What is the investment grade of your Company’s bonds?

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Does your company purchase the bonds of other companies as an investment?

 

What is the investment grade of your Company’s bonds?

 

Within their Notes to the Financial Statements can you identify any discussions on financial risk?

 

If your Company has issued Bonds look at terms and identify the interest rates they are paying.

 

Find a competitor to your company and look at their debt as well. Maybe compare the 2 through a Debt/Equity ratio. Who is managing their debt structure better?

 

 

Here is a sample below

 

 

 

 

                         
Name Amount    Price Coupon % Current Yield % Adjusted Current Yield Fixed Or Floating Callable ? YTM Par Val. Coup Freq. Issued Maturity Date
Nike 2.25%  500M 98 2.25 2.30 2.56 Fixed No 253 1000 Semi- Annual 4/26/2013 2023
Nike 3.625%   500M 92.54 3.625 3.92 4.19 Fixed No 4.07 1000 Semi- Annual 4/27/2013 2043
                         
Nike Bond Rating is AA- by Morningstar, A+ by S&P, A1 by Moddy’s            
Nike Debt/Assets 5.82%                    
                     

Nike bonds should be considered low risk.   First the credit rating services each have

Nike’s credit rate between very good, and high quality.  Specifically, Moody’s says

“NIKE’s A1 senior unsecured rating reflects the company’s significant scale in the global athletic industry with revenues in excess of $25 billion, the ownership of the “NIKE” brand whose distinctive ‘swoosh’ logo is one of the most recognized consumer brands in the world, and the company’s solid track record of demonstrating revenue, earnings and cash flow growth for an extended period of time. The rating also reflects the company’s strong credit metrics, very good liquidity profile, and its maintenance of balanced financial policies which we expect will continue. The rating is constrained by the inherent cyclicality and changing consumer preferences in the global footwear and apparel industries.” (Moody’s .com).

 

Nike bond prices are currently at a discounted price.  This is evidenced by the price for each being less than par value, and that the current yield, and adjusted current yields are both higher than the coupon rate.  This indicates that interest rates have increased since these bonds were issued in April of 2013 (Brigham & Ehrhardt, 2014).  The coupons on these Nike bonds are paid semiannually.  The Nike 3.625% bond it is benchmarked to the 20-year treasury for the bond maturing in 2043, and a ten-year treasury for the 2.25% bond maturing in 2023.   An interesting feature of these bonds is that they are not callable.  While having a callable option would seem like useful tool for a bond issuer to have in case the cost of capital decreased (interest rates went down).  The problem when these bonds were issued could have been a competitive bond market where a non-callable feature was required to adequately market the securities as close to Par value as possible.

Looking at how the Nike bond is valued, the largest risk is an increase in interest rates.  Currently the bond is trading at a discount and the interest rates are better than the coupon rates.  If interest rates increased by just two percent, the bond would be even further discounted and provide almost half the return of other alternatives.  The risk being that should interest rise even 2%, the owners of these bonds would be getting paid much less than a similar risk should be paying.  If interest rates increased by 2%, Nike bonds would look like this:

Name Amount Price Coupon % Current Yield % Adjusted Current Yield
Nike 2.25% 500M 87.27 2.25 2.58 4.28
Nike 3.625% 500M 72.18 3.625 5.02 6.03

Notice the current and adjusted current yields have increased, conversely if interest rates went down 2%, Nike’s bond would look like this:

Name Amount Price Coupon % Current Yield % Adjusted Current Yield
Nike 2.25% 500M 114.9 2.25 1.96 1.97
Nike 3.625% 500M 142.2 3.625 2.55 2.57

 

While it does not seem realistic that interest rate will fall by 2%, it is interesting to see what a 4% spread will do to the cost of the Nike Bonds.

 

Looking at Nike bonds from the perspective of an investing I might say Nike’s credit is fantastic, their management structure is stable, and there are favorable terms for owners of these bonds (not callable).  At the same time the coupon rate is not floating, in other words it will not benchmarked to another indicator of prevailing interest rates (Brigham & Ehrhardt, 2014). This leads to the primary risk of a bond prices decreasing for similar bonds.  This concern however should be mitigated with interest rates being at historic lows.  I would hover be concern about a rise in interest rates as well.  While my yields would increase relative to a current price, my yield would only relate to the price I purchased the bond at.  For example, if I buy the 2.25% Nike bond today discounted to 92 today I will get an adjusted yield of about 2.56%.  If interest rates go up and the bond becomes worth 87.27 and the adjusted yield increased to 4.28%, my yield is still 2.56% because of where my investment was at.

 

 

References

Moody’s.com (2015).  Nike Credit Rating.  Retrieved October 19, 2015 from:https://www.moodys.com/research/Moody’s+assigns+A1+rating+to+NIKE’s+proposed+bond+issue–PR_271309

 

Bond Value Calculator for Interest Rate Effects on Bond Was From: http://www.free-online-calculator-use.com/bond-value-calculator.html

 

Brigham, E., Ehrhart, M., (2014).  Financial Management.  South – Western Cengage Leaning. Mason, Oh. (14th Ed.).

 

JWMI 531, (2015). Howe Professional Investors Value Bonds. Week 3, Lesson 1.

Morningstar.com (2015).  Nike Analysis.  Retrieved Various Dates From:http://www.morningstar.com/stocks/XNYS/NKE/quote.html

 
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The Houston Corp. Needs To Raise Money For An Addition

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The Houston Corp. needs to raise money for an addition to its plant.

Question 1
The Houston Corp. needs to raise money for an addition to its plant. It will issue 300,000 shares of new common stock. The new shares will be priced at $60 per share with an 8.5% spread on the offer price. Registration costs will be $150,000. Presently Houston Corp has earnings of $3 million and 750,000 shares outstanding.

(a) Compute the potential dilution from this new stock issue.

(b) Compute the net proceeds to Houston Corp.

(c) What rate of return must be earned on the net proceeds so that no dilution of earnings per share occurs?

Question 2
Gray House is issuing bonds paying $105 annually that will mature fifteen years from today. The bond is currently selling for $980.
Calculate:

(a) Coupon Rate

(b) Current Yield

(c) Yield To Maturity

Question 3
The Haavelmo Widget Corporation has just signed an 84-month lease on an asset with an 8-year life. The lessor will retain the property at the end of the lease, and the present value of the minimum lease payments is $250,000. The estimated fair value of the property is $300,000. Is this an operating lease?

a.no
b.yes
c.if the company elects to treat the lease as an operating lease
d.more information is required

Question 4
Private placement of corporate bonds

a.has increased in use as new bond issues increased.
b.are the most popular method of raising debt capital.
c.are more expensive to issue than publicly placed bonds.
d.have lower interest rates than mortgage-backed securities.

Question 5
All of the following are disadvantages of going public except

a.the firm may now become active in mergers and acquisitions.
b.the company must make all information available to the public through filings to the SEC and the state.
c.an erosion in value may take place after the initial offering.
d.there is a high cost associated with going public.

Question 6
Which of the following bonds offers the most security to the bondholder?

a.Junior mortgage bonds
b.Senior mortgage bonds
c.Debenture bond
d.Income bond

Question 7
A “subordinated debenture”

a.must be transferred with the bond to which it is attached.
b.is used mainly by railroad companies and usually specifies equipment as collateral.
c.entitles the bondholder to purchase shares of common stock at a specific price.
d.is an unsecured bond with an inferior claim on assets in the event of liquidation.

Question 8
An investment banker makes money from

a.commissions from buyers.
b.fees from other investment bankers in the syndicate.
c.the spread between issue price and proceeds to the issuer.
d.artificially supporting the stock price during and after the offering.

Question 9
Raybac is about to go public. Its present stockholders own 500,000 shares. The new public issue will represent 800,000 shares. The shares will be priced at $25 to the public with a 4% spread. The out-of pocket costs will be $450,000. What are the net proceeds to the firm?

a.$18,750,000
b.$19,200,000
c.$18,250,000
d.$19,550,000

Question 10
The market stabilization function usually

a.is performed by the company.
b.lasts six to nine months.
c.provides price support for the stock during the distribution period.
d.is illegal.

Question 11
Corporate debt has

a.increased rapidly since World War II.
b.increased slowly since World War II.
c.held fairly steady over the last forty years.
d.none of the above

Question 12
Zero-coupon bonds

a.provide no annual interest payments.
b.have highly stable prices even with changing interest rates.
c.provide an investor with tax-free income until maturity.
d.two of the above.

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Walmart – Success Factors, Risks & Projections

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ASSIGNMENT DUE DATE TUESDAY 8/9/16 @ 3:00 PM EST

 

You will discuss factors that may affect current and future performance of the chosen company (Walmart). Based on what you know about the organization’s financial health and performance; you will then forecast future performance of the company for each of the next three years.

 

Prompt: After having evaluated the company’s financial health, you should research and assess the company’s strategic priorities and behavior. You should investigate internal risks and non-monetary factors that may affect current and future performance and decisions. To justify your findings and projections, you will need to produce accurate and relevant data tables, explaining how the numbers were informed by existing information and modeling different scenarios.

 

IV. Success Factors and Risks. Use this section to discuss the factors that may affect current and future performance. Specifically:

A. How do the organization’s financial and strategic priorities affect accounting procedures and business decisions? How might that affect business success? For example, is management growth-oriented or efficiency-oriented? What is the organization’s approach to risk and short- versus long-term planning horizons?

B. How might the organization better capitalize on non-financial factors such as market share, reputation, human resources, physical facilities, or patents? Support your response with relevant research and analysis.

C. What are the most significant internal risks to the company’s financial performance? Give evidence to support your response. For example, is the company vulnerable to technological changes or cyber-attacks? Loss of high-talent personnel? Production disruptions?

 

V. Projections. Based on what you know about the organization’s financial health and performance, forecast its future performance. In particular, you should:

A. Project the organization’s likely consolidated financial performance for each of the next three years. Support your analysis with an appendix spreadsheet showing actual results for the most recent year, along with your projections and assumptions. Remember, your supervisor is interested in fresh perspectives, so you should not just replicate existing financial statements, but should add other relevant calculations or disaggregation to help inform decisions.

B. Modify your projections for the coming year to show a best- and worst-case scenario, based on the potential success factors and risks you identified. As with your initial projections, support your analysis with an appendix spreadsheet, specifying your assumptions and including relevant calculations and disaggregation beyond those in existing financial reports.

C. Discuss how your assumptions, forecasting methodology, and information gaps affect your projections. Why are your projections appropriate? For example, are they consistent with the organization’s mission and priorities? Aggressive but achievable? How would changing your assumptions change your projections?

 

Guidelines for Submission: Your Success Factors, Risk, and Projections report should be approximately 2–4 pages long (excluding title page, spreadsheets and graphs, and references list). It should be double spaced, with 12-point Times New Roman font and one-inch margins, and should use the latest guidelines for APA formatting for references and citations. Please also include your name, course name, and submission date on the title page.

 
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SAINT LEO COM540 MODULE 8 FINAL EXAM

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The ____ section of the business continuity policy provides an overview of the information storage and retrieval plans of the organization.

scope

training requirements

roles and responsibilities

special considerations

Question 2. Question :

A ____ is a fully configured computer facility, with all services, communications links, and physical plant operations.

cold site

service bureau

warm site

hot site

Question 3. Question :

A ____ agreement usually guarantees space when needed, even if this means that the service bureau has to acquire additional space in the event of a widespread disaster.

mutual

noncompete

service

nondisclosure

Question 4. Question :

The ____ team is responsible for providing any needed supplies, space, materials, food, services, or facilities needed at the primary site other than vendor-acquired technology and other material obtained by the vendor team.

damage assessment

data management

logistics

business interface

Question 5. Question :

The ____ team works to install operating systems on the hardware installed by the hardware team.

application recovery

OS

computer setup team

network recovery team

Question 6. Question :

The ____ team is responsible for recovering and reestablishing operating systems (OSs).

database recovery

systems recovery

applications recovery

vendor recovery

Question 7. Question :

____ is functionally similar to job rotation, but only involves the rotation of a portion of a job, rather than the entire position.

Vertical job rotation

Task rotation

Computer training

Horizontal job rotation

Question 8. Question :

The ____ team is responsible for recovering and reestablishing operations of critical business applications.

vendor contact

system recovery

applications recovery

network recovery

Question 9. Question :

The ____ method of backup uses a rotation of six sets of media and is perhaps the most simple and well known.

six tape rotation

six-day rotation

Tower of Hanoi

six night rotation

Question 10. Question :

The ____ method of backup uses five media sets per week and allows recovery of data for the previous three weeks.

Towers of Hanoi

six-tape rotation

Grandfather-Father-Son

six-day rotation

Question 11. Question :

In disaster recovery, the ____ is the point at which a management decision to react is made in reaction to a notice or other data such as a weather report or an activity report from IT indicating the escalation of an incident.

mirrored site

hot site

cold site

trigger

Question 12. Question :

____ is the movement of employees from one position to another so they can develop additional skills and abilities.

Job rotation

Task rotation

Computer training

Cross-training

Question 13. Question :

The ____ team works to quickly set up the hardware needed to establish operations in the alternate site.

business continuity management team

operations team

computer setup team

network recovery team

Question 14. Question :

____ uses a specialized parity coding mechanism known as the Hamming code to store stripes of data on multiple data drives and corresponding redundant error correction on separate error correcting drives.

RAID level 1

RAID level 2

RAID level 3

RAID level 4

Question 15. Question :

____ is the group charged with analyzing vulnerabilities, evaluating existing plans, and developing and implementing the comprehensive crisis management program.

Crisis management planning committee

Humanitarian planning committee

Emergency response committee

Cross-training planning committee

Question 16. Question :

The ____ lists and describes the efforts to resume normal operations at the primary places of business.

incremental backup plan

disaster recovery plan

full-backup plan

business continuity plan

Question 17. Question :

The ____ contains the steps for implementing critical business functions using alternate mechanisms until normal operations can be resumed at the primary site or elsewhere on a permanent basis.

incremental plan

disaster recovery plan

full-backup plan

business continuity plan

Question 18. Question :

A ____ allows the organization to provide a disaster recovery/business continuity option while reducing the overall cost.

service bureau

mutual agreement

time-share

service agreement

Question 19. Question :

____ are highly probable when infected machines are brought back online or when other in-fected computers that may have been offline at the time of the attack are brought back up.

Follow-on incidents

War games

Black bag operations

Blue bag operations

Question 20. Question :

Before returning to routine duties, the IR team must also conduct a(n) ____.

chain of custody

after-action review

war game

Alarm Compaction

Question 21. Question :

The ____ is the point in the past to which the recovered applications and data at the alternate infrastructure will be restored.

recovery point objective

relocation point objective

simulation point objective

warm site objective

Question 22. Question :

____ consists of efforts designed to address the psychological and emotional impact on the workforce.

Crisis communications

Humanitarian assistance

Emergency response

Cross-training

Question 23. Question :

Once the incident has been contained, and all signs of the incident removed, the ____ phase begins.

actions after

black bag operation

chain of custody

blue bag operation

Question 24. Question :

____ occur over time and slowly deteriorate the capacity of an organization to withstand their effects.

Slow onset disasters

Communication disasters

Rapid onset disasters

Data disasters

Question 25. Question :

The ____ involves providing copies of the DR plan to all teams and team members for review.

DR plan desk check

DR plan structured walk-through

DR plan simulation

DR plan parallel testing

Question 26. Question :

A ____ is owned by a single organization; it can be as small as two PCs attached to a single hub or it may support hundreds of users and multiple servers.

honeypot

cache

filter

LAN

Question 27. Question :

____ contingency considerations should enhance the ability of recovery personnel to restore WAN services after a disruption.

Cache

Server

Web site

WAN

Question 28. Question :

The ____ team works with the hardware and OS teams to get internal and external services up and running to begin supporting business functions.

applications recovery

OS

computer setup team

network recovery team

Question 29. Question :

During the ____ phase the organization begins the recovery of the most time-critical business functions – those necessary to reestablish business operations and prevent further economic and image loss to the organization.

recovery

risk analysis

parallel testing

audit review

Question 30. Question :

____ are those that occur suddenly, with little warning, taking the lives of people and destroying the means of production.

Slow onset disasters

Communication disasters

Rapid onset disasters

Data disasters

Question 31. Question :

The ____ is the group responsible for initiating the occupation of the alternate facility.

advance party

disaster recovery team

applications development team

forensic team

Question 32. Question :

In the ____ section of the business continuity policy, the training requirements for the various employee groups are defined and highlighted.

scope

training requirements

roles and responsibilities

special considerations

Question 33. Question :

The ____ team is responsible for working with the remainder of the organization to assist in the recovery of nontechnology functions.

damage assessment

data management

logistics

business interface

Question 34. Question :

A ____ is defined by the ICM as a disruption in the company’s business that occurs without warning and is likely to generate news coverage and may adversely impact employees, investors, customers, suppliers, and other stakeholders.

humanitarian crisis

sudden crisis

business crisis

smoldering crisis

Question 35. Question :

____ is the rapid relocation of an organization’s critical business functions to another location.

Business relocation

Business continuity

Incidence response

Reactive review

Question 36. Question :

The ____ system can be used both to distribute information about the disaster and to collect information about the status of the employees.

DR plan desk system

DR plan simulation

auxiliary phone alert and reporting system

damage assessment report

Question 37. Question :

____ is most commonly used in organizations that balance safety and redundancy against the costs of acquiring and operating the systems.

RAID level 4

RAID level 5

RAID level 6

RAID level 7

Question 38. Question :

A(n) ____ is a list of officials ranging from an individual’s immediate supervisor through the top executive of the organization.

emergency report

chain of command

cross-training

crisis report

Question 39. Question :

____ is the storage of duplicate online transaction data, along with the duplication of the databases at the remote site to a redundant server.

Remote journaling

Electronic vaulting

Hot swapping

Database shadowing

Question 40. Question :

____ involves the batch transfer of data to an offsite facility.

Database shadowing

Remote journaling

Six-tape rotation

Electronic vaulting

 

 

 
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