1. Due date: September 29, 2018 by mid-night.
2. Any project that is submitted after the due date will not be accepted and a zero (0) will be assigned to the project.
3. This is an individual work, NOT a group work. Each student is individually responsible for completing the project. Each student is expected to do his/her own work without help from any other person, except the instructor.
4. Use the template posted on Canvas to complete the following tasks and answer the questions. You can modify the template per your need.
5. Upload the excel file on Canvas using the link created under Assignments > Project 1. (Name your file as Project 1_Full name).
Task 1: Financial Planning and Growth
Suppose, you were hired by GEM, Inc., to assist the company with its financial planning and to evaluate the company’s performance. Your supervisor provides you with the most recent income statement and balance sheet of GEM, Inc. (provided in the template).
1. Calculate the internal growth rate and sustainable growth rate for GEM? (10 point)
2. Sales for 2019 are projected to grow by 15 percent. Interest expense and depreciation expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. If the firm is operating at full capacity (100%) and no new debt or equity is issued, what is the external financing needed (EFN) to support the 15 percent sales growth? (20 point)
Task 2- Time value of money
3. Marti's coin collection contains fifty 1937 silver dollars. Her grandparents purchased them at their face value ($50) in 1937. These coins have appreciated by 8.2 percent annually. How much will the collection be worth in 2020? (5 point)
4. Five years ago, you invested $1,800. Today it is worth $2,215. What rate of interest did you earn? (5 point)
5. On your tenth birthday, you received $400 which you invested at 6.2 percent interest, compounded annually. Your investment is now worth $856. How old are you today? (5 point)
6. How much more money would you make on investments that pays interest compounded annually and that pays simple interest , given the 8% interest rate, $150,000 deposit amount and 15 years? (10 point)
Task 3: Discounted Cash Flow Valuation
It’s your 25th birthday today and since you recently got a job in Tesla, you want to start saving for your anticipated retirement at age 65. You want to be able to withdraw $150,000 from your savings account on each birthday for 15 years following your retirement; the first withdrawal will be on your 66th birthday. You intend to invest in the local credit union, which offers 7 percent APR. You want to make equal annual payments on each birthday into the account established at the credit union for the retirement fund.
7. If you start making these deposits on your 26th birthday and continue to make deposits until you are 65 (the last deposit will be on your 65th birthday), what amount must you deposit annually to be able to make the desired withdrawals at retirement? (10 point)
8. Suppose you just inherited a large sum of money. Rather than making equal annual payments, you want to make one lump sum payment on your 25th birthday to cover your retirement needs. What amount do you have to deposit? (5 point)