Project Financing: Dow DuPont Company

Project Financing: Dow DuPont Company.

Dow DuPont

Investing in products and services should produce returns so that stockholders, stakeholders, and others are interested in the organization.

In this assignment, you will learn about a new product or service.

Tasks:

For M1 Assignment 3 (“Understanding the Numbers for Better Decisions”), you chose a publicly-traded company ( Dow DuPont Company) and analyzed its financial statements. Use that company to do the following:

  1. Identify a new product or service—either recently rolled out or about to be rolled out—in the  Dow DuPont Company  you chose in Module 1 (Note: Information about new products or services can be found on a company’s website or in the management’s discussion and analysis section of the company’s annual report.If you cannot locate a new product or service introduced by the company please invent something.)
  2. Analyze the quality of the  Dow DuPont Company existing products or services. Try answering the following questions about returns on the new product or service of your choice.
    • What is the return on equity earned by the company? Based upon this return, is the company picking good products or services?
    • What is the return on capital earned by the company? Based upon this return, is the company picking good products or services?
  3. Discuss how the  Dow DuPont Company financed the initiative and why it was perceived to be advantageous. To answer this question, you might want to look at the following:
    • How sensitive has this company’s value been to changes in macro-economic variables such as interest rates, currency movements, inflation, and the economy?
    • How sensitive has this company’s operating income been to changes in the same variables?
    • How sensitive is the sector’s value and operating income to the same variables?

Project Financing: Dow DuPont Company

What is the equity in your account after 2 years and would you have received a margin call before the 2-year time period elapsed?

What is the equity in your account after 2 years and would you have received a margin call before the 2-year time period elapsed?.

margin call

Problem 1

You buy 100 shares of GE in a margin account at $60 a share

The initial margin is 40%

The cost of borrowing is 5% (from your broker)

The stock pays a dividend of $1 a share

The minimum maintenance requirement is 20%

1) In 1 year the stock rises to $80 – what is the percentage return on your investment?

2) Calculate the % return if you had not used margin (cash account)- why are they different?

Given that net worth = Assets (items of value) – Liabilities (things you owe)

3) What would your net worth be if the stock dropped to $35 in 1 year? Explain what would most likely happen in this scenario.

4) Calculate the price at which you will receive a margin call – base your calculation on the information that is present when you make the purchase – hence at time t=0

Problem 2

You sell short 100 shares of ABC at $75 a share

The initial margin is 50%

The cost of borrowing money in the margin account in 5%

Ignore cost of borrowing shares

The stock pays a dividend of $2 a share

The minimum maintenance requirement is 20%

5) Calculate the price at which you will receive a margin call – base your calculation on the information that is present when you initiate the short sale – hence at time t=0

6) In 2 years the stock rises to $100 a share – what is the annual percentage return on your investment?

7) What is the equity in your account after 2 years and would you have received a margin call before the 2-year time period elapsed? Explain

What is the equity in your account after 2 years and would you have received a margin call before the 2-year time period elapsed?

Describe two (2) financial career options that an individual with a finance education might pursue and explain the value that such a position adds to a company.

Describe two (2) financial career options that an individual with a finance education might pursue and explain the value that such a position adds to a company..

Financial career options

Finance is an exciting field in need of intelligent, skilled people. The job opportunities range from corporate finance; financial planning; investment banking; insurance; and real estate from individuals, institutions, government, and businesses. Finance managers acquire, spend, and manage money and other financial assets.

Use the Internet and / or Strayer Resource Center to research career options within the field of finance. Consider the Bureau of Labor Statistics Website, and the Websites of finance professional associations such as the Association for Financial Professionals (AFP), Society of Financial Service Professionals (SFSP), The National Association for Personal Financial Advisors (NAPFA), and Financial Management Association International (FMA).

Write a two to three (2-3) page paper in which you:

  1. Describe two (2) financial career options that an individual with a finance education might pursue and explain the value that such a position adds to a company.
  2. Explain the essential skills that would make a person successful in each of the described positions.
  3. Recommend one (1) of the career options. Identify the most attractive features of the position.
  4. Format your assignment according to the following formatting requirements:
    1. Typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
    2. Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page is not included in the required page length.

Describe two (2) financial career options that an individual with a finance education might pursue and explain the value that such a position adds to a company.

World Gourmet Coffee Company (WGCC) is a distributor and processor of different blends of coffee

World Gourmet Coffee Company (WGCC) is a distributor and processor of different blends of coffee.

World Gourmet Coffee Company

World Gourmet Coffee Company (WGCC) is a distributor and processor of different blends of coffee. The company buys coffee beans from around the world and roasts, blends, and packages them for resale. WGCC currently has 15 different coffees that it offers to gourmet shops in one-pound bags. The major cost is raw materials; however, there is a substantial amount of manufacturing overhead in the predomi-nantly automated roasting and packing process. The company uses relatively little direct labor.

Some of the coffees are very popular and sell in large volumes, while a few of the newer blends have very low volumes. WGCC prices its coffee at full product cost, including allocated overhead, plus a markup of 30 percent. If prices for certain coffees are significantly higher than market, adjustments are made. The company competes primarily on the quality of its products, but customers are price-conscious as well.

Data for the 20×1 budget include manufacturing overhead of $3,000,000, which has been allocated on the basis of each product’s direct-labor cost. The budgeted direct-labor cost for 20×1 totals $600,000. Based on the sales budget and raw-material budget, purchases and use of raw materials (mostly coffee beans) will total $6,000,000.

The expected prime costs for one-pound bags of two of the company’s products are as follows:

 

Kona                     Malaysian

Direct material ………………………………………………………….       $3.20                        $4.20

Direct labor ……………………………………………………………….          .30                            .30

 

WGCC’s controller believes the traditional product-costing system may be providing misleading cost information. She has developed an analysis of the 20×1 budgeted manufacturing-overhead costs shown in the following chart.

 

ActivityCost DriverBudgeted ActivityBudgeted Cost

Purchasing …………………………..Purchase orders …………………. 1,158 …………..$ 579,000

Material handling …………………Setups ………………………………. 1,800 ……………..720,000

Quality control……………………..Batches …………………………….. 720 ………………..144,000

Roasting ……………………………..Roasting hours …………………….96,100 ……………961,000

Blending ……………………………..Blending hours…………………….33,600 ……………336,000

Packaging ……………………………Packaging hours ………………….26,000 ………….. 260,000

 

Total manufacturing-overhead cost …………………………………………………………..$3,000,000

 

Data regarding the 20×1 production of Kona and Malaysian coffee are shown in the following table. There will be no raw-material inventory for either of these coffees at the beginning of the year.

 

Kona             Malaysian

Budgeted sales ……………………………………………………………………2,000 lb.             100,000 lb.

Batch size ……………………………………………………………………………..500 lb.               10,000 lb.

Setups ………………………………………………………………………………3 per batch            3 per batch

Purchase order size …………………………………………………………………500 lb.               25,000 lb.

Roasting time ………………………………………………………………..  1 hr. per 100 lb.     1 hr. per 100 lb.

Blending time ……………………………………………………………..   .5 hr. per 100 lb.     .5 hr. per 100 lb.

Packaging time …………………………………………………………….  .1 hr. per 100 lb.     .1 hr. per 100 lb.

 

Required:

  1. Using WGCC’s current product-costing system:
  2. Determine the company’s predetermined overhead rate using direct-labor cost as the single cost driver.
  3. Determine the full product costs and selling prices of one pound of Kona coffee and one pound of Malaysian coffee.

 

  1. Develop a new product cost, using an activity-based costing approach, for one pound of Kona coffee and one pound of Malaysian coffee.

 

  1. What are the implications of the activity-based costing system with respect to
  2. The use of direct labor as a basis for applying overhead to products?
  3. The use of the existing product-costing system as the basis for pricing?

World Gourmet Coffee Company (WGCC) is a distributor and processor of different blends of coffee

The creation of an external capital funding proposal

The creation of an external capital funding proposal.

Overview: The final project for this course is the creation of an external capital funding proposal.

Most businesses face a landscape of uncertainty and a never-ending stream of risks and opportunities. Managers must continually project the likely financial
impact of decisions, make recommendations, act on those decisions, determine how to pay for them, and evaluate the costs and effectiveness of what has been
done. Many decisions are short-term, routine, and operational. Others are longer-term investment decisions that require substantial new resources, such as
developing new services, expanding into new geographic markets, or undertaking business combinations or spin-offs. Each requires managers to forecast, plan,
and make decisions based on a thorough understanding of both internal and external factors that can affect a company’s financial success.
For the summative assessment in this course, you will bring your finance and economics knowledge to bear by preparing an external capital funding proposal for
a major international investment at a publicly traded corporation. In order to secure the support of potential financial backers, your proposal will need to lay out
what the proposed investment opportunity is, how it fits within the company’s broader mission and goals, its financial impact, and the amount being requested
and why (including alternative funding mechanisms considered). In addition, it will also need to include information on the organization’s context, risk factors,
and microeconomic assumptions that could affect the success of the investment.
Prompt: You have already chosen the company you will use for your final project, and you have started a narrative description of your expansion project into
another country. In this milestone, you will build on that narrative description providing sufficient detail about the expansion, its costs, and its time frame to give
a loan committee a firm sense of the proposed investment. You will also analyze the impact of the investment proposal on your business by explaining why now
is the right time for this investment given the global context and by explaining how the investment is a good strategic fit with your company. This milestone
addresses all of Section II and Section III (Parts A and B only) of the final project.
Specifically, the following critical elements must be addressed:
II. Investment Project: Use this section to describe the investment for which you are seeking funding, its costs, and time frame. Specifically, you should:
A. Describe the investment project. Be sure to provide sufficient detail to give the loan committee a firm sense of the parameters of the activity, the
need for it, and what financial metrics are relevant for determining success. In other words, what do you propose to do, where, what marketplace
need will it fill, and how will you measure success?
B. Specify the resources the project will require and where these resources will come from. In addition to noting the amount of the loan you are
requesting, you should also consider human resources, facilities, government approvals, intellectual property, access to natural resources, and other
resources that might be required to carry out the project.
C. Time frame. When will the project start, what is the anticipated economic life of the proposed expansion, and how will you decide if, when, or how
to exit? Justify your choices with appropriate financial metrics.
III. Justification: In this section, you should analyze the impact of the investment proposal on your business. In particular, you should cover:
A. Why is now a good time for this investment given the global context? Justify your response, citing specific external factors such as trade regulations,
foreign currency considerations, or trends in foreign direct investment that might affect business financial decisions.
B. Strategic fit. Use this section to discuss why the investment proposal makes sense for your company strategically. Specifically:
1. How does the investment align with the company’s organizational and financial priorities? Support your argument with evidence from
company reports and financial statement analysis designed to persuade the lender that the investment is a good strategic fit for your
company.
2. How does the project fit within the global microeconomic environment? Support your response with evidence. For example, would the
expansion tap unmet demand for the company’s key products or services or fill a new niche? How do you know?
3. How does the project build on the organization’s core competencies and comparative advantage? For example

 

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The creation of an external capital funding proposal

Effective financial reporting depends on sound ethical behavior.

Effective financial reporting depends on sound ethical behavior..

Effective financial reporting

Effective financial reporting depends on sound ethical behavior. Financial scandals in accounting and the businesses world have resulted in legislation to ensure adequate disclosures and honesty and integrity in financial reporting.  A sound economy is contingent on truthful and reliable financial reporting.

Instructions:

-Read the following scenario.

-Answer the questions that follow. Your answers should result in a 2-3 page submission.

-Reference back to your text book for guidance on how to think through the scenario.

Scenario:

Imagine you are the assistant controller in charge of general ledger accounting at Linbarger Company. Your company has a large loan from an insurance company. The loan agreement requires that the company’s cash account balance be maintained at $200,000 or more, as reported monthly. At June 30, the cash balance is $80,000. You give this update to Lisa Infante, the financial vice president. Lisa is nervous and instructs you to keep the cash receipts book open for one additional day for purposes of the June 30 report to the insurance company. Lisa says, “If we don’t get that cash balance over $200,000, we’ll default on our loan agreement. They could close us down, put us all out of our jobs!” Lisa continues, “I talked to Oconto Distributors (one of Linbarger’s largest customers) this morning. They said they sent us a check for $150,000 yesterday. We should receive it tomorrow. If we include just that one check in our cash balance, we’ll be in the clear. It’s in the mail!”

Questions

1. What is the accounting problem that the Linbarger Company faces?

2. What are the ethical considerations in this case? Provide rationale for why these are ethical considerations.

3. What are the negative impacts that can happen if you do not follow Lisa Infante’s instructions to wait one more day to post the balance?

4. Who will be negatively impacted if you do comply? Provide a rationale for why these individuals will be impacted.

5. What is one alternative that you could pursue in this scenario? Support your recommendations with information you learned in this cl

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Effective financial reporting depends on sound ethical behavior.

Social and economic factors have always played a role in personal financial planning.

Social and economic factors have always played a role in personal financial planning..

Social and economic factors

Social and economic factors have always played a role in personal financial planning. Social factors include the standard that has been set by society. For example, people believe that if someone is successful then they should be dressed in expensive name brand clothes and drive a new car. Another social factor is the cost of being social today. For example, many people think that to be social, one should be out with friends or colleagues for drinks after work or events every other weekend. Even my kids birthday parties are expected to be a huge event rather than a simple cake and ice cream at home with family. Economic factors include the cost of living, the state of the housing market, the stock market, and the economy of the state you live in or plan to live in. For example, a fall in the housing market would affect the current equity I have or will have. A rise in the housing market would also affect that, but in a positive way. The cost of living is important because if you can’t afford to pay the price it costs just to make by, you certainly won’t be saving for your future.

 

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Social and economic factors have always played a role in personal financial planning.

Research & Analysis of Business Problems

Research & Analysis of Business Problems.

Research & Analysis of Business Problems

Requirements

 

  • Using the weighted matrix provided in D2L you will choose one solution.
  • Perform a cost/benefit analysis of your solution.
  • This is the ONE assignment that does not require a bibliography.

 

Assignment: 2 tables

 

  • Weigh your possible solutions in a weighted matrix table. On the lines below the table describe your 3 proposed solutions in 1-2 sentences each.

 

You have completed a thorough contextual analysis of your company, and have identified a problem that you will tackle in the paper. Based on your causal analysis, brainstorm and identify 3-4 plausible solutions to address the problem. Be sure they are feasible and ethical solutions. Your solutions should make sense and show solid business decision thinking.

 

Using the weighted-criteria decision matrix tool we discussed in class, and business thinking to determine key criteria you will use to evaluate the solutions. Build your matrix and evaluate which of the solutions will best solve the problem.

 

  • Take the ONE solution from your weighted matrix table and do a cost benefit analysis.

 

Using the Cost Benefit Analysis tool discussed in class, identify the tangible and intangible costs and benefits associated with your solution. At this point I just want you to identify and list them.  If possible, you should try to quantify the tangible components in your final paper.  Put this in a table format.

 

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Research & Analysis of Business Problems

Liquidity and Liquidity Risk in Small Firms

Liquidity and Liquidity Risk in Small Firms.

Liquidity and Liquidity Risk in Small Firms

The file Project 3.xls in the Projects folder contains the end-of-month prices of the
Columbia Small Cap Core fund (ticker: FSCRX) in the period from November 2000 to
December 2014. The file Project 3.xls also provides you with the Fama-French factors
(MKT-RF, SMB, HML) and the risk-free rate (RF) in the same time period. Project 3.xls
also provides, for a longer sample from January 1964 to December 2014, the market-wide
liquidity measure called Pastor-Stambaugh gamma we discussed in class (Gamma column),
as well as its innovations computed by Pastor and Stambaugh (IGamma column) and the
value-weighted returns to the five portfolios sorted on market capitalization. Use these
data to answer the questions below:
i. Estimate the Fama-French model for the Small Cap fund. Does the fund beat the
Fama-French model by a statistically significant amount? (5 points)
ii. Partition Pastor-Stambaugh gamma into the expected part and the innovation using
the first-order autoregression. Please write down the regression equation for the autoregression
(with estimated coefficients) and report means and standard deviations
of the illiquidity measure and its news component. (10 points)
iii. Your colleague suggests that you can avoid doing the regression in (ii) and take the
simple change in Pastor-Stambaugh gamma as a proxy for the innovation. Looking
at the estimation output in (ii), what would be wrong with doing that? (5 points)
iv. Construct the simple change suggested in (iii). Look at the correlation between
IGamma column and your version of the innovation to Gamma from (ii) and the
correlation between IGamma and the simple change in Gamma. Comment on their
magnitude and how they compare with each other. (You can assume that IGamma
is the true innovation and the other two are proxies for IGamma). (10 points)
1
v. (Bonus question) Compute two more correlations: between Gamma and IGamma
and between the innovation from (ii) and Gamma. Why do you think you get the
results you get? (10 points)
vi. Regress the fund returns on MKT, SMB, HML, and IGamma. What do you learn
from the sign of the slope on IGamma? Does it help to understand where the alpha
is coming from or does it make the alpha more puzzling? (15 points)
vii. Form the factor-mimicking portfolio for IGamma using the five size portfolios. Please
report the factor-mimicking regression with the estimated coefficients and R-square.
(Hint: You may want to multiply the news component by 100 for scaling purposes).
Does it look like a good factor-mimicking regression? (10 points)
viii. (Bonus question) Look at the slopes from the factor-mimicking regression in (vii).
Are their signs and the relations between them consistent with your expectations?
(Hint: Think about the flight-to-quality effect we discussed in class). (10 points)
ix. Project 3.xls also has the PS-VW tradable factor we discussed in class (it starts
in January 1968). Estimate the correlation between the factor-mimicking portfolio
from (vii) and PS-VW. Comment on its sign and its magnitude. Do you expect it
to be positive? Do you expect it to be large? (5 points)
x. Estimate the Fama-French model for the PS-VW portfolio and the factor-mimicking
portfolio you formed in (vii) using all the data you have. What do the signs of the
alphas and the Fama-French betas tell you about whether either of them is a good
liquidity risk factor? Are you surprised about the signs of the alphas and betas or
did you expect them to turn out this way? (15 points)
xi. Regress the fund returns on MKT, SMB, HML, and PS-VW. What do you learn from
the slope on PS-VW? Is the slope on PS-VW consistent with the slope on IGamma
in (vi)? Explain your reasoning. (15 points)
xii. What do you learn from the alpha in (xi) and how it compares with the alpha in (i)?
What is the main difference between the intercept in (vi) and (xi)? (10 points)

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Liquidity and Liquidity Risk in Small Firms

Describe the ways in which your company is committed to being a good corporate citizen.

Describe the ways in which your company is committed to being a good corporate citizen..

Describe the ways in which your company is committed to being a good corporate citizen.

Hints: Consider the following areas:

Creating jobs

Following the laws of every jurisdiction in which your company operates

Fair and honest treatment of employees

Non-discrimination of employees and increasing diversity of your work force

Hints: If your company is designed as a social venture—in which you have a primary purpose of achieving a social or environmental goal—describe what that goal is and what aspects of your company are designed to reach that goal. Provide a rationale for why you have or why you have not chosen this to be a social venture.

Discuss how your company’s activities will affect the environment and identify the steps you will take to mitigate any negative impacts.

Hints: As a beverage company, consider such issues as your choice of packaging, disposal of bottles / packages by consumers, and your use of resources, such as water in areas where water may be scarce.

Determine any health issues / claims related to the product you are making, whether negative or positive. Suggest the strategy your company will use to mitigate any negative issues, and to ensure any positive claims are true.

Many beverage products have negative health impacts on certain segments of a population (e.g., children, pregnant mothers, etc.). Suggest your company’s plan, through advertising, distribution, and / or other methods, to target and reach only appropriate market segments.

Format your assignment according to these formatting requirements:

Cite the resources you have used to complete the exercise. Note: There is no minimum requirement for the number of resources used in the exercise.

Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; references must follow APA or school-specific format. Check with your professor for any additional instructions.

Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required page length.

Section 2: Business Plan Financials (MS Excel worksheets template)

For year one, revise and submit the Income Statement, Cash Flow Projections, and Balance Sheet sections from the “Business Plan Financials” MS Excel template (see: Course Required Files in Week 1).

The specific course learning outcomes associated with this assignment are:

Describe strategic planning techniques used to formulate alternative strategies designed to achieve stated business goals.

Create a plan to implement a firm’s strategy and manage the change from current operations.

Analyze strategies for exerting the internal leadership needed to drive the implementation of strategic initiatives and improve operating excellence.

Use technology and information resources to research issues in strategic management.

Write clearly and concisely about strategic management using proper writing mechanics.

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Describe the ways in which your company is committed to being a good corporate citizen.