financial statement analysis

FIN 442 | Spring 2018 | Homework 4

(1) Calculate the value of the bond using the following information. What has caused this valuation in regards to the face value? (2 pt):

· 5 Year Maturity

· $100 Face Value

· 5% Annual Coupon Rate

· 1.5% Risk Free Rate

· 2% Credit Spread

(2) Using the same bond from problem (1), please calculate both the value of the bond at amortized cost and fair value after the bond payment in the second year, assuming that the Federal government has raised the risk free rate by 1%. What has happened to the fair value and why? (2 pt).

(3) Using the attached KMB Data sheet, please calculate the following liquidity and credit ratios (16 pts)

· Total Debt = Short Term Debt + Long Term Debt

· Recall Interest Expense line item from the last time we did this exercise

· For FFO/Total Debt there is no amortization expense and for now we will assume no non cash items

· Don’t use average items, just use straight line

· Pick three ratios, compare them to the industry, and comment on their strengths and/or weaknesses.