FIN550 SNHU Macroeconomic Items For this milestone, submit a draft of the Macroeconomic Items section of the final project, along with your supporting expl

FIN550 SNHU Macroeconomic Items For this milestone, submit a draft of the Macroeconomic Items section of the final project, along with your supporting explanations. Base your calculations on the data provided in 2017 UPS Annual Report Be sure to substantiate your claims.Submit your calculations on the designated tab of the Final Project Student Workbook and your supporting explanations as a Microsoft Word document.This milestone will be used in your final project. For additional details, please refer the Milestone Four Guildelines and Rubric document.***Include References. See three attachments for additional details.*** Milestone One: Time Value of Money (please fill in YELLOW cells)
Interest Rate
8%
FCF1
FCF2
FCF3
FCF4
Amounts*
Pv*
0.00
Total Pv*
*In millions
0.00
Pv=FVN/(1+I)^N
$0.00
PV(I,N,0,FV)
$0.00
$0.00
Explanations:
FCF (Free Cash Flow) is the net change in cash generated by the o
business during a reporting period, minus cash outlays for working
expenditures, and dividends during the same period. This is a stro
the ability of an entity to remain in business.
FCF5
$0.00
Note: For this part of the Milestone, please capital lease payment
property. Usually Free Cash Flows (FCFs) are used to calculate NPV
Flow calculations will be covered later in the course and thus can’t
the initial Milestone #1 analysis.
Interest Rate (given) – in our scenario we will use 8% interest rate
implicit rate, the average rate that lease consumer face on the cu
net change in cash generated by the operations of a
eriod, minus cash outlays for working capital, capital
during the same period. This is a strong indicator of
ain in business.
estone, please capital lease payments under
ows (FCFs) are used to calculate NPV. Free Cash
red later in the course and thus can’t be used for
sis.
scenario we will use 8% interest rate. This rate is an
e that lease consumer face on the current market.
Milestone Two: Stock Valuation and Bond Issuance (please fill in the YELLOW cells)
PART I: STOCK VALUATION
Dividend from Financial Statements:
Year (fill in
Cash
what year you Div/share ($)
are using)
Dividend
Yield
Stockholder’s
Stock Price
Equity (in millions)
201#
201#
201#
#DIV/0!
#DIV/0!
#DIV/0!
1. Stock Valuation – The new dividend yield if the company increased its dividend per share by 1.75
Year (fill in
Cash
Dividend
what year you Div/Share ($) Yield
are using)
+1.75
201#
1.75 #DIV/0!
201#
1.75 #DIV/0!
201#
1.75 #DIV/0!
Stockholder’s
Stock Price
Equity (in millions)
0
0
0
#DIV/0!
#DIV/0!
#DIV/0!
2. The dividend yield if the firm doubled it’s outstanding shares
Year (fill in
Cash
Dividend
what year you Div/Share ($) Yield
are using)
201#
0 #DIV/0!
201#
0 #DIV/0!
201#
0 #DIV/0!
Stockholder’s
Stock Price
Equity (in millions) doubled
0 #DIV/0!
0 #DIV/0!
0 #DIV/0!
3. The rate of return on equity (i.e., the cost of stock) based on the new dividend yield you calculated above
Year (fill in
Cash
Stock Price
what year you Div/Share ($)
are using)
+1.75
201#
1.75 #DIV/0!
201#
1.75 #DIV/0!
201#
1.75 #DIV/0!
Return on
Investment
CALCULATE ROI
(Dividends + Capital gain)/ Divided b
(D1 + (P1-P0)) / PO
PART II: BOND ISSUANCE
Current Bonds from Financial Statements
Present Value
Periods
Interest
Payments
Future Value
PV
N
I
PMT
FV
($2,963)
40 Semi-annual payment: 2036-2016 = 20 years *2 = 40 periods
2.9375 Interest paid semi-annually: 5.875%/2 = 2.9375%
0 This bond does not make regular PMTs, assume zero coupon b
CALCULATING FV (please see help on the right hand side)
1. The new value of the bond if overall rates in the market increased by 5%
Present Value
Periods
Interest
Payments
Future Value
PV
N
I
PMT
FV
($2,963)
40
Please adjust interest
0
CALCULATING FV (please see help on the right hand side)
2. The new value of the bond if overall rates in the market decreased by 5%
Present Value
Periods
Interest
Payments
Future Value
PV
N
I
PMT
FV
($2,963)
40
Please adjust interest
0
CALCULATING FV (please see help on the right hand side)
3. The value of the bond if overall rates in the market stayed exactly the same
– identical to CURRENT BOND VALUE from Financial Statements
ells)
Explanations:
Cash Dividend – distribution of the corporate income. They are
appear on Income Statement.
Note: Part of Statement of Cash Flows. Please be aware that co
Dividend Yield – annual cash dividend per share of common sto
of a share of the common stock. (Dividend yield = Annual Divide
Note: Current Stock Price is not part of the Financial Statement
for Dividend Yield
d per share by 1.75
d yield you calculated above
ALCULATE ROI
Dividends + Capital gain)/ Divided by the original Price
1 + (P1-P0)) / PO
Stockholder’s Equity = Assets – Liabilities. This represents the o
Owners are called stockholder because they hold stocks or shar
goal of every corporate manager is to generate shareholder val
Return on Equity – for this part we will modify and use return o
Using the formula: Dividend (+1.75)/+[(new price-old price)/old
Note – for this part, you will need extra price from 2011
Bonds are a long-term debt for corporations. By buying a bond,
to the corporation. The borrower promises to pay specified inte
lifetime and at the maturity, payback the entire principle. In ca
have priority over stockholders for any payment distributions.
Bonds = Debt……………Bondholders = Lenders
Stock=Equity…………….Stockholders = Owners
Calculation: Please note that for bond calculations, only one bo
that February 1st, 2015 is the origination date. The value on fin
considered PV (Present value). Maturity date would be also ass
payment schedule would be adjusted to February 1 and August
available in 8-k 2006)
036-2016 = 20 years *2 = 40 periods
lly: 5.875%/2 = 2.9375%
e regular PMTs, assume zero coupon bonds
see help on the right hand side)
The following Senior-Note was used from page 44:
5.875% Senior Notes; due December 16, 2036; interest payable
December 16
PV (Present Value) = 2,963 million
Our scenario: 5.875% Senior Notes; due February 1, 2036; inter
February 1 and August 1
PV (Present Value) = 2,963 million
5.875%+5% = 10.875%/2 = 5.4375%
see help on the right hand side)
5.875%-5% = 0.875%/2 = 0.4375%
FV (Future Value Calculation) – using Excel Formula
Step 1) Select Formulas
Step 2) Click on Financial
Step 3) Select FV – you will see the formula below
Step 4) Enter the following:
Rate – enter as decimal, no % sign. Example: 4% as 0.04
Nper – number of period. Enter a whole number. Example 50
Pmt – payment. Our example does not assume regular payment
Pv – Present value. Enter as negative. Example $1,000 should be
Type – leave blank
see help on the right hand side)
Updated: 01/22/2018 by ZB
of the corporate income. They are not expenses and do not
.
sh Flows. Please be aware that corporation list 5 years worth of
dividend per share of common stock divided by the market price
ck. (Dividend yield = Annual Dividend/Current Stock Price)
ot part of the Financial Statements – calculated suing the formula
– Liabilities. This represents the ownership of a corporations.
r because they hold stocks or share of the company. The main
ger is to generate shareholder value.
rt we will modify and use return on investment instead.
+1.75)/+[(new price-old price)/old price]
eed extra price from 2011
or corporations. By buying a bond, the bond-owner lends money
wer promises to pay specified interest rate during the loans
payback the entire principle. In case of bankruptcy, bondholders
rs for any payment distributions.
olders = Lenders
olders = Owners
for bond calculations, only one bond was used and we assume
origination date. The value on financial statements will be
). Maturity date would be also assumed for February 2036 and
adjusted to February 1 and August 1. (issued in 2006 and details
as used from page 44:
cember 16, 2036; interest payable semi-annually on June 16 and
llion
Notes; due February 1, 2036; interest payable semi-annually on
llion
– using Excel Formula
e the formula below
sign. Example: 4% as 0.04
er a whole number. Example 50
does not assume regular payments. Assume zero coupon bond for our example.
egative. Example $1,000 should be -1000
Milestone Three: Capital Budgeting Data (please fill in YELLOW cells)
Initial Outlay
Cash Flows (Sales)
– Operating Costs (excluding Depreciation)
– Depreciation Rate of 20%
Operating Income (EBIT)
– Income Tax (Rate 35%)
After-Tax EBIT
+ Depreciation
Cash Flows
CF1
–
$0
NPV
IRR
$0.00
#NUM!
WACC
CF2
CF3
Select from drop
down:
ACCEPT
ACCEPT
CF4
–
CF5
–
–
Capital Budgeting Example Set-up
ACCEPT
Initial investment $65,000,000
REJECT
Straight-line Depreciation of 20%
Income Tax @35%
WACC of 8% approximately. (HD WACC was about 8.83%)
Cash Flow (which in this case are Sales Revenues) are as follows:
CF1: $50,000,000
CF2: $45,000,000
CF3: $65,500,000
CF4: $55,000,00
CF5: $25,000,000
Operating Costs
CF1: $25,500,000
CF2: $25,500,000
CF3: $25,500,000
CF4: $25,500,000
CF5: $25,500,000
WACC- why do we use WACC rate for new projects? If the project
doesn’t earn more percent than WACC, the corporation should
abandon the project and invest money elsewhere.
Initial Investment – always negative. Corporation has to invest
money (“lose” it till they recover it via sales) in order to gain future
benefit.
Milestone Four: Interest Rate Implication (please fill in YELLOW cells)
1. Original Scenario from Milestone 1 – Time Value of Money using 8%
Interest Rate
8.00%
FCF1
FCF2
FCF3
FCF4
Amounts*
Pv*
0.00
Total Pv*
*In millions
0.00
0.00
0.00
0.00
2. Change in interest rate and its implications – Lower Interest Rate (5%)
Interest Rate
FCF1
FCF2
FCF3
FCF4
Amounts*
Pv*
0.00
Total Pv*
*In millions
0.00
0.00
0.00
0.00
3. Change in interest rate and its implications – Higher Interest Rate (15%)
Interest Rate
FCF1
FCF2
FCF3
FCF4
Amounts*
Pv*
0.00
Total Pv*
*In millions
0.00
0.00
0.00
0.00
Explanation:
We will use Milestone 1 and Time Value of Money for Milestone 4 a
Two cases will be analyzed:
Lower Interest Rate at 5%
Higher Interest Rate at 15%
FCF5
0.00
FCF5
0.00
FCF5
0.00
Money for Milestone 4 analysis
FIN 550 Milestone Four Guidelines and Rubric
Overview: For the final project, you will use 2017 UPS Annual Report to prepare a financial analysis report for UPS. You will include in your analysis the
background calculations and managerial analysis for each of the following topics: time value of money, stock and bond valuation, and capital budgeting. You will
also discuss macroeconomic variables that might impact the company’s financial decision making and strategic objectives. These topics will be covered over four
milestones to be submitted throughout the course before you submit the final project. Note that while these elements may seem separate and unrelated,
together they will present a well-rounded view of the company’s finances with regard to the topics.
In Milestone Four, you will submit a draft of the Macroeconomic Items section of the final project, along with your supporting explanations.
Prompt: Provide an explanation of the impact of external factors on the financial position of UPS. Use the designated tab in the Final Project Student Workbook
to demonstrate the implications of interest rate changes on at least one of the calculations you performed in one of the earlier milestones.
Specifically, the following critical elements must be addressed:
V.
Macroeconomic Items: The CEO of the company is convinced that financial analysis should hinge only on what is happening internally within the
company. Convince him otherwise based on the following:
A. Analyze the implications of interest rate changes on any of the calculations you performed. Be sure to substantiate your claims.
B. How might an issue (negative or positive) within the overall stock market impact the company’s stock valuation numbers, other financial
variables, or its overall portfolio management? Be sure your response is supported by evidence.
C. Analyze the impact of any external factor (i.e., external to the company) discussed throughout the course on the company’s financial position. Be
sure to justify your reasoning.
Guidelines for Submission: Your paper must be submitted as a 2- to 3-page Microsoft Word document, not including your calculations, which should be
completed in the Final Project Student Workbook. Use double spacing, 12-point Times New Roman font, and one-inch margins. Sources should be cited according
to APA style.
Rubric
Critical Elements
Macroeconomic Items:
Implications of Changes
Proficient (100%)
Analyzes implications of interest rate
changes, substantiating claims
Needs Improvement (80%)
Analyzes implications of interest rate
changes, but response or substantiation
is cursory or illogical
Macroeconomic Items: Stock Assesses the impact of an issue within
Assesses the impact of an issue within
Market
the overall stock market on the
the overall stock market on the
company’s stock valuation numbers or
company’s stock valuation numbers or
any other financial variable, supporting
any other financial variable, but response
response with evidence
is cursory, illogical, or weakly supported
Macroeconomic Items:
Analyzes the impact of a factor external Analyzes the impact of a factor external
External Factor
to the company on the company’s
to the company on the company’s
financial position, justifying reasoning
financial position, but response is
cursory, illogical, or weakly supported
Articulation of Response
Submission has no major errors related
Submission has major errors related to
to citations, grammar, spelling, syntax, or citations, grammar, spelling, syntax, or
organization
organization that negatively impact
readability and articulation of main ideas
Not Evident (0%)
Does not analyze implications of interest
rate changes
Value
30
Does not assess the impact of an issue
within the overall stock market on the
company’s stock valuation numbers or any
other financial variable
30
Does not analyze the impact of a factor
external to the company on the company’s
financial position
30
Submission has critical errors related to
citations, grammar, spelling, syntax, or
organization that prevent understanding of
ideas
Earned Total
10
100%
2017 UPS Annual Report
2017 UPS
Annual Report
Transforming UPS…
for Today and Tomorrow
55 Glenlake Parkway, NE, Atlanta, GA 30328-3474
www.ups.com
© 2018 United Parcel Service of America, Inc. UPS, the UPS brandmark and the color brown
are trademarks of United Parcel Service of America, Inc. All rights reserved.
180069_L01_CVRS.indd 1
2/28/18 8:51 PM
INVE STOR INFOR MATION
YEAR FOUNDED
1907
KEY METRICS
27,850 UPS ACCESS
POINT LOCATIONS
10.5 MILLION
CUSTOMERS
2017
2016
2015
Return on assets (adj.)
12.1%
12.8%
13.3%
Return on assets (GAAP)
11.4%
8.7%
13.1%
Return on invested
capital (adj.)*
26.8%
32.5%
32.4%
Return on invested
capital (GAAP)
30.3%
27.4%
39.2%
2.6%
2.7%
3.0%
*
Dividend yield
FINANCIAL HIGHLIGHTS
2017
2016
2015
$65,872
$60,906
$58,363
58,343
55,439
50,695
Net income
4,910
3,431
4,844
Adjusted net income*
5,259
5,104
4,923
Diluted earnings per
share
5.61
3.87
5.35
Adjusted diluted earnings
per share*
6.01
5.75
5.43
Dividends declared
per share
3.32
3.12
2.92
Revenue
Operating expenses
Assets
45,403
40,377
38,311
Long-term debt
20,278
12,394
11,316
Shareowners’ equity
1,030
429
2,491
Capital expenditures
5,227
2,965
2,379
Cash and marketable
securities
4,069
4,567
4,726
(in millions except for per-share amounts)
5.1 BILLION
454,000
9,100
ALTERNATIVE
FUEL VEHICLES
UPS MY CHOICE
MEMBERS
Computershare
Send notices of address changes or questions
regarding account status, stock transfer, lost
certificates, or dividend payments to:
FREE CASH FLOW
Proceeds from disposals
of PP&E
2017
2016
2015
$1,479
$6,473
$7,430
(5,227)
(2,965)
(2,379)
24
88
26
Net change in finance
receivables
5
9
5
Other investing activities
1
(59)
(30)
(3,718)
3,546
5,052
7,291
2,461
1,030
$3,573
$6,007
$6,082
Discretionary Pension
Contributions
Adjusted free cash f low
(in millions of dollars)
MORE THAN
®
TRANSFER AGENT AND REGISTRAR
IN DELIVERY FLEET
Capital expenditures
2,242 DAILY
143 MILLION
DAILY ONLINE TRACKING
FLIGHT SEGMENTS
UPS
55 Glenlake Parkway, NE
Atlanta, GA 30328-3474
800.877.1503 or 404.828.6059
investors.ups.com
Our Class B common stock is listed on the New York
Stock Exchange under the symbol “UPS”.
119,000 VEHICLES
Net cash from operations
INVESTOR RELATIONS
You can contact our Investor Relations Department at:
EXCHANGE LISTING
WORLDWIDE
OPERATING
FACILITIES
EMPLOYEES
Free cash f low
2017 DELIVERY VOLUME
43
MILLION
2,500
ANNUAL MEETING
Our annual meeting of shareowners will be held at 8 a.m.
on May 10, 2018, at the Hotel Du Pont, 11th and Market
Street, Wilmington, DE. Shareowners of record as of
March 12, 2018, are entitled to vote at the meeting.
Regular Mail:
UPS
c/o Computershare
PO Box 505002
Louisville, KY 40233-5002
or:
Expedited Delivery:
UPS
c/o Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
FORM 10-K
Our Annual Report on Form 10-K for the year ended
December 31, 2017, forms part of the UPS 2017 Annual
Report. If you would like an additional copy of our Form
10-K, you can access it through the Investor Relations
website at www.investors.ups.com or at the Securities
and Exchange Commission website, sec.gov. The Form
10-K also is available free of charge by calling, contacting
via the website, or writing to the Investor Relations
Department.
UPS SHAREOWNER SERVICES
Convenient access 24 hours a day, seven days a week.
Class A Common Shareowners
www.computershare.com/ups
888.663.8325
Class B Common Shareowners
www.computershare.com/ups
800.758.4674
Calls from outside the United States: 201.680.6612
TDD for hearing impaired: 800.231.5469
TDD for non-U.S. shareowners: 201.680.6610
DIRECT STOCK PURCHASE PLAN
To make an initial purchase of UPS Class B Common
Stock online, visit www.computershare.com/Investor
and go to “Buy stock direct-search and enroll in available
plans”. Follow the instructions provided to search for
Investment Plans and access the Enrollment Wizard.
Current Class B shareowners can enroll in the
plan online by accessing their accounts through
www.computershare.com/ups or by calling 800.758.4674.
DIVIDEND REINVESTMENT PLAN
To reinvest dividends in the purchase of additional
UPS shares:
Class A and B Shareowners
www.computershare.com/ups
ONLINE ACCESS TO SHAREOWNER
ACCOUNT MATERIALS
Enroll in E-Communications, a self-service program
that provides electronic notification and secure access
to shareowner communications. To enroll, access
your account at www.computershare.com/ups. After
accessing your account select the “View Account” link
to manage your holdings. Then click on “My Profile,”
select “Update” under “Communications” and follow the
enrollment instructions.
UPS WEBSITES
Investor Relations – – – – – – – – – – – – – – – investors.ups.com
UPS Corporate – – – – – – – – – – – – – – – – – – – – – – – – – ups.com
Sustainability/
Corporate Responsibility – – – – – sustainability.ups.com
Services and Solutions – – – ups.com/businesssolutions
*See reconciliation of Non-GAAP financial measures on page A1.
180069_L01_CVRS.indd 2
3/5/18 5:32 PM
Dear Fellow Shareowner,
From our humble roots as a bicycle
intelligence, machine learning, blockchain,
messenger service, UPS has a long and
robotics, and many other cutting-edge
proud legacy of innovation. Today, we
technologies to future-proof our network.
live in an era of great technological
While these investments represent a
changes that are redrawing the terms of
major financial commitment in the
engagement for companies across the
near term, the benefits to our customers
globe. So while UPS achieved all-time
and shareowners over the long run will
highs in both earnings per share* and
be substantial. By implementing new
revenues last year, our ambitions are even
technology and expanding capacity in our
greater. Our founder Jim Casey famously
facilities, we are making the industry’s
said that “our horizon is as distant as our
most-efficient network even more
mind’s eye wishes it to be,” and in that
effective. Our digital investments give
same spirit, late in 2017, we embarked on a
us – and our customers – more flexibility,
major transformation initiative to ensure
consistency and vi…
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