DVU Apple Fixed Income Security Essay

Fixed-Income Security

Objectives

Students should familiarize themselves with bonds and preferred stock as an investment opportunity and as a source of funds. In this assignment, students will determine why a fixed-income security may be offered by a firm, what features it must have in order to be attractive to investors, and what kind of financial results were achieved. Balance sheet accounts as well as certain ratios are to be analyzed.

Final Project Guidelines

Students should select a company that has issued bonds in the last 3 years so that the information sources can provide sufficient financial data for analysis. The selection is subject to faculty approval: the company and bond chosen should be posted no later than Week 6 to the Q&A Forum where the professor will indicate approval/disapproval of the selection before research should commence.

Post the following:

1. Your company choice
2. The security chosen (select an individual bond, not a bond fund)
3. When that security was issued

The Final Project is made up of several sections, each listed below. Each section should be a minimum of one full page (excluding charts, graphs, etc.). You will submit your Final Project in Week 8.

• Papers should be 8-12 written pages in length, 10-point font, and double spaced. The paper should include a cover page, table of contents, introduction, body of the report (Sections 1-5), conclusion, and works cited. Only the introduction, body, and conclusion count towards the page count. Graphs, tables, and appendices should be added when needed, however, these items are not part of the total page count.
• Even though this is not a scientific-type writing assignment and is mostly creative in nature, references are still very important. At least three authoritative, outside references are required (anonymous authors or web pages are not acceptable). These should be listed on the last page titled “Works Cited.”
• Appropriate citations are required utilizing the APA standard.
• All DeVry University policies are in effect, including the plagiarism policy.
• Any questions about this paper may be discussed in the Q&A Forum.
• This paper is worth 230 total points and will be graded on quality of research and paper information, use of citations, grammar, and sentence structure. See the grading rubric below.

Final Project

• Introduction: (25 points) Please construct a comprehensive introduction that lays out your project.
• Section 1: Company Background: (25 points) This section should include what industry the firm is in, its products, its competitors, and the stated main reason for needing capital (to fund receivables, capacity expansion, retire older debt, etc.). If you can’t find a specific discussion about this, then use your judgment as to why you think the funds were needed and explain your reasoning.
• Section 2: Balance Sheets: (25 points) What did the balance sheet look like in the quarter just prior to issuing the bonds? Include both a copy from before the issue and after the issue in an appendix to your paper. From the “Key Financial Ratios” link contained in the Week 2 Lesson, calculate Return on Equity (ROE), one debt ratio, and at least one other ratio of your choice both before and after the bonds were issued, and discuss what the results indicate and why you think they are important to your report.
• Section 3: Trends in YTM and Price: (25 points) At what price and yield-to-maturity (YTM) was the initial offering sold? Tabulate the price and YTM of the issue at the end of each calendar quarter for the last six quarters. Then, plot the tabulated values to visualize the trends in YTM and prices. Add a brief discussion about your graph or chart and what the results indicate.
• Section 4: Rate of Return: (25 points) If you were one of the original investors in this issue and you had invested $10,000, what would your total return be if you sold the securities at today’s market price? Compute the current duration of the bond and add a brief discussion about your calculations and what the results indicate.
• Section 5: WACC: (25 points) Compute the firm’s current Weighted Average Cost of Capital (WACC) assuming the total debt of the firm is in the issue that you analyzed. This means that if the company has more than one debt issue outstanding with a total face value of $X million and your chosen issue involves $Y million, then assume that all $X million is in your issue. This will simplify the calculations without diminishing learning value. Add a brief discussion about your calculations and what the results indicate.
• Conclusion: (25 points) Based on your research in Sections 1-5, discuss at least three overall conclusions about this offering. In your conclusion, please recap your analysis so that a reader can draw upon your expertise in order to make an educated investment decision. The conclusion should draw together all that you have researched and analyzed and provide a well-supported investment recommendation.