≠≠FIN301 Class Web Page, Fall ' 19

Instructor: Maggie Foley

Jacksonville University

 

The Syllabus 

Business Finance Online, an interactive learning tool for the Corporate Finance Student http://www.zenwealth.com/BusinessFinanceOnline/index.htm

 

 

Weekly SCHEDULE, LINKS, FILES and Questions

Chapter

Coverage, HW, Supplements

-        Required

References

 

Chapter 1, 2

Marketwatch Stock Trading Game (Pass code: havefun)

Use the information and directions below to join the game.

1.     URL for your game: 
http://www.marketwatch.com/game/jufin301-19f

2.     Password for this private game: havefun.

3.     Click on the 'Join Now' button to get started.

4.     If you are an existing MarketWatch member, login. If you are a new user, follow the link for a Free account - it's easy!

5.     Follow the instructions and start trading!

Discussion:How to pick stocks (finviz.com)

Daily earning announcement: http://www.zacks.com/earnings/earnings-calendar

IPO schedule:http://www.marketwatch.com/tools/ipo-calendar

 

FYI: MarketWatch Stock Game written by Maelyn OíConnor (Thanks, Maelyn)

 

 

Chapter1: Introduction

image001.jpg

 Note:

Flow of funds describes the financial assets flowing from various sectors through financial intermediaries for the purpose of buying physical or financial assets.

*** Household, non-financial business, and our government

 

Financial institutions facilitate exchanges of funds and financial products.

*** Building blocks of a financial system. Passing and transforming funds and risks during transactions.

*** Buy and sell, receive and deliver, and create and underwrite financial products.

*** The transferring of funds and risk is thus created. Capital utilization for individual and for the whole economy is thus enhanced.

 

Chapter 2 Introduction of Financial Market

ppt

 

1.     What are the six parts of the financial markets

Money:

         To pay for purchases and store wealth (fiat money, fiat currency)

Financial Instruments:

         To transfer resources from savers to investors and to transfer risk to those best equipped to bear it.††

Financial Markets:

         Buy and sell financial instruments

         Channel funds from savers to investors, thereby promoting economic efficiency

         Affect personal wealth and behavior of business firms. Example?

Financial Institutions.

         Provide access to financial markets, collect information & provide services

         Financial Intermediary: Helps get funds from savers to investors

Central Banks

         Monitor financial Institutions and stabilize the economy

Regulatory Agencies

         To provide oversight for financial system.

 

2.      What are the five core principals of finance

  • Time has value
  • Risk requires compensation
  • Information is the basis for decisions
  • Markets determine pricesand allocation resources
  • Stability improves welfare

 

Introduction to Capital Markets - ION Open Courseware (Video)

How the stock market works (video)

 

No homework for chapter 2

 

Chapter 5

Chapter 5 Time value of Money

ppt

Time value of money (Video)

The time value of money - German Nande (video)

 

Tutoring of Time Value of Money calculation in Excel

 

 

Chapter 5 in class exercise

 

 

Chapter 5 Homework (due on first mid term)††

 

1.        You deposit $5,000 in a saving account at 10% compounded annually. How much is your first year interest? How much is your second year interest? (500, 550)

 

2.        What is the future value of $5,000 invested for 3 years at 10% compounded annually? ( 6,655)

 

3.        You just bought a TV for $518.4 on credit card. You plan to pay back of $50 a month for this credit card debt. The credit card charges you 12% of interest rate on the monthly basis. So how long does it take to pay back your credit card debt? (11 months)

 

4.        You are going to deposit certain amount in the next four years. Your saving account offers 5% of annual interest rate.

First year: †††††††††††††† $800

Second year: †††††††††† $900

Third year: ††††††††††††† $1000

Fourth year: ††††††††††† $1200.

How much you can withdraw four years later? (4168.35)

 

5.        You are going to deposit certain amount in the next four years. Your saving account offers 5% of annual interest rate.

First year: †††††††††††††† $800

Second year: †††††††††† $900

Third year: ††††††††††††† $1000

Fourth year: ††††††††††† $1200.

How much is the lump sum value as of today (NPV)? (3429.31)

 

6.        Ten years ago, you invested $1,000. Today it is worth $2,000. What rate of interest did you earn? (7.18%)

 

7.        At 5 percent interest, how long would it take to triple your money? (22.52)

 

8.        What is the effective annual rate if a bank charges you 12 percent compounded monthly? (12.68%)

 

9.        Your father invested a lump sum 16 years ago at 8% interest for your education. Today, that account worth $50,000.00. How much did your father deposit 16 years ago? ($14594.50)

 

10.     You are borrowing $300,000 to buy a house. The terms of the mortgage call for monthly payments for 30 years at 3% interest. What is the amount of each payment?  ($1264.81)

 

11.     You deposit $200 at the beginning of each month into your saving account every month. After two years (24 deposits total), your account value is $6,000. Assuming monthly compounding, what is your monthly rate that the bank provides?(1.74%)

 

12.     You want to buy a fancy car. For this goal, you plan to save $5,500 per year, beginning immediately.You will make 4 deposits in an account that pays 8% interest.Under these assumptions, how much will you have 4 years from today? ($26,766)

 

13.     Citi card is giving you a good deal. You can transfer your balance from your current credit card to Citi new card with $50 balance transfer fee. The new card charges at 5% a year. But your old card charges at 12% a year. Your balance in your old card is $5,000. If you can afford to pay back to the credit card of $250 a month. How much quicker does it take you to pay back your debt with the new card? (Hint: for the new card, your debt = 5000+50=5050; Assume monthly compounding by credit card companies). (1.28 months)

14.     Your girlfriend just won the Florida lottery.She has the choice of $40,000,000 today or a 20-year annuity of $2,850,000, with the first payment coming one year from today. If the mutual fund of hers provides 4% of return each year for the next 20 years, which payment option is more attractive to her? ($40million)

15.     The Thailand Co. is considering the purchase of some new equipment. The quote consists of a quarterly payment of $4,740 for 10 years at 6.5 percent interest. What is the purchase price of the equipment? ($138,617.88)

16.     The condominium at the beach that you want to buy costs $249,500. You plan to make a cash down payment of 20 percent and finance the balance over 10 years at 6.75 percent. What will be the amount of your monthly mortgage payment? ($2,291.89)

17.     Today, you are purchasing a 15-year, 8 percent annuity at a cost of $70,000. The annuity will pay annual payments. What is the amount of each payment? ($8,178.07)

18.     Shannon wants to have $10,000 in an investment account three years from now. The account will pay 0.4 percent interest per month. If Shannon saves money every month, starting one month from now, how much will she have to save each month? ($258.81)

19.     Trevor's Tires is offering a set of 4 premium tires on sale for $450. The credit terms are 24 months at $20 per month. What is the interest rate on this offer? (6.27 percent)

20.     Top Quality Investments will pay you $2,000 a year for 25 years in exchange for $19,000 today. What interest rate are you earning on this annuity? (9.42 percent)

21.     You have just won the lottery! You can receive $10,000 a year for 8 years or $57,000 as a lump sum payment today. What is the interest rate on the annuity? (8.22 percent)

22.     Around Town Movers recently purchased a new truck costing $97,000. The firm financed this purchase at 8.25 percent interest with monthly payments of $2,379.45. How many years will it take the firm to pay off this debt? (4.0 years)

23.     Expansion, Inc. acquired an additional business unit for $310,000. The seller agreed to accept annual payments of $67,000 at an interest rate of 6.5 percent. How many years will it take Expansion, Inc. to pay for this purchase? (5.68 years)

24.     You want to retire early so you know you must start saving money. Thus, you have decided to save $4,500 a year, starting at age 25. You plan to retire as soon as you can accumulate $500,000. If you can earn an average of 11 percent on your savings, how old will you be when you retire? (49.74 years)

25.     You just received a credit offer in an email. The company is offering you $6,000 at 12.8 percent interest. The monthly payment is only $110. If you accept this offer, how long will it take you to pay off the loan? (82.17 months)

26.     Fred was persuaded to open a credit card account and now owes $5,150 on this card. Fred is not charging any additional purchases because he wants to get this debt paid in full. The card has an APR of 15.1 percent. How much longer will it take Fred to pay off this balance if he makes monthly payments of $70 rather than $85? (93.04 months)

27.     Bridget plans to save $150 a month, starting today, for ten years. Jordan plans to save $175 a month for ten years, starting one month from today. Both Bridget and Jordan expect to earn an average return of 8 percent on their savings. At the end of the ten years, Jordan will have approximately _____ more than Bridget. ($4,391)

28.     What is the future value of weekly payments of $25 for six years at 10 percent? ($10,673.90)

29.   At the end of this month, Bryan will start saving $80 a month for retirement through his company's retirement plan. His employer will contribute an additional $.25 for every $1.00 that Bryan saves. If he is employed by this firm for 25 more years and earns an average of 11 percent on his retirement savings, how much will Bryan have in his retirement account 25 years from now? ($157,613.33)

30.   Sky Investments offers an annuity due with semi-annual payments for 10 years at 7 percent interest. The annuity costs $90,000 today. What is the amount of each annuity payment? ($6,118.35)
31. Mr. Jones just won a lottery prize that will pay him $5,000 a year for thirty years. He will receive the first payment today. If Mr. Jones can earn 5.5 percent on his money, what are his winnings worth to him today? ($76,665.51)

  Summary of math and excel equations

Math Equations 

FV = PV *(1+r)^n

PV = FV / ((1+r)^n)

N = ln(FV/PV) / ln(1+r)

Rate = (FV/PV)1/n -1

Annuity: N = ln(FV/C*r+1)/(ln(1+r))

Or N = ln(1/(1-(PV/C)*r)))/ (ln(1+r))

 

EAR = (1+APR/m)^m-1

APR = (1+EAR)^(1/m)*m

 

image002.jpg

 

Excel Formulas 

To get FV, use FV function.   

      =abs(fv(rate, nper, pmt, pv))

 

To get PV, use PV function                           

     = abs(pv(rate, nper, pmt, fv))

 

To get r, use rate function                          

     = rate(nper,  pmt, pv, -fv)

 

To get number of years, use nper function       

     = nper(rate,  pmt, pv, -fv)

 

To get annuity payment, use PMT function

     = pmt(rate, nper, pv, -fv)

 

To get Effective rate (EAR), use Effect function

 = effect(nominal_rate, npery)

 

To get annual percentage rate (APR), use nominal function

 = nominal(effective rate,  npery)

 

NPV NFV calculator(FYI, might be helpful)

www.jufinance.com/nfv

 

 

Chapter 3 Financial Statement Analysis

 

Ppt

 

Experts Explain: Financial Statements (well explained, video)

 

************* Introduction ***************

 

Letís compare Nike with GoPro based on 10K (www.nasdaq.com)

Nike Income Statement (values in 000's)

Period Ending:

Trend

5/31/2018

5/31/2017

5/31/2016

5/31/2015

Total Revenue

$36,397,000

$34,350,000

$32,376,000

$30,601,000

Cost of Revenue

$20,441,000

$19,038,000

$17,405,000

$16,534,000

Gross Profit

$15,956,000

$15,312,000

$14,971,000

$14,067,000

Operating Expenses

Research and Development

$0

$0

$0

$0

Sales, General and Admin.

$11,511,000

$10,563,000

$10,469,000

$9,892,000

Non-Recurring Items

$0

$0

$0

$0

Other Operating Items

$0

$0

$0

$0

Operating Income

$4,445,000

$4,749,000

$4,502,000

$4,175,000

Add'l income/expense items

($66,000)

$196,000

$140,000

$58,000

Earnings Before Interest and Tax

$4,325,000

$4,886,000

$4,623,000

$4,205,000

Interest Expense

$0

$0

$0

$0

Earnings Before Tax

$4,325,000

$4,886,000

$4,623,000

$4,205,000

Income Tax

$2,392,000

$646,000

$863,000

$932,000

Minority Interest

$0

$0

$0

$0

Equity Earnings/Loss Unconsolidated Subsidiary

$0

$0

$0

$0

Net Income-Cont. Operations

$1,933,000

$4,240,000

$3,760,000

$3,273,000

Net Income

$1,933,000

$4,240,000

$3,760,000

$3,273,000

 

 

 

Nike Balance Sheet (values in 000's)

Period Ending:

Trend

5/31/2018

5/31/2017

5/31/2016

5/31/2015

Current Assets

Cash and Cash Equivalents

$4,249,000

$3,808,000

$3,138,000

$3,852,000

Short-Term Investments

$996,000

$2,371,000

$2,319,000

$2,072,000

Net Receivables

$3,498,000

$3,677,000

$3,241,000

$3,358,000

Inventory

$5,261,000

$5,055,000

$4,838,000

$4,337,000

Other Current Assets

$1,130,000

$1,150,000

$1,489,000

$1,968,000

Total Current Assets

$15,134,000

$16,061,000

$15,025,000

$15,587,000

Long-Term Assets

Long-Term Investments

$0

$0

$0

$0

Fixed Assets

$4,454,000

$3,989,000

$3,520,000

$3,011,000

Goodwill

$154,000

$139,000

$131,000

$131,000

Intangible Assets

$285,000

$283,000

$281,000

$281,000

Other Assets

$0

$0

$0

$0

Deferred Asset Charges

$2,509,000

$2,787,000

$2,422,000

$2,587,000

Total Assets

$22,536,000

$23,259,000

$21,379,000

$21,597,000

Current Liabilities

Accounts Payable

$5,698,000

$5,143,000

$5,313,000

$6,151,000

Short-Term Debt / Current Portion of Long-Term Debt

$342,000

$331,000

$45,000

$181,000

Other Current Liabilities

$0

$0

$0

$0

Total Current Liabilities

$6,040,000

$5,474,000

$5,358,000

$6,332,000

Long-Term Debt

$3,468,000

$3,471,000

$1,993,000

$1,079,000

Other Liabilities

$0

$0

$0

$0

Deferred Liability Charges

$3,216,000

$1,907,000

$1,770,000

$1,479,000

Misc. Stocks

$0

$0

$0

$0

Minority Interest

$0

$0

$0

$0

Total Liabilities

$12,724,000

$10,852,000

$9,121,000

$8,890,000

Stock Holders Equity

Common Stocks

$3,000

$3,000

$3,000

$3,000

Capital Surplus

$6,384,000

$5,710,000

$7,786,000

$6,773,000

Retained Earnings

$3,517,000

$6,907,000

$4,151,000

$4,685,000

Treasury Stock

$0

$0

$0

$0

Other Equity

($92,000)

($213,000)

$318,000

$1,246,000

Total Equity

$9,812,000

$12,407,000

$12,258,000

$12,707,000

Total Liabilities & Equity

$22,536,000

$23,259,000

$21,379,000

$21,597,000

 

 

Nike Cash Flow Statement(values in 000's)

Period Ending:

Trend

5/31/2018

5/31/2017

5/31/2016

5/31/2015

Net Income

$1,933,000

$4,240,000

$3,760,000

$3,273,000

Cash Flows-Operating Activities

Depreciation

$774,000

$716,000

$662,000

$649,000

Net Income Adjustments

$766,000

($175,000)

$254,000

$502,000

Changes in Operating Activities

Accounts Receivable

$187,000

($426,000)

$60,000

($216,000)

Changes in Inventories

($255,000)

($231,000)

($590,000)

($621,000)

Other Operating Activities

$35,000

($120,000)

($161,000)

($144,000)

Liabilities

$1,515,000

($158,000)

($586,000)

$1,237,000

Net Cash Flow-Operating

$4,955,000

$3,846,000

$3,399,000

$4,680,000

Cash Flows-Investing Activities

Capital Expenditures

($1,028,000)

($1,105,000)

($1,143,000)

($963,000)

Investments

$1,326,000

$118,000

$93,000

$785,000

Other Investing Activities

($22,000)

($21,000)

$16,000

$3,000

Net Cash Flows-Investing

$276,000

($1,008,000)

($1,034,000)

($175,000)

Cash Flows-Financing Activities

Sale and Purchase of Stock

($3,521,000)

($2,734,000)

($2,731,000)

($2,020,000)

Net Borrowings

($29,000)

$1,421,000

$868,000

($26,000)

Other Financing Activities

($55,000)

($29,000)

($22,000)

$0

Net Cash Flows-Financing

($4,835,000)

($2,148,000)

($2,974,000)

($2,790,000)

Effect of Exchange Rate

$45,000

($20,000)

($105,000)

($83,000)

Net Cash Flow

$441,000

$670,000

($714,000)

$1,632,000

 

 

 

For discussion: Which company is better?

 

Letís find it out by comparing stock performance between the two firms.

What is your conclusion?

 

 

 

Nike Stock price chart in the past five years

 

image003.jpg

 

 

 ******* Part I: Balance Sheet and Income Statement **************

Home Depot (Ticker in the market: HD) reported the following information for the year ended January 30th, 2011 (expressed in millions).

Sales: $67,977

Cost of goods sold: $44,693

Marketing, general and administrative expenses: $15,885

Depreciation expenses: $1,616

Interest expense: $530

Tax rate: 36.70%

Number of shares outstanding: 1,623

Dividends paid to stockholders: $1,569.

Use the above information to try to prepare the income statement of Home Depot for the year ended January 30th, 2011 

 

Home Depot (Ticker in the market: HD) reported the following information for the year ended January 30th, 2011 (expressed in millions).

Cash: $545

Accounts receivables: $1,085

Inventories: $10625

Other current assets: $1,224

Gross fixed assets: $38,471

Accumulated depreciation: $13,411

Other fixed assets: $1,586

Accounts payable: $9,080

Short term notes payable: $1,042

Long term debt: $11,114

Total common stock: $3,894

Retained earnings: $14,995

Use the above information to try to prepare the balance sheet of Home Depot for the year ended January 30th, 2011.

 

 

 

GoPro Income Statement (values in 000's)

Period Ending:

Trend

12/31/2017

12/31/2016

12/31/2015

12/31/2014

Total Revenue

$1,179,741

$1,185,481

$1,619,971

$1,394,205

Cost of Revenue