Assume you have been hired to join a team serving as an internal financial analyst to THE COMPANY. Your client plans to invest in bonds and (or) stocks issued by THE COMPANY (ODFL). In part, 6 of the assignment you are asked to provide some recommendations to THE COMPANY’S management.  

Assume you have been hired to join a team serving as an internal financial analyst to THE COMPANY. Your client plans to invest in bonds and (or) stocks issued by THE COMPANY (ODFL). In part, 6 of the assignment you are asked to provide some recommendations to THE COMPANY’S management.   150 150 Affordable Capstone Projects Written from Scratch

Research Project (5 Pages)

Bond and Stock Performance Analysis

Company: OFDL (Old Dominion Freight Line)

 

PRESENTATION OF PAPER AND WRITING

Organization, Format and Presentation of Paper including the Title page, Introduction, Body, and Summary. Each section of the paper must begin with a sub-heading.  Please use the sub-headings included in the assignment.

Use of Tables, Figures and Other Graphics to Summarize and Support Analysis Presented in the Paper.

Logical and Smooth Flowing Transitions and Relationships among Sections of the Written Report.

Research Sources and Significance of Research Information and Data, Use of APA Citation Methodology.

OBJECTIVE

Assume you have been hired to join a team serving as an internal financial analyst to THE COMPANY. Your client plans to invest in bonds and (or) stocks issued by THE COMPANY (ODFL). In part, 6 of the assignment you are asked to provide some recommendations to THE COMPANY’S management.

THE COMPANY for this part of the project must have bonds listed on the website http://finra-markets.morningstar.com/BondCenter/Default.jsp. To find the information on bonds, click on Search in the middle of the screen (under Market Center Bond Guide), under Quick Search type the Issuer Name and the Symbol, and click SHOW RESULTS.

SUGGESTED WEBSITES

www.morningstar.com - To find the information for your company you need to type the stock symbol in the Quotes window to get into the company’s page.

http://finra-markets.morningstar.com/BondCenter/Default.jsp - To find the information on bonds, click on Search in the middle of the screen (under Market Center Bond Guide), under Quick Search type the Issuer Name and the Symbol, and click SHOW RESULTS.

www.marketwatch.com  -To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.

www.money.cnn.com  -To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.

www.finance.yahoo.com - To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.

www.nyse.com – Click on Data, then click on Stocks (under Quotes), and type the name of the company or the stock symbol in the window “Keyword or symbol” to get into the company’s page.

www.nasdaq.com - To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.

 

Specific Assignment

Please develop evaluation of bond and stock performance for THE COMPANY (OFDL).

  1. Background and Industry (one shortparagraph).
  2. The financial leverageratios
  3. a) Find the financial leverageratios for ODFLfor the last 3-5 years in the Internet. Present these ratios as the table(s) in the project.

Debt-to-assets ratio (Debt ratio)

Debt-to Equity ratio

Interest Coverage ratio (the Times Interest Earned)

  1. b) Write (about) 1 pageof the analysis of theratio results. In analyzing, answer the following questions. Please explain your answer to each question.

How is THE COMPANY financing its assets? Discuss how much risk is associated with the bonds issued by the company? How can this risk be measured? Please explain.

  1. Collect and evaluate the data about bondperformance of the assigned company.

 Copy the quotations of two bonds issued by ODFL that contain the Price. Present these quotations in the project.

Assume that par value of the bond is $1,000. What were the last prices of the bonds in $$$ (listed in the Price column)? Show your work in your project.

Assume that par value of the bond is $1,000. Calculate the annual coupon interest payments. Show your work in your project.

Assume that par value of the bond is $1,000. Calculate the current yield of the bonds. Show your work in your project.

Write a 2 page of the analysis of the bonds. In your analysis, you should answer the following questions. Please explain your answer to each question.

How much is the YTM listed in quotations is for the bonds? Explain the meaning of YTM?

If you are going to buy a bond issued by OFDL, which bond would you choose? Why?

Are these bonds callable? If the bonds that you chose are callable (non-callable), will it change your decision to buy them?

If you are an investor who is looking for a bond to invest in, are you going to buy a bond that you chose? You should develop a specific recommendation, with supporting rationale to explain your answer.

 

  1. Collect and evaluate the data about stock performance of the assigned company for the last one year.  

1) Find the market ratios for the company for the last 1-3 years and its major competitor (FedEx Corp) for the last year in the Internet. 

Present the market ratios as the table(s) in your project.

Write about 1 page of analysis of the market ratio results that you found. Compare the market ratio results against the industry or main competitor. In the report please answer the question: Are the common stockholders receiving an adequate return on their investment?

Compare the P/E ratio of  ODFL with the industry average or 5-year average. Is the stock overvalued, undervalued, or properly valued? Why?  In accordance with your findings, is it reasonable to buy the stock? Please explain your answers.

-2) Analysis of the historical stock prices trend for the last year. 

Collect and evaluate the data about stock prices of the assigned company for the last one year for the company and its major competitor.

Create the chart(s) using the stock price chart tools on the websites or Excel. Present the chart(s) in your project.

Write about 0.5 page of analysis the historic stock prices trend for the last year.

3) Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required return on THE COMPANY stock. Note that you will need the risk-free rate and the market return. Show this information in your project. 

  1. Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required return on stock. Note that you will need the risk-free rate, beta, and the market return.
  2. a) To get the current yield on 10-year Treasury securities go to finance.yahoo.com -click on Markets - U.S. Treasury Bonds Rates.  You will use the current yield on 10-year Treasury securities as the risk-free rate to estimate the required rate of return on stocks. Discuss how appropriate this rate is as a measure of risk.
  3. b) Between 1926 and 2014, the compound annual rate of return of S&P 500 is estimated a 7.5%. We will use this number as the market return.Discuss how appropriate this rate is as a measure of return.
  4. c) Beta is listed in finance.yahoo.comunder Trading Information – Stock Price History, as well as on the company’s front page. What is the beta listed for the company? What does it mean?
  5. d)  Calculate the required return on the stockusingthe Capital Asset Pricing Model (CAPM) Security Market Line. Please show your work.
  6. There are several methods how to calculate the growth rate. One of the possible ways is to calculate the sustainable growth rate as g = ROE *(1- Dividend payout ratio). You can find ROE and the dividend Payout Ratio on www.finance.yahoo.comunder Statistics.

Calculate the company’s sustainable growth rate. Please show your work.

  1. Apply the Gordon model (constant growth rate model) to calculate the intrinsic (economic) value of the stock. Please show your work.

Please note that for some companies it is not possible to use the Gordon model. If that is the case, please explain why it is not possible to use this model for your company. What other models is it possible to use?

  1. Compare the result of your calculations with the current stock price. Is the stock overvalued, undervalued, or properly valued? Why?  In accordance with your findings, is it reasonable to buy the stock?Why? Please explain your answer.

-5- Develop a specific recommendation, with supporting rationale for your client, as to whether the assigned company’s recent trend in financial and stock performance is of sufficient financial strength to warrant entering in a long-term investment in bonds and/or stocks of the company. Explain your answer (about 1 page).

-6- Develop a specific recommendation, with supporting rationale for the ODFL’S management - Think about the financial strategy of the company, how to best balance THE COMPANY’S financial leverage to optimize shareholder wealth going forward taking into consideration the company’s current market position, credit rating, dividend policy, etc.

 -7- Reflection - the students should write a paragraph in their own words reflecting on what they learned from the research and how they think they could apply what they learned in the workplace.  

 


 

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