Assignment 2: Project Financing
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.
For M1 Assignment 4 (“Understanding the Numbers for Better Decisions”), you chose a publicly-traded company and analyzed its financial statements. Use that company to do the following:
- Identify a new product or service—either recently rolled out or about to be rolled out—in the company of your choice (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).
- Analyze the quality of the company’s existing projects. 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 projects?
- What is the return on capital earned by the company? Based upon this return, is the company picking good projects?
- Discuss how the 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?