Calculating Growth Rates and Future Values

ART 1 End of Chapter “Questions and Problems”

For the following questions you’ll need to review the problems at the back of each chapter and ensure you are using the required textbook edition per the syllabus. You can use the provided excel resources templates under the “Resources” folder on Sakai to aid in your calculations. Make sure you show your work by copying and pasting from your excel file underneath each of the Chapter questions below in order to receive full credit. A correct answer without the accompanying back-up will only receive partial credit.

A) Chapter 2

a. # 18 Net Income and OCF answer parts (a) (b) and (c)

B) Chapter 3

a. # 2 Calculating Profitability Ratios

b. # 8 DuPont Identity

C) Chapter 4

a. # 13 Calculating Growth Rates and Future Values

b. # 14 Calculating Rates of Return

c. # 17 Calculating Present Values

D) Chapter 5

a. # 2 Present Value and Multiple Cash Flows

b. # 28 Discounted Cash Flow Analysis

c. # 30 Calculating Annuities Due

E) Chapter 6

a. # 3 Bond Prices

b. # 8 Coupon Rates

c. # 19 Interest Rate Risk

F) Chapter 7

a. # 1 Stock Value

b. # 22 Stock Valuation

c. # 27 Stock Valuation and PE

PART 2 Starbucks & Peer Ratio Analysis

During lecture, we had several breakout sessions whereas we analyzed Starbucks’ Balance Sheet, Income Statement, and Financial Ratios. Using the Ratios downloaded, you’ll select your own “Peer Group” of companies in order to formulate a financial analysis and answer the following questions below.

A) What companies did you consider for your Peer Group? Which companies did you finally select?

B) Why did you select those companies and not others?

C) Using a chart table, compare the most recent year’s ratios between Starbucks ratios to its competitor companies (the ones you selected for your Peer Group). A list of required ratios and a template chart are included in the excel resource, but include the following: Liquidity (Quick, Current, Debt-Equity); Asset Management (Asset Turnover, Receivables Turnover, Inventory Turnover); Profitability (ROA, ROE, ROI, EBITDA, Tax Rate); and Per Share (Cash Flow per Share).

D) Based on your findings, where do you see Starbucks’ outperforming its competitors? Underperforming? What led you to these conclusions?

PART 3 Starbucks & Peer Stock Valuation

A) Using the Peer Group from above, prepare a chart table comparing Starbucks’ Price using a Benchmark method.

B) Calculate the Current Value of the companies (price per share x shares outstanding)

C) What do you believe is the appropriate PE and predicted EPS for the companies? Why did you select these PE and EPS numbers?

D) Calculate the Future Value of the companies based on (C) above.

E) Based on your findings would you purchase Starbucks shares? Why or why not?