you’a finan-
cial anaiyst, tO P「ePa「e these statements and give insight into the血ancial position of
the fi「m. Leah has provided information from he「 bank statements, b冊s) and receipts in
an Excel sp「eadsheet, Which is found in your downloaded prQject files. She expIained to
you thattaxes are paid ata 「ate of30 percent, and dividends are paid ata rate of40 per-
cent. (Note: You can create the statements in the same Excei sp「eadsheet that has the
financia=nformation. Be su「e to Iet the instructor know if you choose to do this instead of
C「eating them in a Wo「d document・)
Prepa「e the fo11owlng:
漢 An income statementfo「2015 and 2016
音 Abalance sheetfor 2015 and 2016
臆Operating cash fIows for the two yea「S
看 Cash fIows from assets in 2016
漢 Cash fIows to creditors for2016
園 Cash fIows to stockholders fo「 2016
③ PENN FOSTER, lNC. 2O17 coRPORA丁E円NANCE
Graded PrQject
B, Answer the fo=owing:
1. How would you desc「ibe the fjnancial position ofthe fi「m in 2016?
W「ite a
ief overview.
2. What do you think about Leah’s pIans to expand?
囲翁圃電艶聞㊨醜悪観箆㊧閏㊧㊧繭⑱輔
In orderto expand, Ei Cap Climbing Company (ECCC) is considering taking out a mort-
gage for a new store location, a nOn「eSidentiai real property that inc看udes land and a
uiIding. Leah is unsure ifshe has the cash fiow to take on any more debt. She asked you
to create a ioan amortizatjon scheduIe for the proposed mortgage loan. Then, yOull create
a chart that represents the po巾On Of each payment that goes toward principaI and inte「est.
A. P「epare the fo=owing:
漢 A Ioan amortization schedule
漢A chart showing the percentage ofthe payment applied towa「d the p「incipal
and interest
』⑭鏡閲風聞⑱繭猶量io鵬Sc蘭e範囲㊨
First, yOu’= need to create a ioan amortization schedu看e in the downIoaded Excel
sp「eadsheet. C「eate the table on the tab namedくくPart 2 Loan Amortization Sched.’’
The foliowing table iiiustrates the payments and inte「est amounts for a fixed-「ate, 30-yea「,
$500,000 mortgage, at a five-PerCent inte「est rate. The monthiy payment w川be 2,684.11.
- �Payment �5%interest �Principal �Balance �Annual
Amount �Expense ���!nte「est Expense
常 0 � � � �500,000.00 �
」1 �2,684,11 �2,083.33 �600.78 �499書399.22 �
」 2 �2,684.11 �2,080.83 �603.28 �498,795.94 �
eak in the sequence"
The table serves as a= eXamPle ofwhat you判c「eate in Excei・ Note that the table shows
on-y the figures fo「 the first and the last year of payments; yOu判need to caicuIate the
amounts for the 「emaInlng PaymentS, and f冊hem in"
Once you,ve determined how each of the amounts in the table is obtained’yOu Can uSe
「eIative and absoiute cell 「eferences to fi旧n the ful1 360 payments.
@ PENN FOSTER, INC. 2017 coRPORATE FINANCE
Graded Prqject
The fo=owing is an explanation of the columns in the table:
看Payment佃mbe十十he first column in the table shows the 360 payments required
to pay off the mortgage loan (30 yea「s, With 12 monthly payments per yea「)・
■ Payment amounL-The second column shows the monthly payment amount.
臆/nteresトーThe thi「d coiumn shows the po由On Ofthe monthiy payment that goes
to inte「est.
獲P面函a」The fou軸COlumn shows the po巾On Paid towa「d the principal.
臆BaIance-The皿h column shows the starting balance of $500,000, and the
「emaining baIance each month afte「 the principa=s subtracted.
看Amua廟ferest expense-The last column provides a running total of the inte「est
expense on the mortgage fo「 the enti「e 12-mOnth period. It,s the amount that would
e reported on the financial statements.
漢7bta/s--The “lbtaIs】, unde「 the “5% lnte「est Expense” and “P「incipal’’coIumns
show the final totais for the 30-yea川fe of the mo巾gage.
聞⑱鳴g観艶聞鵬的鋭さa舶曲e肥S門抽翁鳴
Next, yOu判Create a Chart fo"owing these steps. C「eate the table on the tab named
(`Part 2 Chart.’’
1. Start by selecting the Inte「est Expense and Principal columns. Make su「e to
seIect the coIumn headers and values. Don’t select the Tbtals 「ow.
2. Ciickon the Inserttab and seIect a “Stacked Column.” Make su「e to label the
x-aXis (Payment mOnth) and yLaXis (do=ars), and inciude a legend for the two
Values (interest and principaI)"
3, You「finaI chart shouId be set up simiIa「to the chart beiow, With the data
popuiating the charL (The inc「ements don’t need to be the same)"
ー一 書臆喜 一一一一-○○‥一 、--了n i十i -〔-〇〇〇〇…i・〇一「‾二〇‾`二〇㌔一〇iかヽ/m〇〇〇車〔′〇一
③ PENN FOSTER, lNC. 2017 CORPORATE FINANCE
Graded Prqiect
B. Answer the fo=owing:
1 , How can you desc「ibe the 「elationship between time and the amount paid
towards p「incipal and inte「est?
2. Knowing what we know about ECCC’s cash f10W f「Om Part申S it reason-
able to beIieve that ECCC can take on this new debt?
醗観蝿観の観開聞㊧明暗陣掴㊧曾
lt)s now 2017, and Ei Cap CIimbing Company (ECCC) has continued to grow" One of
ECCC,s majo「 「evenue-P「Oducing p「oducts is a sp「ing-ioaded camming device called
SLCD, Or CamS. 1t’s a device with a sma= handIe (Ca=ed the `一trigger”) and two sprIng
loaded ``cams” on an ax看e. When the t「igger is puiled, the cams move togethe「) dec「easlng
the size ofthe cams. It)s then inserfed into a c「ack or pocket in the rock. When the trigge「
iS 「eIeased, the cams expand・ These cams are used as ancho「s when `▲t「ad,十ock climbing∴
ECCC cu「「ently has one set of cams on the market, and saIes have been exce=ent.
The cams a「e lighte「 and perfe「m better than their competitors. Howeve「, aS Wjth any
high-Perfermance item, teChnoIogy changes rapidly- and the cams are now fa冊ng behind
the competition.
ECCC spent $200,000 to develop a p「ototype fo「 a new Iine of cams that has aii the
featu「es of the existing cams, but a「e made from an even lighte「 and stronger 7075-T6
aIuminum a=oy. The company has spent a further $150,000 for a ma「keting study to
determine the expected sales figures for the cam line.
ECCC can manufactu「e a set ofthe new cams fo「 an average of $140 each in va「iabie
costs. Fixed costs for the ope「ation are estimated to run an additional $2.1 m冊on per yea「
ifthe new project is undertaken. The estimated sales volume is 75,000' 85'000’80,000’
70,000, and 65,000 pe「yea「fo「the next five years) 「eSPeCtiveiy" The unit p「ice ofthe new
cam setw冊e $240. The necessary equipment can be purchased fo「 $10.5 m冊on and w川
e dep「eciated on a seven-year MACRS schedule. It,s beIieved the vaiue of the equipment
in five yearsw紺be $1.1 m冊on.
P「oduction ofthe cu「「ent cam line is expected to be terminated in two yea「S. If ECCC
doesn’t introduce the new Iine ofcams, SaIes w冊be 45,000 units and 25,000 units for the
next two yea「s, 「eSPeCtive-y" The p「ice of the cam set is $150・ With variable costs of $95
each, and fixed costs of $1.5 m冊on per yea口f ECCC does introduce the new cams’Saies
ofthe existing productw冊fall by lO,000 units pe「yea「 and the price ofthe existing sets
should be Iowered to $120 each. Net working capitaI for the cams w川be 22 percent of
sales and w=l occu「with the timjng ofthe cash flows fo「the yea「; for example, the「e’s no
initiaI outiay fo「 NWC, but changes in NWC wⅢ occu「 i= Yea「 1 with the first year’s sales・
ECCC has a 30-PerCent COrPO「ate taX rate and a required retu「n of lO percent・ (Note: You
can c「eate the solutions in the same ExceI spreadsheet that has the data report informa-
tion. Be su「e to let the inst「uctor know ifyou choose to do this instead ofc「eating them ln a
W
d document.)
◎ P∈NN FOSTER, INC" 2017 CORPORA丁E円NANCE
Graded Pl,Qject
Leah has p「ovided you with a data 「eport in an Excel sp「eadsheet that contains information
to answe「 the fo=owing questions:
1. What’s the payback peried ofthe prqiect?
2. What’s the profitab帥ty index ofthe prqiect?
3. What’s the lRR ofthe project?
4, What’s the NPV ofthe project?
5, Shouid Leah accept the project?
6. if Leah needs to adjust the price of the product, What’s the /owest Leah couid make
the price ofthe new cam set and s細have a positive NPV p「。ject (keeping a= othe
assumptions the same)?
酔覇旧鞋鮎醐$晦藍朋$琶開㊧$$
亡ぶ「二こ、二三二二二二二三三二二二二二一二二一一∴二二二二ミニ二二二二二間ここ二二三振批二二二罷工二二こここ二二二二言開-こ一一- --二二二二ここ二二二‾二二-- =二二二二ここ=こ=ここ〔二二二ご二二二〇
LastIy言ust fo「 fun, Ei Cap Ciimbing Company (ECCC) is Iooking at determining thei
SenSitivity to market fIuctuations.
Since ECCC isn’t pubiica=y t「aded and can’t look at thei「 own stock history, they must
evaIuate their competitors. Black Diamond Equipment is their cIosest competitor’but the
COmPany doesn’t have enough t「ading volume to make any sound conclusions・ Leah
identifies Callaway Goif Company (ELY) as ECCC’s cIosest publicly-t「aded competitor"
Even though ELY se=s golf equipment言t too is a specialized company se冊ng high-teCh
SPOrtS equlPment.
部閥繭蟹陸e竜盆w醐eA甲聞
Note: 777is高foma飯プn /s a/so in your fextbook.
丁he CAPM is one ofthe most tho「oughly researched modeIs in financiai economICS.
When beta is estimated in p「actice, a Variation of CAPM, Cal看ed the maIket mode/ is
often used. -fo de「ive the ma「ket model, We Start With the CAPM:
E(Ri) = Rf+ l【E(RM)一Rf]
Since CAPM is an equation, We Can Subtract the risk-free rate f「om both sides, Which
E(R,) - Rf二β【E(RM) ‾ Rf]
丁his equation is dete「ministic-that is, eXaCt. In a reg「ession’We 「ealize that the「e’s
some indeterminate e「ro「. We need to fo「ma=y recognize this in the equation by adding
epsiIon, Which 「ep「esents this e「ro「:
E(Ri)一Rf= P[E(RM) - R予] + 8
@ PENN FOSTER, iNC. 2017 coRPORATたFINANCE
Graded PrQject
Finaiiy, think ofthe above equation in a reg「ession. Since there’s no inte「CePt in the equa-
tion, the inte「cept is zero. However, When we estimate the 「egression equation- We Can
add an intercept term, Which we判ca= alpha:
E(RI)喜Rf= αi十β[E(RM) - Rf寒+ 8
The inte「cept te「m is known as Jensen,s alpha, and it 「epresents the “excess’十etum. If
CAPM holds exactly, this intercept should be ze「o. Think ofalpha in terms ofthe SML‥ if
the alpha is positive, the stock pIots above the SM口fthe alpha is negative, the stock piots
e看ow the SML, You’i冊St Create a SCatte「 PIot and then perfo「m a 「eg「ession analysis fo
ELY stock and the mutual fund. Then use those results to compa「e and anaiyze the resuIts.
A. Scatte「 PIotting and Reg「ession Analysis
Use the following steps to c「eate the scatter piot:
1. Go to the Part4 Stock