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allofFDM.docxProject 1: Analyzing Financial Statements
Scenario
You have been chosen to join a team of consultants at Maryland Creative Solutions (MCS). Congratulations on your hiring! The group you will be working with has a history of helping transform troubled companies into profitable enterprises with a promising future. Your team is assigned to a client firm, Largo Global Inc. (LGI). LGI's operational efficiency has declined over the past three years. The company's board of directors has hired MCS to uncover the underlying issues and make recommendations to turn things around.
Competencies
Your work will be evaluated using the competencies listed below.
· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.
· 3.4: Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making.
· 6.2: Evaluate strategic implications for domestic and international markets of an organization's industry.
· 10.2: Analyze financial statements to evaluate and optimize organizational performance.
Project 1: Analyzing Financial Statements Step 1: Prepare for the Project
In two weeks, you will meet with your team to discuss the main reasons for LGI's reduced operational efficiency. You need to prepare for the meeting by reviewing how to perform financial analysis, including common-size, cash flow, and ratio analysis. Log into O'Reilly by following these instructions before accessing the chapters and completing the required reading.
Required Reading
Parrino, R., Kidwell, D. S., & Bates, T. W. (2012). Fundamentals of Corporate Finance (2nd ed.). Wiley.
Chapter 3: Financial Statements, Cash Flows and Taxes
· Section 3.1 to 3.6
Chapter 4: Analyzing Financial Statements
· Section 4.1 to 4.6
Professionals in the Field
This video discusses how a corporate finance textbook was used in uncovering financial irregularities and a dangerous situation. It is 9:00 minutes.
Transcript
Using Financial Knowledge to Unravel a Scheme
Project 1: Analyzing Financial Statements Step 2: Review and Practice
Maryland Creative Solutions (MCS) has provided you with background material on how its teams approach financial analysis. Using the Project 1 Review and Practice Guide , review the structure and purpose of the income statement and balance sheet. Make sure you also are familiar with the DuPont equation as well as these five groups of financial ratios: liquidity, efficiency, leverage, profitability, and market value. Study how to perform common-size and cash flow analyses. Finally, apply what you have learned so far by completing the exercises referenced in the Project 1 Review and Practice Guide.
You must review the material provided by MCS and do the practice exercises so that you are
· prepared to have informed discussions with your team about company financial statements,
· understand what the statements reveal about operational efficiency, and
· can use this information to make recommendations for improvements.
Complete this review and practice by the end of Week 1.
Review and Practice
You must complete the review and practice content to participate in the discussion in Step 3.
Project 1 Review and Practice Guide
Project 1: Analyzing Financial Statements Step 3: Participate in the Required Project 1 Discussion
Luis Alvarez / DigitalVision / Getty Images
You have finished reviewing the material and performing the exercises but you have some questions. Participate in the Project 1 class discussion. Respond to the two questions below by posting in the discussion; then, respond to two of your classmates' discussion posts by the end of the week.
Discussion
Answer the following questions:
1. Discuss the concepts that were most challenging for you in the readings and review material. How did the practice exercises help clarify these?
2. What did you learn that will help you analyze LGI's financial statements?
Before you participate in the discussion activity read the MBA discussion guidelines .
Project 1: Analyzing Financial Statements Step 4: Complete the Analysis Calculation for Project 1
To help you analyze LGI's financial situation so that you can make recommendations for improvement, you receive an Excel workbook containing the company's key financial statements. After performing the ratio, common-size, and cash flow analyses, submit your initial findings.
Complete the analysis calculation for the project:
· Download the Project1ExcelWorkbook_100121 , click the Instructions tab, and read the instructions.
· Perform ratio, common-size, and cash flow analyses using the Income Statement and Balance Sheet worksheet in the Excel workbook.
· If you would like instructor feedback on this step, follow the instructions below to submit your Excel file to the Assignments folder as a milestone by the end of Week 1. This is optional. If you choose to submit the milestone, you will receive instructor feedback. To distinguish the milestone submission from the file you will submit in Step 5, label your file as follows: P1_milestone_lastname_Calculation_date
Take Action
Submit your assignment to your instructor for review and feedback.
Follow these steps to access the assignment:
· Click My Tools in the top navigation bar.
· Click Assignments.
· Select the relevant assignment.
· You should use the comments your instructor made about your optional milestone submission to revise your calculations as needed. Next, proceed to Step 5, where you will answer questions about your analysis, make recommendations for the client, and compile and submit your final report.
Project 1: Analyzing Financial Statements Step 5: Prepare the Analysis Report for Project 1
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Today you will meet with your team to discuss the reasons for LGI's reduced operational efficiency. The reduced efficiency has raised questions about the company's income statement, balance sheet, and statement of cash flows. Answer the questions in the Project 1 Questions – Report Template document. Prepare your analysis report including recommendations for how the company can improve its financial situation.
To complete the analysis report for the project:
· Download the Project 1 Questions – Report Template
· Read the instructions.
· Answer all the questions.
· Include your recommendations.
· Submit the business report (Word document) and calculation (Excel file) to the Assignments folder as your final deliverable at the end of Week 2. Label your files as follows:
· P1_Final_lastname_Report_date.docx
· P1_Final_lastname_Calculation_date.xlsx
Check Your Evaluation Criteria
Before you submit your assignment, review the competencies below, which your instructor will use to evaluate your work. A good practice would be to use each competency as a self-check to confirm you have incorporated all of them. To view the complete grading rubric, click My Tools, select Assignments from the drop-down menu, and then click the project title.
· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.
· 3.4: Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making.
· 6.2: Evaluate strategic implications for domestic and international markets of an organization's industry.
· 10.2: Analyze financial statements to evaluate and optimize organizational performance.
Take Action
Submit your assignment to your instructor for review and feedback.
Follow these steps to access the assignment:
· Click My Tools in the top navigation bar.
· Click Assignments.
· Select the relevant assignment.
Project 2: Managerial Economics
Scenario
In Project 1, you confirmed that Largo GIobal Inc. (LGI) is on a downward trajectory. In Project 2 you must identify some of the root causes of the company's financial stress so that you understand what can be done to turn things around. Reversing the trend is not going to be an easy task, but you are confident because your team has years of experience working with troubled companies.
You have seen many marketing-driven CEOs bankrupt their businesses by losing sight of their company's bottom line. It is going to be a balancing act to find the right mix of decisions that will improve the efficiency of LGI as well as make it sustainable in the long run.
In Project 2 you are going to put on your "economist" hat. You will study how supply and demand affect LGI. You know that calculating elasticity will help you figure out how to reverse LGI's downward trend.
You also need to explore the structure of the industry from various angles and understand how consolidation or transformation impact LGI.
To turn things around, LGI can take one of three approaches: (1) increase revenue, (2) maintain revenue at the current level, or (3) choose a different strategy based on a limited production quantity that may be below the current level.
Competencies
Your work will be evaluated using the competencies listed below.
· 3.1: Identify numerical or mathematical information that is relevant in a problem or situation.
· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.
· 3.3: Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.
· 4.1: Lead and/or participate in a diverse group to accomplish projects and assignments.
· 4.3: Contribute to team projects, assignments, or organizational goals as an engaged member of a team.
· 4.4: Demonstrate diversity and inclusiveness in a team setting.
· 5.1: Develop constructive resolutions for ethical dilemmas based on application of ethical theories, principles and models.
· 10.1: Apply relevant microeconomics principles to support strategic decisions for the organization.
Step 1: Prepare for the Project
In two weeks, you will provide your business report to your team at Maryland Creative Solutions so they can advise Largo Global Inc. (LGI) on the best way to optimize production and reverse the trend. Before preparing the report, you must review information on supply and demand, elasticity, and industry structures. Complete the required reading to explore these topics.
Required Reading
Webster, T. J. (2015). Managerial economics: tools for analyzing business strategy. Lexington Books.
· Pages 21–50
· Pages 55–72
Chapter 7: Industry Organization
· Pages 169–177
Recommended Reading
Saylor. (2012). Principles of managerial economics. Principles of managerial economics (v. 1.0).
Chapter 1: Introduction to Managerial Economics
Chapter 2: Key Measures and Relationships
Chapter 4: Cost and Production
Project 2: Managerial Economics Step 2: Review and Practice
Equipped with the analyses performed in the business report you submitted for Project 1, you should feel well prepared to dive into the company data provided about the industry structure. Using the Project 2 Review and Practice Guide provided, review supply and demand, elasticity, and industry structures to determine how these affect the company's profitability. Then apply what you have learned so far by completing the exercises referenced in the Project 2 Review and Practice Guide.
You must review the material provided and do the practice exercises so that you can
· complete a supply and demand graph,
· calculate elasticity and assess market structure,
· understand the impact of an industry structure on an organization, and
· use the above information to make recommendations for improvements.
Review and Practice
You must complete the review and practice to fully collaborate with your group in Step 3.
Project 2 Review and Practice Guide
Project 2: Managerial Economics Step 3: Collaborate With Your Group
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This project is a group assignment. You have been assigned to a group. Your group assignment was communicated through the weekly announcement. If you have not completed the Team Agreement and Work Plan, do so now and submit it to the dropbox.
To fully participate with your group and prepare for the next steps, complete the Review and Practice content on your own. Then take time to interact collaboratively with your teammates in the discussion area established for each group.
It is imperative that you are well prepared and have developed synergy within your group, so that you can learn from each other and together produce a coherent business report. Your report should reflect the work of your team—not be individual responses patched together.
Regardless of your role within your group, make sure that you contribute to this team project as an engaged participant.
Take Action
Submit your assignment to your instructor for review and feedback.
Follow these steps to access the assignment:
· Click My Tools in the top navigation bar.
· Click Assignments.
· Select the relevant assignment.
Project 2: Managerial Economics Step 4: Complete the Analysis Calculation for Project 2
To help you analyze LGI so that you can make recommendations to reverse the trends, you receive an Excel workbook containing the following:
· Prices and quantities of LGI's product
After plotting a supply/demand graph and calculating elasticity, submit your team's initial findings.
Complete the analysis calculation for the project:
· Download the Project 2 Excel workbook, click the Instructions tab, and read the instructions.
· Draw a supply and demand graph and calculate elasticity.
· If you would like instructor feedback on this step, follow the instructions in the Take Action box below to submit your Excel file to the Assignments folder as a milestone by the end of Week 3. This is optional. If you choose to submit the milestone, you will receive instructor feedback on the milestone submission. To distinguish the milestone submission from the file you will submit at the end of Project 2, label your file as follows: P2_milestone_lastname_Calculation_date.
Take Action
Submit your assignment to your instructor for review and feedback.
Follow these steps to access the assignment:
· Click My Tools in the top navigation bar.
· Click Assignments.
· Select the relevant assignment.
· You should use the comments your instructor made about your optional milestone submission to revise your work as needed. Next, proceed to Step 5, where you will answer questions about your analysis, make recommendations for LGI, and compile and submit your final report.
Project 2: Managerial Economics Step 5: Prepare the Analysis Report for Project 2
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You are ready to make a recommendation about how to mitigate the decline in revenue that LGI has experienced. You looked at the industry structure, created a supply/demand graph, and calculated elasticity. Answer the questions in the Project 2 Questions – Report Template. Prepare the business report.
Complete the business report for the project:
· Download the Project 2 Questions – Report Template
· Read the instructions.
· Answer all the questions.
· Include your recommendations.
· Submit the business report (Word document) and calculation (Excel file) to the Assignments folder as your final deliverable. Here is the file name convention for both files:
· P2_Final_lastname_Report_date.docx
· P2_Final_lastname_Calculation_date.xlsx
Check Your Evaluation Criteria
Before you submit your assignment, review the competencies below, which your instructor will use to evaluate your work. A good practice would be to use each competency as a self-check to confirm you have incorporated all of them. To view the complete grading rubric, click My Tools, select Assignments from the drop-down menu, and then click the project title.
· 3.1: Identify numerical or mathematical information that is relevant in a problem or situation.
· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.
· 3.3: Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.
· 4.1: Lead and/or participate in a diverse group to accomplish projects and assignments.
· 4.3: Contribute to team projects, assignments, or organizational goals as an engaged member of a team.
· 4.4: Demonstrate diversity and inclusiveness in a team setting.
· 5.1: Develop constructive resolutions for ethical dilemmas based on application of ethical theories, principles and models.
· 10.1: Apply relevant microeconomics principles to support strategic decisions for the organization.
Take Action
Submit your assignment to your instructor for review and feedback.
Follow these steps to access the assignment:
· Click My Tools in the top navigation bar.
· Click Assignments.
· Select the relevant assignment.
· Project 3: Costing and Cost Allocations Start Here
cenario
In your last business report, you recommended a strategic decision about the revenue target to make LGI competitive. In Project 3, you will help LGI's leadership move the company forward on a path toward a sustainable future. The company needs to restore the confidence of shareholders and other stakeholders by maintaining a satisfactory level of operating performance.
LGI, like all companies, needs robust earnings before interest, taxes, depreciation, and amortization (EBITDA). In other words, earnings must be sufficient to cover LGI's investing activities, debt service, and taxes—with a healthy profit left for reinvestment and distributions to stockholders
Your Project 3 business report will focus on strengthening EBITDA. To do this, you will analyze LGI's cost structure and determine how to increase productivity. These tasks are prerequisites for identifying a future investment (Project 4) and how to finance it (Project 5).
Competencies
Your work will be evaluated using the competencies listed below.
· 3.1: Identify numerical or mathematical information that is relevant in a problem or situation.
· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.
· 3.3: Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.
· 10.3: Determine optimal financial decisions in pursuit of an organization's goals.
· 10.5: Develop operating forecasts and budgets and apply managerial accounting techniques to support strategic deci
Project 3: Costing and Cost Allocations Step 1: Prepare for the Project
For the next two weeks, you will focus on the specific actions LGI can take to strengthen its EBITDA. You will analyze cost-volume-profit, pricing decisions, and activity-based costing. Log into O'Reilly by following these instructions before accessing the chapters and completing the required reading.
Required Reading
Davis, C. E. & Davis, E. (2011). Managerial Accounting . Wiley.
Chapter 3: Cost-Volume-Profit Analysis and Pricing Decisions
· Section 3.1 to 3.3
Chapter 7: Activity-Based Costing and Activity-Based Management
· Sections 7.1–7.2
Recommended Reading
Chapter 2: Cost Behavior and Cost Estimation
· Sections 2.1–2.3
Project 3: Costing and Cost Allocations Step 2: Review and Practice
Using the Project 3 Review and Practice Guide, review EBITDA and cost structures to set LGI on the path toward a sustainable future. Then apply what you have learned by completing the exercises and problems referenced in the Project 3 Review and Practice Guide.
You must review the guide and do the practice exercises and problems so that you
· are prepared to have informed discussions with your team about LGI’s income statement,
· understand what the cost data reveal about operational efficiency, and
· can use this information to make recommendations for improvements.
Complete this review and practice by the end of Week 5.
Review and Practice
You must complete the review and practice content to participate in the discussion in Step 3.
Project 3 Review and Practice Guide
Project 3: Costing and Cost Allocations Step 3: Participate in the Required Project 3 Discussion
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You have finished reviewing the material and performing the exercises, but you have some questions. Participate in the Project 3 class discussion. Respond to the two questions below by posting in the discussion; then, respond to two of your classmates' discussion posts by the end of the week.
Discussion
Answer the following questions:
1. Discuss the concepts that were most challenging for you in the readings and review material. How did the practice exercises help clarify these?
2. What did you learn that will help you analyze LGI's cost structure to increase its productivity and put the company on a path to a sustainable future?
Before you participate in the discussion activity see MBA discussion guidelines .
Project 3: Costing and Cost Allocations Step 4: Complete the Analysis Calculation for Project 3
Your team has provided you with an Excel workbook containing LGI's financials. You will use the workbook to
· Determine how LGI can strengthen EBITDA
· Discover ways for LGI to increase productivity
· Perform cost calculations in the worksheets
Complete the analysis calculation for the project:
· Download the Project 3 Excel Workbook, click the Instructions tab, and read the instructions.
· Calculate and evaluate costs using the worksheets.
· If you would like instructor feedback on this step, follow the instructions in the box below to submit your Excel file to the Assignments folder as a milestone by the end of Week 5. This is optional. If you choose to submit the milestone, you will receive instructor feedback you may use to make corrections before submitting your final Project 3. To distinguish the milestone submission from the file you will submit in Step 5, label your file as follows: P3_milestone_lastname_Calculation_date
Take Action
Submit your assignment to your instructor for review and feedback.
Follow these steps to access the assignment:
· Click My Tools in the top navigation bar.
· Click Assignments.
· Select the relevant assignment.
· You should use the comments your instructor made about your optional milestone submission to revise your calculations as needed. Next, proceed to Step 5, where you will answer questions about your analysis, make recommendations for the client, and compile and submit your final r
Project 3: Costing and Cost Allocations Step 5: Prepare the Analysis Report for Project 3
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You have developed an in-depth understanding of LGI's operating efficiency related to costing and the impact on EBITDA. You feel confident that your target revenue combined with a better mix of fixed and variable costs will positively boost LGI’s productivity, providing the company with a competitive edge. LGI will finally be on a path toward a sustainable future. Answer the questions in the Project 3 Questions – Report Template document. Prepare your analysis report including recommendations for how the company can improve its financial situation.
Complete the analysis report for the project:
· Download the Project 3 Questions – Report Template
· Read the instructions.
· Answer all the questions.
· Include your recommendations.
· Submit the analysis report (Word document) and analysis calculation (Excel file) to the Assignments folder as your final deliverable at the end of Week 6. Label your files as follows:
· P3_Final_lastname_Report_date.docx
· P3_Final_lastname_Calculation_date.xlsx
Check Your Evaluation Criteria
Before you submit your assignment, review the competencies below, which your instructor will use to evaluate your work. A good practice would be to use each competency as a self-check to confirm you have incorporated all of them. To view the complete grading rubric, click My Tools, select Assignments from the drop-down menu, and then click the project title.
· 3.1: Identify numerical or mathematical information that is relevant in a problem or situation.
· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.
· 3.3: Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.
· 10.3: Determine optimal financial decisions in pursuit of an organization's goals.
· 10.5: Develop operating forecasts and budgets and apply managerial accounting techniques to support strategic decisions.
Take Action
Submit your assignment to your instructor for review and feedback.
Follow these steps to access the assignment:
· Click My Tools in the top navigation bar.
· Click Assignments.
· Select the relevant assignment.
Project 4: Time Value of Money and Annuities Start Here
Print Project
Transcript
Scenario
Your advice has helped Largo Global Inc. (LGI) make substantive progress. Now, you must provide the means to achieve this increase in efficiency and productivity. You must recommend a plan for making the strategic investments that will keep LGI moving on a sustainable path.
Your Project 4 business report will focus on which assets to invest in or whether to disinvest. You will identify the types of assets LGI should eventually acquire and/or renew. You will also determine the investments that will help LGI improve its operations and generate the cash flow needed to improve its bottom line.
Competencies
Your work will be evaluated using the competencies listed below.
· 3.1: Identify numerical or mathematical information that is relevant in a problem or situation.
· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.
· 3.3: Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.
· 8.1: Evaluate major business/organizational systems and processes and make recommendations for impro
Project 4: Time Value of Money and Annuities Step 1: Prepare for the Project
For the next two weeks, you will focus on an investment strategy that will increase the efficiency and productivity of LGI to keep the company moving in the right direction. You will pay attention to which assets to invest in and divest from to generate cash flow and improve the bottom line. Log into O'Reilly by following these instructions and complete the required reading.
Required Reading
Parrino, R. Kidwell, D. S., & Bates, T. W. (2012). Fundamentals of corporate finance . Wiley.
Chapter 5: The Time Value of Money
· Section 5.1 to 5.4
Chapter 6: Discounted Cash Flows and Valuation
· Sections 6.1 to 6.4
Recommended Reading
Davis, C. E. & Davis, E. (2011). Managerial Accounting . Wiley. Chapter 9, Capital Budgeting
Project 4: Time Value of Money and Annuities Step 2: Review and Practice
Using the Project 4 Review and Practice Guide, review investment techniques to set LGI on a path toward a sustainable future. Then apply what you have learned by completing the exercises and problems referenced in the Project 4 Review and Practice Guide.
You must review the guide and do the practice exercises and problems so that you
· are prepared to have informed discussions with your team about LGI’s investment strategy,
· understand which assets LGI should acquire and/or renew, and
· can use this information to make recommendations for improvements.
Complete this review and practice by the end of Week 7.
Review and Practice
You must complete the review and practice content to participate in the discussion in Step 3.
Project 4 Review and Practice Guide
Project 4: Time Value of Money and Annuities Step 3: Participate in the Required Project 4 Discussion
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You have finished reviewing the material and performing the exercises, but you have some questions. Participate in the Project 4 class discussion. Respond to the two questions below by posting in the discussion; then, respond to two of your classmates' discussion posts by the end of the week.
Discussion
Discuss the concepts that were most challenging for you in the readings and review material. How did the practice exercises help clarify these?
What did you learn that will help you determine which assets to invest in and where to disinvest to help LGI improve its operations, generate cash flow, and improve the bottom line?
Before you participate in the discussion activity, see MBA discussion guidelines .
Project 4: Time Value of Money and Annuities Step 4: Complete the Analysis Calculation for Project 4
Your team has provided you with an Excel workbook containing LGI's financials. You will use the Project 4 Excel workbook to perform discounting of cash flow and valuation calculations.
Complete the analysis calculation for the project:
· Download the Project 4 Excel Workbook, click the Instructions tab, and read the instructions.
· Calculate and evaluate the investment choices using the worksheets.
· If you would like instructor feedback on this step, submit your Excel file to the Assignments folder as a milestone by the end of Week 7. This is optional. If you choose to submit the milestone, you will receive instructor feedback you may use to make corrections before submitting your final Project 4. To distinguish the milestone submission from the file you will submit in Step 5, label your file as follows: P4_milestone_lastname_Calculation_date
Take Action
Submit your assignment to your instructor for review and feedback.
Follow these steps to access the assignment:
· Click My Tools in the top navigation bar.
· Click Assignments.
· Select the relevant assignment.
· You should use the comments your instructor made about your optional milestone submission to revise your calculations as needed. Next, proceed to Step 5, where you will answer questions about your analysis, make recommendations for LGI, and compile and submit your final report.
Project 4: Time Value of Money and Annuities Step 5: Prepare the Analysis Report for Project 4
You have developed an in-depth understanding of LGI's operating efficiency as it relates to costing and its impact on the bottom line. You feel confident that your investment choices will positively boost LGI’s productivity and improve the company’s operations. LGI will finally be on a path of a sustainable future. Answer the questions in the Project 4 Questions – Report Template document. Prepare your analysis report including recommendations for how the company can improve its financial situation.
Complete the analysis report:
Download the Project 4 Questions – Report Template
· Read the instructions.
· Answer all the questions.
· Include your recommendations.
· Submit the analysis report (Word document) and analysis calculation (Excel file) to the Assignments folder as your final deliverable at the end of Week 8. Label your files as follows:
· P4_Final_lastname_Report_date.docx
· P4_Final_lastname_Calculation_date.xlsx
Check Your Evaluation Criteria
Before you submit your assignment, review the competencies below, which your instructor will use to evaluate your work. A good practice would be to use each competency as a self-check to confirm you have incorporated all of them. To view the complete grading rubric, click My Tools, select Assignments from the drop-down menu, and then click the project title.
· 3.1: Identify numerical or mathematical information that is relevant in a problem or situation.
· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.
· 3.3: Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.
· 8.1: Evaluate major business/organizational systems and processes and make recommendations for improvement.
Take Action
Submit your assignment to your instructor for review and feedback.
Follow these steps to access the assignment:
· Click My Tools in the top navigation bar.
· Click Assignments.
· Select the relevant assignment.
Project 5: Cost of Capital, Risk/Return, and Capital Budgeting Start Here
Print Project
Transcript
Scenario
Your team's work with Largo Global Inc. (LGI) is nearly complete. In your consulting role, you have recommended steps for improving the company's financial health. You have offered advice on a revenue target, recommended steps for optimizing operations, and suggested investments that will improve LGI's competitive position. In your final project, you will continue working on capital budgeting with a focus on the best way for LGI to finance the investments you recommend.
Your Project 5 business report will focus on ensuring LGI's capital structure is sound and that the company is on a financially sustainable path. You will recommend a plan for financing investments that does not expose LGI to unnecessary risk. By the end of this project, the company's financial statements should demonstrate that it has returned to a competitive position.
Competencies
Your work will be evaluated using the competencies listed below.
· 3.1: Identify numerical or mathematical information that is relevant in a problem or situation.
· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.
· 3.3: Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.
· 10.4: Make strategic managerial decisions for obtaining capital required for achieving organizational goals.
Project 5: Cost of Capital, Risk/Return, and Capital Budgeting Step 1: Prepare for the Project
For the next two weeks, you will focus on the concepts of risk and return, the cost of capital, and capital budgeting. You will ensure that the financing plan you recommend supports LGI's long-term financial position. Log into O'Reilly by following these instructions and complete the required reading.
Required Reading
Parrino, R., Kidwell, D. S., & Bates, T. W. (2012). Fundamentals of Corporate Finance (2nd ed.) Wiley.
· Section 7.1 to 7.7
Chapter 10: The Fundamentals of Capital Budgeting
· Sections 10.1 to 10.6
Chapter 13: The Cost of Capital
· Sections 13.1 to 13.4
Recommended Reading
Clayman, M. R., Fridson, M. S., & Troughton, G. H. (2012). Corporate Finance: A Practical Approach (2nd. ed.) . Wiley.
Project 5: Cost of Capital, Risk/Return, and Capital Budgeting Step 2: Review and Practice
Using the Project 5 Review and Practice Guide, review the options for financing investments available to LGI. Then, apply what you have learned by completing the exercises and problems referenced in the Project 5 Review and Practice Guide.
You must review the guide and do the practice exercises and problems so that you
· are prepared to have informed discussions with your team about capital structure and appropriate leverage,
· understand risk and return,
· can make recommendations for financing LGI's investments, and
· can complete your mission, turning around LGI.
Complete this review and practice by the end of Week 9.
Review and Practice
You must complete the review and practice content to participate in the discussion in Step 3.
Project 5 Review and Practice Guide
Project 5: Cost of Capital, Risk/Return, and Capital Budgeting Step 3: Participate in the Required Project 5 Discussion
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You have finished reviewing the material and performing the exercises, but you have some questions. Participate in the Project 5 class discussion. Respond to the two questions below by posting in the discussion; then, respond to two of your classmates' discussion posts by the end of the week.
Discussion
Answer the following questions:
1. Discuss the concepts that were most challenging for you in the readings and review material. How did the practice exercises help clarify these?
2. What did you learn that will help you determine the most appropriate way to finance the investments you previously recommended for LGI?
Before you participate in the discussion activity, see MBA discussion guidelines .
Project 5: Cost of Capital, Risk/Return, and Capital Budgeting Step 4: Complete the Analysis Calculation for Project 5
Your team has provided you with an Excel workbook containing LGI's financials. You will use the Project 5 Excel workbook to perform advanced capital budgeting techniques to assess the viability of the investment you made in the previous project.
Complete the analysis calculation for the project:
· Download the Project 5 Excel Workbook, click the Instructions tab, and read the instructions.
· Calculate cost of debt and equity as well as weighted average cost of capital (WACC).
· Apply the capital asset pricing model (CAPM).
· Develop a capital budget.
If you would like instructor feedback on this step, submit your Excel file to the Assignments folder as a milestone by the end of Week 9. This is optional. If you choose to submit the milestone, you will receive instructor feedback you may use to make corrections before submitting your final Project 5. To distinguish the milestone submission from the file you will submit in Step 5, label your file as follows: P5_milestone_lastname_Calculation_date
· You should use the comments your instructor made about your optional milestone submission to revise your calculations as needed. Next, proceed to Step 5, where you will answer questions about your analysis, make recommendations for LGI, and compile and submit your final report.
Take Action
Submit your assignment to your instructor for review and feedback.
Follow these steps to access the assignment:
· Click My Tools in the top navigation bar.
· Click Assignments.
· Select the relevant assignment.
Project 5: Cost of Capital, Risk/Return, and Capital Budgeting Step 5: Prepare the Analysis Report for Project 5
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You have developed an in-depth understanding of LGI's operating efficiency related to costing and how that impacts the bottom line. You feel confident that your investment choices will positively boost LGI's productivity and improve the company's operations. Thanks to your efforts, the company will have a plan for financing its investments appropriately. LGI will finally be on a path of a sustainable future. Answer the questions in the Project 5 Questions – Report Template document. Prepare your analysis report including recommendations for how the company can improve its financial situation.
Complete the analysis report:
· Download the Project 5 Questions – Report Template
· Read the instructions.
· Answer all the questions.
· Include your recommendations.
· Submit the analysis report (Word document) and analysis calculation (Excel file) to the dropbox as your final deliverable at the end of Week 10. Label your files as follows:
· P5_Final_lastname_Report_date.docx
· P5_Final_lastname_Calculation_date.xlsx
Check Your Evaluation Criteria
Before you submit your assignment, review the competencies below, which your instructor will use to evaluate your work. A good practice would be to use each competency as a self-check to confirm you have incorporated all of them. To view the complete grading rubric, click My Tools, select Assignments from the drop-down menu, and then click the project title.
· 3.1: Identify numerical or mathematical information that is relevant in a problem or situation.
· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.
· 3.3: Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.
· 10.4: Make strategic managerial decisions for obtaining capital required for achieving organizational goals.
Learning Topic
Learning Resource List for MBA 620 by Project
Resources
Project #1
Required Reading
Parrino, R., Kidwell, D., & Bates T. (2011). Fundamentals of corporate finance (2nd ed.). Wiley.
Chapter 3: Financial Statements, Cash Flows, and Taxes
· Sections 3.1 to 3.6
Chapter 4: Analyzing Financial Statements
· Sections 4.1 to 4.6
Recommended Reading
Davis, C. E., & Davis, E. (2011). Managerial accounting . Wiley. (Chapters 12 and 13)
Project #2
Required Reading
Webster, T. J. (2015). Managerial economics: tools for analyzing business strategy. Lexington Books.
· Pages 21–50
· Pages 55–72
Chapter 7: Industry Organization
· Pages 169–177
Recommended Reading
The Saylor Foundation. (2012). Principles of managerial economics (v. 1.0).
Chapter 1: Introduction to Managerial Economics
Chapter 2: Key Measures and Relationships
Chapter 4: Cost and Production
Project #3
Required Reading
Davis, C. E., & Davis, E. (2011). Managerial accounting . Wiley.
Chapter 3: Cost-Volume-Profit Analysis and Pricing Decisions
· Sections 3.1 to 3.3
Chapter 7: Activity-Based Costing and Activity-Based Management
· Sections 7.1 to 7.2
Recommended Reading
Chapter 2: Cost Behavior and Cost Estimation
· Sections 2.1 to 2.3
Project #4
Required Reading
Parrino, R., Kidwell, D., & Bates T. (2011). Fundamentals of corporate finance (2nd ed.). Wiley.
Chapter 5: The Time Value of Money
· Sections 5.1 to 5.4
Chapter 6: Discounted Cash Flows and Valuation
· Sections 6.1 to 6.4
Recommended Reading
Davis, C. E. & Davis, E. (2011). Managerial accounting . Wiley. ( Chapter 9, Capital Budgeting )
Project #5
Required Reading
Parrino, R., Kidwell, D., & Bates T. (2011). Fundamentals of corporate finance (2nd ed.). Wiley.
· Sections 7.1 to 7.7
Chapter 10: The Fundamentals of Capital Budgeting
· Sections 10.1 to 10.6
Chapter 13: The Cost of Capital
· Sections 13.1 to 13.4
Recommended Reading
Clayman, M. R., Fridson, M. S., & Troughton, G. H. (2012). Corporate finance: A practical approach (2nd ed.). Wiley.
Learning Resource List for MBA 620 by Book
Required Reading
Parrino, R., Kidwell, D., & Bates T. (2011). Fundamentals of corporate finance (2nd ed.). Wiley.
Chapter 3: Financial Statements, Cash Flows, and Taxes
· Section 3.1 to 3.6
Chapter 4: Analyzing Financial Statements
Sections 4.1 to 4.6
Chapter 5: The Time Value of Money
· Sections 5.1 to 5.4
Chapter 6: Discounted Cash Flows and Valuation
· Sections 6.1 to 6.4
Webster, T. J. (2015). Managerial economics: tools for analyzing business strategy. Lexington Books.
· Pages 21–50
· Pages 55–72
Chapter 7: Industry Organization
· Pages 169–177
Davis, C. E., & Davis, E. (2011). Managerial accounting . Wiley.
Chapter 3: Cost-Volume-Profit Analysis and Pricing Decisions
· Section 3.1 to 3.3
Chapter 7: Activity-Based Costing and Activity-Based Management
· Sections 7.1–7.2
Parrino, R., Kidwell, D., & Bates T. (2011). Fundamentals of corporate finance (2nd ed.). Wiley.
· Sections 7.1 to 7.7
Chapter 10: The Fundamentals of Capital Budgeting
· Sections 10.1 to 10.6
Chapter 13: The Cost of Capital
· Sections 13.1 to 13.4
Recommended Reading
Davis, C. E., & Davis, E. (2011). Managerial accounting . Wiley.
Chapter 2: Cost Behavior and Cost Estimation
· Sections 2.1–2.3
Chapter 12: Financial Statement Analysis
Chapter 13: Statement of Cash Flows
The Saylor Foundation. (2012). Principles of managerial economics (v. 1.0).
Chapter 1: Introduction to Managerial Economics
Chapter 2: Key Measures and Relationships
Chapter 4: Cost and Production
Clayman, M. R., Fridson, M. S., & Troughton, G. H. (2012). Corporate finance: A practical approach (2nd ed.). Wiley.
